Transport business Toll has more than tripled its full year profit and says it is on track to lift its earnings as it pushes ahead with a restructure.
Toll’s result headed today’s full year results with insurance group IAG announcing a $1.3 billion profit while QBE’s profit fell.
Toll made a net profit of $286.1 million for the year to June 30, up from $84.5 million the previous year.
Toll Holdings described the business environment as difficult and said it was continuing to make changes to its operations through cost cuts and improved productivity.
It expects to generate $40-50 million in cost savings this financial year from the restructuring program, which was announced in May.
“Assuming no material change in the external environment, we expect that these savings, other efficiency gains and other growth initiatives will deliver higher earnings for Toll in full year 2015,” Toll said on Tuesday.
Meanwhile, Toll has removed a surcharge it had imposed on customers to help cover the cost of the controversial carbon tax, which federal parliament abolished in July.
Toll said the changes primarily affected its Australian marine, air and rail modes and facilities-based activities.
“We are currently working through associated impacts on our supply chain,” Toll said.
“These changes are not anticipated to have a material impact on earnings.”
In other results, Insurance Australia Group (IAG) said it expects to boost premiums by up to 20 per cent this year as it lifted full year net profit by 59 per cent to $1.23 billion.
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IAG – the owner of brands such as NRMA and CGU – achieved an insurance margin of 18.3 per cent at upper end of guidance, up from 17.2 per cent in 2012-13.
That margin measures the profit it makes on premiums.
IAG’s insurance profit of $1.58 billion was up 10.6 per cent.
The insurance giant’s guidance for fiscal 2015 comprises higher gross written premium growth of 17-20 per cent, largely as a result of consolidating the Wesfarmers business it acquired in Australia and New Zealand.
The gross written premium for 2013-14 increased by three per cent to $9.8 billion.
The integration of the Wesfarmers insurance underwriting business in May was expected to result in a combined annualised pre-tax synergy and benefit run rate of $230 million by the end of fiscal.
However there would be one-off pre-tax costs of about $220 million.
The insurance margin this year is expected to be lower at 13.5-15.5 per cent.
The fully franked dividend of 26 cents was up from 25 cents.
IAG chief executive Mike Wilkins said the company benefited from lower than expected claim costs from natural perils, favourable credit spreads on fixed interest investments and higher than originally expected reserve releases.
The 2012-13 result was skewed by a $287 million loss on the UK business it sold.
The net natural peril claim expense of $553 million was higher than last year but still below its allowance, reflecting relatively benign weather in Australia.
Insurer QBE will sell off or float businesses in three continents, including Australia, as it works to get back on track after another disappointing profit slide.
QBE made a net profit of $US392 million ($A424 million) for the six months to June 30, down 18 per cent from $US477 million for the same period last year.
The company has announced it will partially float its Australian mortgage lenders insurance business and sell off its US agency business.
It will also finalise the sale of its central and eastern European operations and will raise around $A810 million through a share purchase plan and institutional placement.
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QBE expects the asset sales and equity raising to improve the quality and flexibility of its balance sheet and help lift the company’s performance.
The insurer is targeting a full year insurance profit margin of between eight and nine per cent, up from 7.6 per cent in the first half.
It expects gross written premium of between $US16.6 billion and $US17 billion for the full year.
Chief executive John Neal said QBE’s underlying business was performing well, despite the profit slide, which was affected by a $US170 million cash injection to address problems with its Latin American business.
“We are pleased that our underlying business is demonstrating the solid progress QBE is making towards delivering improved performance,” he said.
“When combined with the capital measures announced today, we are confident that we have turned the corner on performance consistency with enhanced financial transparency and flexibility.”
Neal said the initial public offer of the Australian lender’s mortgage insurance (LMI) operations would allow QBE to retain an exposure to a profitable business, while giving it a broader shareholder base and greater flexibility to fund its growth plans.
“QBE LMIs results have been outstanding and are expected to remain so for the foreseeable future,” he said.
“The capital intensity of this business led us to purchase additional reinsurance protection to support the business growth plans, however, with the longer term in mind, the introduction of third party shareholders offers QBE LMI enhanced capital flexibility to support its growth ambition.”
QBE’s gross written premium fell 10 per cent during the first half to $8.49 billion, due primarily to the insurer exiting a number of businesses in Europe and the US.
The company made an underwriting profit of $US244 million during the half, which was down from $US530 million a year ago, and an insurance profit of $US530 million, down from $US790 million.
It announced a fully-franked interim dividend of 15 cents per share, down from 20 cents per share a year ago.
Steel and mining group Arrium is targeting further earnings growth after lifting its full year profit 83 per cent.
Arrium, formerly known as OneSteel, made an underlying net profit of $296 million for the year to June 30, up from $162 million a year ago.
Statutory net profit was $205 million, up from a loss $701 million, which was the result of restructuring costs.
The profit increase was due to growth in the company’s mining business, which offset weakness in its steel making operations.
Arrium cut 120 jobs from its Newcastle steel-making operations in May and June, due to reduced demand for its products from the mining industry.
The company sold 12.5 million tonnes of iron ore during the year, but expects to reach 13 million tonnes in 2014/15 after doubling capacity at its Whyalla Port.
Arrium said it expected iron ore prices to improve in 2014/15 and is targeting higher earnings from its mining consumables business.
It said earnings from its steel business would remain under pressure during the first half due to weakness in international and domestic markets but expects to benefit from an increase sales volumes.
The company announced an unfranked final dividend of three cents per share, which takes the full year dividend to nine cents, up from five cents a year ago.
