Several AE Portfolio Holdings have reported fiscal 2012 results since the August issue of Australian Edge was published, including three Conservative Holdings and three Aggressive Holdings.

Numbers were consistently solid overall, with three Holdings announcing dividend increases and a fourth affirming an increase it had previously announced. Companies continue to trim debt and/or refinance on better terms. Another consistent theme is that management teams remain concerned about the state of the global economy as well as how sluggishness abroad will find its way to Australia.

Nevertheless, our Holdings, at least as far as the following six are concerned, continue to establish solid track records of building wealth over the long term and to make the case for Australia as a key market for investors interested in growth plus income.

Conservative Holdings

AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY) reported underlying profit of AUD482 million for the 12 months ended Jun. 30, 2012, up 11.8 percent from the prior corresponding period and in line with management’s guidance. Underlying profit strips out the impact of one-time items.

Revenue for the period was AUD7.456 billion, up 5.4 percent, as retail revenue rose 14.8 percent and gross margin per customer expanded by 6 percent. Operating earnings before interest, taxation, depreciation and amortization (EBITDA) on the merchant side rose 20.3 percent to AUD628.5 million. Overall underlying operating cash flow before interest and taxation grew by 4.9 percent to AUD750.7 million.

Statutory net profit after tax (NPAT), which includes costs associated with the Loy Yang A power station and coal mine acquisition as well as changes in the fair value of hedging contracts, was down 79.4 percent to AUD114.8 million.

AGL added 180,000 customers during fiscal 2012, with new signups in all Australian states in which it operates. The company’s organic growth strategy resulted in a net increase of 32.5 percent in New South Wales customers. Management noted during its conference call to discuss results that these additions came at a lower average cost than was incurred during the privatization process in the state. It also anticipates New South Wales becoming its largest market for retail electricity by the time it reports results for the first half of fiscal 2013, which will happen in late February 2013.

The company boosted its final distribution 6.6 percent to AUD0.032 per share, bringing the full-year payout, including the AUD0.28076 interim dividend, to AUD0.60076 per share.

Management said it would achieve good growth in its merchant energy business in fiscal 2013 due to the Loy Yang acquisition but also forecast continuing soft demand for electricity.

AGL, as is its custom, didn’t provide numeric guidance for the current year. Management did, however, project “continued growth in fiscal 2013 underlying earnings per share.” The company will host its annual general meeting on Oct. 23, 2013, at which time management will provide further details on its fiscal 2013 outlook.

AGL Energy, which continues to add assets and customers terms favorable to consistent dividend growth, is a buy under USD16 on the Australian Securities Exchange (ASX).

AGL also trades as an American Depositary Receipt (ADR) on the US over-the-counter (OTC) market; it represents one ASX-listed share. AGL’s ADR is a buy under USD16.

CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY), which makes blood plasma derivatives, vaccines, anti-venom, and cell culture reagents, posted 4.5 percent growth in reported net profit after tax (NPAT) to AUD982.6 million. This includes an unfavorable foreign exchange impact of AUD108 million. On a constant currency basis NPAT was up 16 percent to AUD1.1 billion.

Sales revenue was AUD4.4 billion, up from AUD4.2 billion a year ago and 12 percent in constant currency terms. CSL Behring, which makes plasma proteins for biotherapeutics and is CSL’s largest operating division, posted sales of AUD3.6 billion, up 11 percent in constant currency terms.

Immunoglobulin sales grew by 15 percent as did albumin sales, while specialty products posted 18 percent growth.

Overall cash flow from operations grew by 14 percent to AUD1.16 billion.

Cash on hand as of Jun. 30, 2012, was AUD1.16 billion, with debt outstanding of AUD1.27 billion. CSL spent AUD355 million on research and development during the year.

Management announced a final dividend of AUD0.47 per share along with operating results, up from AUD0.45 a year ago, bringing the full-year payout to AUD0.83 per share, up from AUD0.80 during fiscal 2011.

Management noted in a statement announcing these results that CSL “anticipates trading conditions to be similar to those of fiscal 2012, with global demand tempered by ongoing economic pressures” but forecast profit growth of approximately 12 percent in constant currency terms. Management is also contemplating another AUD900 million share buyback program, the execution of which would lift fiscal 2013 earnings per share.

