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World financial crisis

Profits slump in Europe, Australian economy shrinks

Article published on the 2009-03-04 Latest update 2009-03-04 09:07 TU

An empty shopping complex in Melbourne(Photo: Reuters)

An empty shopping complex in Melbourne
(Photo: Reuters)

Woeful financial announcements continue to hamper businesses across the world on Wednesday, as more companies announce falling profits and Australia enters economic contraction.

In Europe, announcements from a number of big firms demonstrate the continuing difficulties companies are having in dealing with the world financial crisis.

British broadcaster ITV announced net losses of 2.86 billion euros for 2008. Difficult advertising conditions and depreciating assets will mean 600 job losses and the sale of part of it's online services.

French banking group Credit Agricole saw profits shrink by 75 per cent in 2008 as they announced a net profit of 1.024 billion euros. Analysts’ projections of 1.2 billion euros were optimistic, and a fourth quarter loss could not help them match 2007’s net profit of 4 billion euros.

Elsewhere in French business, France Telecom announced their 2008 net profits on Wednesday. They saw a contraction of more than 35 per cent to 4.07 billion euros after deductions, in part due to higher taxes. Although they did report an unexpected increase in turnover, up to 53.5 billion euros.

While over in Germany, Adidas, the sportswear and equipment manufacturer, managed to buck the trend. They increased net profits by 16 per cent for 2008, making 642 million euros. A lower tax rate helped them in the fourth quarter, but they warned that higher costs for labour and materials could mean lower dividends.

In Australasia, announcements were not much better, Australia’s economy contracted by 0.5 per cent in the last quarter, below analysts’ expectations of 0.1 per cent growth. The announcement put pressure on the Australian dollar and the stock market index, which closed 1.6 per cent lower.

Indonesia’s central bank cut interest rates by 0.5 per cent on Wednesday, bringing the key rate to 7.75 per cent, in southeast Asia’s largest economy. Experts are worried that the credit crunch could affect Indonesia’s exports, especially after results from January, which showed that sales dropped by 36 per cent, compared to the same period last year, the biggest drop in more than 20 years.

And in China, banks have taken note of the government’s call for increased lending, as part of it’s stimulus package. In February new loans were extended to 93 billion euros, representing more than triple the amount of lending a year earlier. While in a budget announcement on Wednesday, the government said defence spending would increase by almost 15 per cent in 2009 to 55 billion euros. A marked increase, but less than last year’s increase of over 17 per cent, and less than the US, when compared to the proportion spent in terms of GDP (Gross Domestic Product).