06/12/2006 - 15:25

Alinta cuts net profit forecast

06/12/2006 - 15:25

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Alinta has released a detailed update on its financial and strategic outlook, disclosing that its net profit in the year to December 2006 is expected to be substantially lower than its previous guidance.

Alinta cuts net profit forecast

Alinta has released a detailed update on its financial and strategic outlook, disclosing that its net profit in the year to December 2006 is expected to be substantially lower than its previous guidance.

The company said its underlying operations would contribute $137 - $140 million, slightly up on its previous guidance.

However one-off costs and timing differences meant its net profit was expected to be $160 - $167 million, below the previous guidance of $176 - $180 million.

The negatives include "unforeseen business development costs" totaling $7 million.

The costs associated with implementing its merger with AGL Infrastructure are expected to increase this year to $17 - $20 million, though Alinta chief executive Bob Browning said this was purely a timing change.

"Its positive that we're incurring these costs quicker than we previously expected because it means we are integrating the AGL assets faster and the benefits (sic) of more rapid implementation is lower operating costs in 2007 and beyond," Mr Browning said in a statement.

Alinta also disclosed that the earnings flowing from its ownership of a 19.9 per cent stake in AGL would be $27 million, well below the previous estimate of $35 million.

This was because some hedge funds exercised options they held over Alinta's AGL stock, which reduced its holding and its dividend income.

On the upside, Mr Browning said the estimated annual cost savings from the AGL integration had been increased from $55 million to $70 million. Alinta expects to achieve that level of savings by the end of 2008.

Looking ahead to 2007, Alinta said its profit would increase to $265-$270 million.

This was based on a number of status quo assumptions concerning its shareholdings in APT and Alinta Infrastructure Holdings, and was before deducting $8-$11million in costs associated with the AGL integration.

Regarding the 36 per cent shareholding in APT, Mr Browning said "the ultimate outcome of that scenario could go either way at the moment".

One option was to sell its entire stake in APT but Alinta may also proceed with a full takeover, though Mr Browning said this would be at a price less than the $5.00 at which it acquired a 10 per cent stake.

"That's because we believe APT has paid too much for assets acquitted since, specifically GasNet and Allgas."

Mr Browning said Alinta was also considering a restructure of its asset ownership, following the AGL transaction and its current bid for Alinta Infrastructure Holdings (in which it has lifted its stake to 42 per cent).

He said the company has two types of assets: high capital, low growth assets with reliable cash flows and high growth assets.

"Fundamentally, what Alinta is trying to do is give investors exposure to those different types of assets but in isolation."

He said Alinta may consider a de-merger or may offer two securities out of one company.

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