CSL has posted an impressive 41.86 percent total return in US dollar terms since we added it to the AE Portfolio Conservative Holdings in October 2011, running well past our buy-under target. The final and full-year dividend increases justify an increase in that that target to USD37.

CSL is now a buy under USD37 on the Australian Securities Exchange (ASX) using the symbol CSL and the US over-the-counter (OTC) market using the symbol CMXHF.

CSL also trades as an American Depositary Receipt (ADR) on the US under the symbol CMXHY. The ADR is worth 0.5 regular, ASX-listed shares. CSL’s ADR is a buy under USD18.50.

Envestra Ltd (ASX: ENV, OTC: EVSRF), which is one of Australia’s biggest distributors of natural gas to homes and businesses, posted a 64 percent increase in statutory net profit after tax (NPAT) to AUD73.9 million. Revenue was up 10 percent to AUD468.6 million, while earnings before interest, taxation and depreciation (EBITD) rose 14 percent to AUD331.1 million and cash flow from operating activities surged 25 percent to AUD171.8 million.

Management cited “tight operating and funding cost” controls as the primary drivers of profit growth, in addition to the double-digit boost in revenue that stemmed from annual tariff increases of 15 percent in South Australia and 13 percent in Queensland approved by the Australian Energy Regulator with effect as of July 2011.

Total operating costs were up 3 percent, or AUD4.2 million, mostly due to marketing costs related to efforts to increase customer connections and long-term gas volume growth. Net finance costs, meanwhile, were down 2 percent to AUD171.2 million, despite the fact that net debt increased by AUD35 million. This reflects Envestra’s ability to refinance at better rates. Net debt divided by net debt plus market cap, or gearing, declined during the fiscal year to 64 percent from 68 percent.

Gas delivered was down 6 percent to 50 petajoules due to warmer weather, particularly during the winter of 2011.

Envestra increased its capital budget by 36 percent to AUD176.1 million, as management expanded and upgrade its distribution network. A total of 260 kilometers of mains were laid during the 12 months ended Jun. 30, 2012, while 331 kilometers of old mains were replaced. Management expects to spend approximately AUD230 million during fiscal 2013. Envestra now has 1.1 million customers in Australia, served by 23,600 kilometers of pipelines.

Envestra will pay an interim dividend of AUD0.029 per share in October, consistent with what it paid during the prior corresponding period. Total dividends paid during fiscal 2012 were AUD87.5 million, or AUD0.058 per share, while distributable cash for the year was AUD155.1 million. The cash flow-to-dividend coverage ratio for fiscal 2012 was 1.8 times, up from 1.7 times in fiscal 2011.

Management remains focused on retaining cash to cover more of its ambitions capital program, as it works to improve its BBB- credit rating with Standard & Poor’s.

Management forecast profit after tax of AUD100 million for fiscal 2013, subject to factors such as weather as well as an upcoming decision by the Australian Energy Regulator on the Victorian Access Arrangement.

Management did stress that it “remains the company’s objective to improve distributions” while maintaining a prudent financial position” and that it will review the fiscal 2013 payout policy following the regulatory action in Victoria.

Envestra has posted a 45.08 percent total return in US dollar terms since it debuted as an original member of the AE Portfolio in September 2012. It currently trades about 7.5 percent above our buy-under target. Envestra is a strong buy, however, on dips to USD0.80.

Aggressive Holdings

BHP Billiton Ltd (ASX: BHP, NYSE: BHP) posted a 0.7 percent increase in fiscal 2012 revenue to USD72.23 billion from USD71.74 billion in fiscal 2011. Underlying earnings before interest and taxation (EBIT) decreased by 15 percent to USD27.2 billion, while profit attributable to shareholders excluding exceptional items declined by 21 percent to USD17.1 billion.

Exceptional items totaling USD1.7 billion contributed to a 35 percent decline in attributable profit to USD15.4 billion. Exceptional items included, among others, the previously announced impairment of the Fayetteville dry gas assets acquired from Chesapeake Energy in March 2011 of USD1.8 billion, or USD2.8 billion. A USD637 million non-cash income tax credit was recognized following the passage of Australia’s Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension into legislation in March 2012.

Lower average realized prices reduced underlying EBIT by USD2 billion. The impact was most apparent in BHP’s base metals and iron ore businesses, where weaker prices reduced underlying EBIT by USD1.6 billion and USD1.3 billion, respectively. Aluminium, manganese and stainless steel materials posted underlying EBIT that was lower by a combined USD1.2 billion.

