February 13, 2019 / 2:51 AM / 6 months ago

Australia's auto sector suffers earnings hit as consumer spending slows

* Slowing consumer spending hits classifieds, car repairs

* Classified site Carsales posts profit drop, shares hit 5wk low

* Parts firm Bapcor posts sales slowdown, shares hit 7 wk low

By Tom Westbrook

SYDNEY, Feb 13 (Reuters) - Australia’s auto sector has become the latest casualty of slowing consumer spending and tighter lending, with classifieds site Carsales.Com Ltd and parts dealer Bapcor Ltd turning in weak earnings and seeing their shares drop.

Retail spending data, which does not include car sales, had its worst quarter in a year in December and has been on investors’ radar since the central bank last week downgraded its economic outlook and raised the possibility of an interest rate cut to stimulate growth.

Half-year results at Carsales, which posted a profit drop and decline in new-car display ads, and Bapcor, which reported a slowdown in sales growth, are the latest figures illustrating the deepening financial fallout of consumers hitting the brakes.

“People will be joining the dots on a range of things” in the wake of the central bank’s downgrade, said analyst Tom Piotrowski at Commonwealth Securities.

“The moderation in house prices is a fundamental driver of consumer sentiment and now that washes out in to the practical examples of people being more likely to sell a car rather than buy one,” he said.

In the case of auto sales, tougher loan requirements at banks and a once-in-a-generation downturn in property prices - which tends to make consumers save more and spend less - have also weighed on sentiment and made credit much harder to access.


Classifieds site Carsales posted an 82 percent plunge in profit to A$11.5 million ($8.1 million) for the six months to Dec. 31 as sales costs rose and because it impaired its half-stake in finance broker Stratton in response to regulatory change.

Display advertising, mostly purchased by dealers selling new cars and which a year earlier comprised 18 percent of total sales, slumped 16 percent to A$29.9 million.

“Where we’re feeling it is in new cars,” Chief Executive Cameron McIntyre told Reuters in a phone interview.

“That’s because of two major factors: One is a tightening of credit... the second one is the wealth effect,” he said. “People feel that the value of their properties is declining (and) rather than buy a A$45,000 brand new car (they) might buy a A$35,000 second-hand one.”

Carsales shares posted their steepest decline in nearly 6 months, falling 5.4 percent to A$11.47, a five-week low. The broader market was flat.


Bapcor, which sells and distributes auto parts and runs mechanic workshops, said challenging market conditions slowed revenue growth. It also cut the upper range of its full-year profit guidance.

Its shares subsequently fell a record 9.5 percent to a seven-week low.

“We’re seeing workshops not as busy,” Chief Executive Darryl Abotomey told the Australian Financial Review.

“People are uncertain. People have tightened up”. ($1 = 1.4086 Australian dollars) (Reporting by Tom Westbrook; Editing by Christopher Cushing)

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