From Credit Suisse:
■ As reporting season commences, once again we highlight our CS forecasts and common themes we believe will play out this time around.
■ Risk to consensus estimates is still to the downside. On 15 December 2015 we revised commodity prices down and we remain bears compared with Consensus earnings estimates for most stocks. Consensus earnings have been cut, but not enough in our view.
■ Capex cuts continue. with commodity prices at cyclical lows, capex cuts have been the norm in the sector. We expect announcements of further cuts given limited prospects for a near term recovery in commodity prices.
■ Diversfieds’ focus is on credit ratings and cash conservation. Among the large cap diversifieds, questions continue on credit ratings and balance sheet strength. We anticipate BHP will cut its dividend by ~50% and we look for underlying 1H profit of US$978m. We feel Rio’s div is safe for the time being but US$35/t Fe forecasts raise the spectre of div downgrades in 2017. Rio FY15 underlying profit is forecast to be US$4.5bn. An S32 inaugural dividend is unlikely given 1H FY16 NPAT is forecast to be a modest US$30m.
■ Mid cap preview. While CS forecasts iron ore prices will weaken in 2H CY16, prices have been reasonable and for FMG we expect 1HFY16 revenue of ~US$3.5bn and Underlying NPAT $435m (inclusive of the gain on debt repurchases). Coal prices continue to be placed under pressure with little near term reprieve expected on our CS price deck. For WHC we forecast 1HFY16 revenue of A$571m and Underlying NPAT of $13.5m. In the case of NHC we forecast revenue of A$219m and Underlying NPAT of $31m. Nickel has been one of the most unloved commodities in the past year with supply cuts needed to fix fundamentals. For IGO we forecast 1HFY16 revenue of A$217m and Underlying NPAT of $14m. WSA 1HFY16 we expect revenue of A$122m and Underlying NPAT of $3.2m. Alumina prices fell off the side of the planet in the past year but just recently begun to stabilise. We anticipate a tough 1HFY16 for AWC with Underlying NLAT of US$80m and no dividends forecast until 1HFY17. Despite lower USD denominated mineral sands prices, the weaker AUD has provided a tailwind. ILU has pre-announced its key financial metrics for FY15 with total mineral sands revenue of A$820m and total cash cost of production of $393m. We anticipate Underlying NPAT of $95m in FY15.