On the positive side, a 19 percent increase in the average realized price of oil and a 29 percent rise in the average realized price of liquefied natural gas contributed to a USD1.5 billion increase in underlying EBIT. Stronger thermal and metallurgical coal prices added USD434 million.

Higher costs, excluding the impacts of inflation, exchange rate volatility and non-cash items, reduced underlying EBIT by USD2.7 billion. Labor and contractor cost increases accounted for approximately a third of the impact, while a strike at Queensland Coal created additional pressure.

Underlying EBIT margin remained at a robust 39 percent, while underlying return on capital was 23 percent. Management reported annual production records at 10 operations. Net operating cash flow of USD24.4 billion was down by 18.9 percent.

BHP has 20 major projects currently in progress with a combined budget of USD22.8 billion. Management did, however, state that “no major project approvals are expected” during fiscal 2013. Management also announced that it was abandoning its USD30 billion expansion plan for the Olympic Dam copper-uranium-gold mine in South Australia.

Gearing of 26 percent remains within the parameters defined by BHP’s A credit rating. Management had previously announced an 11 percent increase in BHP’s fiscal 2012 dividend. BHP Billiton is a buy under USD40 on the Australian Securities Exchange (ASX). BHP also trades as an American Depositary Receipt (ADR) on the New York Stock Exchange. The ADR is worth two ordinary ASX-listed shares. BHP’s ADR is a buy under USD80.

Mineral Resources Ltd (ASX: MIN, OTC: MALRF) posted a 60.9 percent rise in net profit after tax (NPAT) for fiscal 2012 to AUD242.2 million on solid increases in  underlying sales for both its services segment as well as its increasingly important commodities production unit. Normalized NPAT grew 29.1 percent to AUD177.1 million, while operating cash flow more than doubled, to AUD242.9 million.

Overall revenue was AUD925.9 million, up 52 percent from AUD609.5 million in fiscal 2011.

Management declared a final dividend for fiscal 2012 of AUD0.30 per share, up from AUD0.27 per share for fiscal 2011. Mineral Resources paid a total of AUD0.46 per share for the full year, up 9.5 percent from the prior corresponding period.

It’s management’s policy to distribute approximately 50 percent of normalized NPAT to shareholders

Mineral Resources provides specialized contract crushing, materials handling and mining services to major miners including BHP Billiton Ltd (ASX: BHP, NYSE: BHP), Fortescue Metals Group Ltd (ASX: FMG, OTC: FSUMF, ADR: FSUGY) and Rio Tinto Ltd (ASX: RIO, NYSE: RIO). T

his segment still generates the largest share of revenue and grew by 23.9 percent during fiscal 2012. Growth in the segment is focused on surpassing the 100 million metric tons per annum (MTPA) annual crushing capacity in fiscal 2013. On Jul. 4, 2012, the unit was awarded a AUD1 billion, 10-year build-own-operate contract by Fortescue for a 25 (MTPA) expansion of operations at the Christmas Creek iron ore mine.

The company added its own mining and exporting operations with the November 2011 opening of its Carina Iron Ore mine, which exported 1,875,240 metric tons of iron ore through Jun. 30. Mining generated revenue of 191.6 million for fiscal 2012. Mineral Resources’ expansion plans in mining are currently focused on the Phil’s Creek iron ore mine in the Pilbara.

Mineral Resources remains a buy for aggressive investors under USD13.

Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY) reported a statutory net profit after tax (NPAT) of AUD980 million for fiscal 2012, up from AUD186 million in fiscal 2011. Underlying NPAT, excluding the impact of financial instruments as well as a gain on dilution of Origin’s Australia Pacific LNG stake, grew by 33 percent to AUD893 million due to a full year contribution from New South Wales energy assets acquired in March 2011, lower exploration expenses and higher commodity prices.

Operating cash flow after tax was AUD1.78 billion, up 12 percent from AUD1.58 billion. Underlying earnings per share climbed 16 percent to AUD0.826, while the company paid a full-year dividend of AUD0.50 per share. This rate was flat with fiscal 2011’s total.

Australia Pacific LNG, Origin’s main future growth driver, is on track to make first LNG deliveries in 2015. The two-train, AUD23 billion project has now been fully sanctioned by its owners. (Origin’s stake is now 37.5 percent.)

