Australia’s Macquarie expects biggest profit decline in 15 years due to falling raw material prices By Reuters

Byron Kaye and Sameer Manekar

SYDNEY (Reuters) – Australia’s top investment bank Macquarie Group (OTC:) said its annual profit fell by a third as stabilizing energy markets hit its commodities trading division and cut profits from the sale of green energy assets. This is the largest decline in 15 years.

Friday’s results come after years of blockbuster gains in the financial giant’s commodities division, which has benefited from unusually volatile European energy markets following Russia’s invasion of Ukraine and increased demand for oil and gas from North America.

Profits from the Sydney-based company’s main source of revenue fell 47 per cent in the financial year ended March 31. Combined with the company’s decision to retain green energy assets in its broader portfolio, overall profits in the commodities division fell 32% to A. 3.5 billion dollars.

The company reduced its final dividend to A$3.85 per share from A$4.50 a year ago.

“It’s definitely been a more challenging environment from a realization standpoint,” Chief Financial Officer Alex Harvey said on a call with analysts, referring to the sale of green energy assets.

Macquarie shares fell 2%, compared with a 0.6% rise in the wider market, as analysts said the performance in the commodities sector was steeper than expected but the headline result was in line with forecasts.

“Net, the quality looks soft in the headlines, but the results are shown inline,” Jarden analysts wrote in a client note.

The company did not provide specific earnings guidance, but said it expects near-term raw material revenues to be “broadly consistent” with 2024 results and higher investment-related earnings from green investments.

For Macquarie, “FY24 is the worst year with an expected rebound in activity in FY25,” Jefferies analysts said in a note.

Macquarie’s commodities business delivered almost half of its revenue, but its Australian retail banking division grew, providing about a fifth of total revenue, the bank said. The sector has grown mortgages faster than the overall market and now accounts for 5.3% of A$2 trillion in home loan volume.

Macquarie Capital, the company’s investment banking and advisory arm, which provides about a sixth of its revenue, increased revenue by 31% thanks to growth in its private credit portfolio.

The decline in profits has translated into lower wages at a company nicknamed the ‘Millionaire Factory’.

According to Macquarie’s annual report published on Friday, its highest-paid employee, CEO Shemara Wikramanayake, earned A$25 million (down from A$33 million the previous year) due to reduced profit sharing. Earned A$).

Nick O’Kane, Macquarie’s former head of products and global markets, was previously the company’s highest-paid employee, earning just A$1 million, down from A$57 million the previous year, after leaving the company in March without being paid the sum. A$ was raised. The time required to earn a share of profits for the year.

($1 = 1.5228 Australian Dollars)