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By Robert Fenner
Dec. 19 (Bloomberg) -- Billabong International Ltd. fell by
a record in Sydney trading after the Australian surf-wear maker
said first-half profit may fall as much as 26 percent and
flagged a review of its capital structure.
The stock slumped 44 percent to A$2.03 at the close of
trade, the largest drop since it was listed in 2000. The decline
cut Billabong’s market value to A$518 million ($514 million),
compared with A$1.5 billion as of the June 30 fiscal year end.
Sales stalled in the company’s three key markets amid a
cool start to the Australian summer, a drop in European demand
and a decline in December sales in North America amid concern an
economic recovery may weaken. The forecast comes less than two
months after Billabong predicted a “strong” rise in earnings.
“This is what happens when you guide to profit growth and
come out with a completely different result,” said Peter Esho,
Sydney-based chief market analyst at City Index, a London-based
provider of trading services in bond, stock and commodities
markets. “It really diminishes trust with the market to have
such a turnaround in performance.”
Goldman Sachs Group Inc. has been hired to review all
alternatives for Billabong’s balance sheet, with an equity sale
“not the preferred path,” according to a filing. The review
comes “in light of the existing operating environment and the
risk for further deterioration,” Billabong said in the filing.
Revenue Growth
The review may consider asset sales, cuts to dividends and
an equity raising, Craig Woolford, an analyst at Citigroup Inc.,
wrote in a note to clients today.
Earnings before interest, tax, depreciation and
amortization will fall to between A$70 million and A$75 million
in the six months ending December from A$94.6 million a year
earlier, the Gold Coast, Australia-based company said.
The forecast is 30 percent less than Citigroup’s profit
estimates, Woolford wrote.
The pace of Billabong’s first-half revenue growth has
halved since September as retailers defer purchases. Sales in
the five months ended Nov. 30 rose 12 percent, compared with the
25 percent pace posted for the three months ended Sept. 30.
“The sales growth trend has deteriorated significantly in
this critical retail period,” Billabong said.
For Related News and Information:
Billabong income statement: BBG AU <Equity> FA SS <GO>
Analyst recommendations: BBG AU <Equity> ANR <GO>
Top Australian news: TOP AU <GO>
--Editors: Dave McCombs, Suresh Seshadri
To contact the reporter on this story:
Robert Fenner in Melbourne at +61-3-9228-8705 or
rfenner@bloomberg.net
