Profits in mining sector on the rise
Australian company gross operating profits rose 6.9 percent in Q2 2016 on a seasonally adjusted basis. The result was largely driven by strong performance in the manufacturing and mining sectors writes Sam Green, Advisor at Options Educator, TradersCircle.
Profits in the mining sector rose 14.2 percent on a seasonally adjusted basis, this was despite a fall in volumes, which would indicate a rise in prices received by the mining sector for the quarter.
Profits in the manufacturing sector rose 22.6% on a seasonally adjusted basis, with only a slight increase in volumes. This is a positive sign for Australia’s much-maligned manufacturing sector. This comes as Australian manufacturing PMIs have shown expansion in the sector for each of the thirteen months to July; with the expansion finally coming to a halt in August.
Profits in the constructing sector plunged during the quarter, falling 27.7 percent during the quarter, despite a rise in volumes, which may indicate that the supply of goods and services from the construction sector is starting to become saturated, after a period of strong property price growth.
A seasonally adjusted estimate for wages and salaries rose 0.8 percent during the quarter, with a rise of 2.8 percent for the year to the June quarter. With CPI tracking at an annualised rate of approximately 1 percent, this represents positive real wages growth, which is an encouraging sign for the Australian economy.
The rise in profits for the quarter came after a fall of 4.4 percent in the previous quarter. Despite the strong performance in the 2nd quarter, Australian company profits are exactly where they were a year ago on a seasonally adjusted basis; and they have fallen 4.3 percent on a trend basis.
Although the Q2 profits result was very strong, (and real wages growth in a developed nation is especially positive), there was no yearly growth in gross operating profits. Additionally, manufacturing and services PMIs have started to fall since the end of the quarter; and the strong quarterly profit growth is therefore not solid evidence of a robust economic turn-around in Australia.
When the experts at Next Investors have a stock pick, it may pay to listen.
The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.
They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.
Click the link below to see what they are currently investing in.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.