Manufacturing slumps despite rate cuts

AUSTRALIA'S manufacturing sector has slumped to its weakest level in nearly three years, gaining little traction from a steady run of interest rate cuts.

The Australian Chamber of Commerce and Industry-Westpac survey of industrial trends showed its composite index dropped to 46 points in the March quarter from 50.4 points in the three previous months.

This was the weakest result since June 2009, and at a level below 50 points indicates the manufacturing sector is in contraction.

"The Australian manufacturing sector remains under considerable pressure despite the substantial rate cuts delivered to date," Westpac economist Elliot Clarke said in the report released today.

He said while the 175 basis points of official interest rate cuts since November 2011 has helped manufacturers exposed to residential construction, the overall sector is weak.

"As the mining investment boom draws to a close, further monetary accommodation will likely prove necessary," he said.

However, the survey's expected composite index rose to 53.2 points in the March quarter from 52.8 points, indicating respondents expect a modest improvement in conditions.

Other components showed its labour index fell to a level consistent with weak annualised employment growth of around one per cent, and while profit expectations improved, they remained well below average levels.

Investment intentions in the manufacturing sector also remained weak.

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Billabong slumps on $537m loss

WAVE OF INTEREST: Two consortiums have made $1.10-a-share offers for struggling retailer Billabong. Picture: Adam Head Source: The Courier-Mail

SHARES in Billabong have fallen back toward their all-time low after the surfwear retailer suffered a $537 million first half loss.

The company has also downgraded its expectations for underlying earnings in the full financial year, with retail conditions still poor, particularly in Europe.

Billabong's net loss in the six months to December 31 compares to a $16.1 million profit in the previous corresponding period. It was caused primarily by $567 million in impairments to the company's brands and value, taken as part of its company-wide restructure.

Billabong shares hit a low of 84.5 cents after the result was released today, close to its lowest ever price of 79 cents. At 10.41am AEDT the price had recovered a little to be at 87 cents, down four cents, or 4.4 per cent.

Today's result comes as Billabong continues talks with two parties that have made takeover offers, and due diligence is scheduled to conclude at the end of March.

In January, the company received a joint takeover bid from US retailer VF Corporation - owner of The North Face and Timberland outdoor clothing brands - and investment firm Altamont Capital Partners. The $523 million offer matched an offer received in December from the Sycamore consortium led by US-based Billabong executive Paul Naude.

Because of weaker-than-expected sales in the year to date, Billabong now anticipates its underlying earnings in the year to June 30 will be between $74 million and $85 million, down from its previous guidance of $85 million to $92 million.

Chief executive Launa Inman also said the benefits of the company's reduction in stores and suppliers would not be seen in the 2012/13 financial year.

No interim dividend will be paid.

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