Telstra 1st-Half Profit Rises 25% on Cost Cuts (Update1)
By Mathew Carr and Richard Noonan
Melbourne, March 7 (Bloomberg) -- Telstra Corp., Australia's largest telecommunications carrier, said first-half profit rose 25 percent, reflecting cost cuts and gains from an accounting change and other investments.
Net income in the six months to Dec. 31 rose to A$2.62 billion ($1.34 billion), or 20 cents a share, from the year- earlier A$2.1 billion, or 16 cents. Sales increased 17 percent to A$11.3 billion.
``It looks very much as I expected,'' said Scott Maddock, who holds Telstra shares as part of the A$3.1 billion he helps manage at Rothschild Australian Asset Management Ltd. ``Operating expenses were kept to a relatively low increase according to the company.''
Melbourne-based Telstra has been pursuing growth in its Internet and wireless business to offset lost market share in its local and long-distance telephone services.
The latest results included a A$478 million gain from an accounting change to Telstra's employee pension plan. The company also generated A$652 million from asset sales and took A$140 million in writedowns on some investments.
Telstra shares rose 12 cents, or 2 percent, to A$6.57.
The company said it cut its staff by 8.9 percent to 47,075 in the latest half from a year ago. That helped cut labor costs by 2.2 percent to A$1.57 billion.
Telstra said total expenses increased 7.3 percent to A$6.77 billion, as asset sale costs rose as well as network charges.
The company said earnings before interest and tax rose 10 percent to A$3.5 billion in the half and that it was on track to have double-digit EBIT growth in fiscal 2001. The first-half performance exceeded an 8.75 percent increase forecast by JP Morgan.
Cost Cutting
Telstra said it now expects to generate more savings from its cost cutting program than previously forecast. It set a A$650 million target, with A$550 million to be reached in fiscal 2001 and another A$100 million in fiscal 2002. It expects to have more than A$100 million in savings in fiscal 2002, though it wasn't specific.
Telstra, 50.1 percent owned by the Australian government, has faced falling prices in its long-distance and wireless units as a result of competition from Telecom Corp. of New Zealand, Cable & Wireless Optus Ltd., Vodafone Group Plc and others. Local call revenue fell 21 percent to A$1.1 billion.
Four analysts surveyed by Bloomberg News expected Telstra to earn A$2.8 billion in the half. Forecasts ranged from A$2.7 billion to A$3 billion.
The results don't yet include the impact of three joint ventures formed by Telstra with Hong Kong's Pacific Century CyberWorks Ltd.
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