Earnings season: soft results expose agri and mining sectors

The major theme from announcements this week exposed the weakness of the agricultural and mining sectors and set a negative tone for the upcoming earnings season. Lending mortgage insurance (LMI) provider Genworth Mortgage Insurance Australia, which controls around 41% of Australia's LMI market, posted a rise in its loss ratio, which represents claims it must pay out, from 19.6% to 22.1% during the six months to June. The company attributed the poor result primarily to a jump in the number of delinquent loans, including those in the resource states of Western Australia and Queensland. Genworth reported a net profit of $113 million for the six months ended June 30, a 25% plunge from 2014. ANZ also cited increased provisions for future losses in its mining and agriculture exposed lending business. Further weakness in the mining sector was felt by downgrades when both Downer EDI Limited and Orica Limited issued results and guidance below market expectations. Both companies cited reduced demand from mining divisions as reasons for the poor results and forecast with further declines likely.