Global surfwear brand Billabong is bracing for cuts to earnings as the rising Australian dollar erodes the value of overseas sales.
The Gold-Coast-based company told shareholders at its annual meeting yesterday its after-tax profit had dropped more than 13 per cent to $152.8 million last financial year, with the financial crisis having a big impact on US retail markets.
Billabong International, which owns surfwear, skateboarding, sunglasses and footwear brands, generates more than 80 per cent of its sales overseas. Chief executive Derek O'Neill said he believed the tide had turned in the US and the company aimed to boost its sales margins in the next three years.
The company predicts 5 per cent growth in net profit this financial year if exchange rate variability is not taken into account.
Mr O'Neill said the company's after-tax profit would drop by $500,000 for each US1¢ rise in the monthly average value of the Australian dollar above US92¢.
''I'm not unhappy about the rising Australian dollar,'' he said. ''It has a number of positive benefits. It's just when there is a massive rise in a very short period of time it affects our profits immediately.''
The group's directors put forward a freeze on executive base pay as part of its remuneration report to shareholders - a document that was rejected by 11 per cent of those who voted.
Questioned about the ''huge amount of variability'' in the company's day-to-day share price, chairman Ted Kunkel said it was affected by US retail reports and rapid appreciation of the Australian dollar.
Billabong shares fell 37¢ yesterday to $10.58. (Credit: Fairfax)
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