Energy Markets generated growth of in underlying earnings before interest, taxation, depreciation and amortization (EBITDA) of 33 percent to AUD1.56 billion, largely on the contribution of the new NSW assets. Underlying EBITDA for Exploration and Production rose 23 percent to AUD329 million on lower exploration expenses and higher commodity prices, though operating costs were up.

AP LNG posted a 25 percent decline in earnings to AUD47 million, primarily because of the dilution of Origin’s ownership stake from 50 percent to 42.5 percent following the first subscription arrangement with China Petroleum & Chemical Corp Ltd, better known as Sinopec (Hong Kong: 386, NYSE: SNP). Sinopec has signed on for additional LNG, drawing Origin’s stake down to a current 37.5 percent. Operating costs were also higher in order to support expanded operations and to meet increased regulatory requirements.

AP LNG’s proved plus probable reserves increased from 11,775 petajoule equivalent (PJe) as of Jun. 30, 2011, to 13,111 PJe as of Jun. 30, 2012.

Contact Energy’s underlying EBITDA increased by 16 percent to AUD400 million, primarily because of reductions in gas and carbon unit costs and improved commercial and industrial margins.

Along with its fiscal 2012 results Origin announced the launch of a AUD625 million syndicated bank loan with tranches of four and five years to refinance debt maturing during the current fiscal year. Management expects to wrap up negotiations by the end of September.

Management described the outlook for fiscal 2013 as “more challenging than in prior years,” emphasizing the fact that it would see less growth from new capital investments as well as additional murkiness due to regulatory uncertainty, particularly related to pricing decisions made by the Queensland Competition Authority. Origin has appealed these decisions. The outlook is also cloudy due to continuing uncertainty surrounding the global and the Australian economies.

Management is targeting 11 percent underlying EBITDA growth for Energy Markets and expects a “higher contribution” from Exploration and Production. It also expects a “higher contribution from Contact Energy. All told management anticipates underlying EBITDA for fiscal 2013 to rise by “around” 10 percent and for underlying NPAT to be in line with fiscal 2012.

Origin Energy is a buy under USD15 on the Australian Securities Exchange (ASX) using the symbol ORG or on the US over-the-counter (OTC) market using the symbol OGFGF. Origin Energy also trades as an American Depositary Receipt (ADR) on the US OTC market. Origin’s ADR, which is worth one ordinary, ASX-listed share, is a buy under USD15.

Conservative Holdings

• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–Aug. 27 Flash Alert
• APA Group (ASX: APA, OTC: APAJF)–Aug. 24 Down Under Digest
• Australand Property Group Ltd (ASX: ALZ, OTC: AUAOF)–Jul. 27 Down Under Digest
• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–May 2 Down Under Digest (FY 2012 first half, ended Mar. 30, 2012), Nov. 5, 2012 (estimate, FY 2012, end Sept. 30, 2012)
• Cardno Ltd (ASX: CDD, OTC: COLDF)–Aug. 14, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–Aug. 27 Flash Alert
• Envestra Ltd (ASX: ENV, OTC: EVSRF)–Aug. 27 Flash Alert
• M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF)–Aug. 27, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–Aug. 10 Down Under Digest
• Transurban Group (ASX: TCL, OTC: TRAUF)–Aug. 10 Down Under Digest

Aggressive Holdings

• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–Aug. 27 Flash Alert
• GrainCorp Ltd (ASX: GNC, OTC: GRCLF)–May 23 Down Under Digest (FY 2012 first half, ended Mar. 30, 2012), Nov. 14, 2012 (estimated, FY 2012, end Sept. 30, 2012)
• Grange Resources Ltd (ASX: GRR, OTC: GRLLF)–Aug. 30, 2012 (confirmed, FY 2012 1H, end Jun. 30, 2012)
• Mineral Resources Ltd (ASX: MIN, OTC: MALRF)–Aug. 27 Flash Alert
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–Aug. 13, 2012 (confirmed, FY 2012, end Jun. 30, 2012)
• New Hope Corp Ltd (ASX: NHC, OTC: NHPEF)–Sept. 20, 2012 (estimate, FY 2012, end Jul. 31, 2012)
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–Aug. 21, 2012 (confirmed, FY 2012 1H, end Jun. 30, 2012)
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–Aug. 27 Flash Alert
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–Aug. 10 Down Under Digest
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–Aug. 29, 2012 (confirmed, FY 2012, end Jun. 30, 2012)