Hot on the heels of the A2 Milk Company Ltd (ASX: A2M) full year results release on Wednesday, another dual-listed New Zealand company has just released its full year results.
This morning Air New Zealand Limited (ASX: AIZ) announced its results for the 12 months ended June 30 and revealed a sharp drop in profits.
According to the release, Air New Zealand reported profit before tax of NZ$374 million, down almost 31% on the NZ$540 million profit before tax it achieved in FY 2018. Net profit after tax was NZ$270 million and operating cash flow was NZ$986 million.
Management advised that the softer result was driven by operating revenue growth of 5.3%, which was offset by a NZ$191 million increase in the price of fuel and a temporary increase in operating costs. The latter was due to the airline seeking to improve network resiliency for its customers in the face of the global Rolls-Royce engine issues.
Despite the sizeable decline in profits, Air New Zealand has maintained its full year dividend. It declared a final 11 NZ cents per share dividend, taking the total ordinary dividends declared for the year to 22 NZ cents per share. The latest dividend will be paid to eligible shareholders on September 18.
The company's chairman, Tony Carter, said: "While we are disappointed that we did not meet the expectations we first set for ourselves at the start of the financial year, the fact is we are operating in a different demand environment than we were 12 months ago. To have achieved a solid result despite these headwinds speaks volumes about the extraordinary dedication and commitment of our people."
This view was echoed by its chief executive officer, Christopher Luxon. He said: "While the New Zealand market has seen foreign competitors reduce capacity or withdraw completely this year, we have continued to grow both domestically and internationally and to adjust our domestic fare structure to keep New Zealanders connected to each other and the world."
"In a society with rapidly changing customer expectations, we know we need to continue to lift our game. We invest a huge amount of time understanding what our customers value and how we can improve their experience, which is why we introduced free Wi-Fi onboard our long-haul flights earlier this year and announced changes to our Economy product offering. We can't wait to share some further exciting product developments and enhancements in the coming months, which we think our customers are going to love," Mr Luxton added.
What should you expect from Air New Zealand in FY 2020?
The release advises that based on current market conditions and assuming an average jet fuel price of US$75 per barrel, it is targeting a profit before tax in the range of NZ$350 million to NZ$450 million in FY 2020 (excluding the impact of the new accounting standard for leases). At worst this will be a decline of 6.5% and at best a sizeable rise of 20%.
Also scheduled to release its earnings today is fellow airline Qantas Airways Limited (ASX: QAN). Expectations are high for Qantas, with analysts expecting a bumper profit result thanks to its fuel-hedging and capacity management initiatives.
