By Clyde Mooney

Yesterday (May 3), amid intense political debate and record-breaking exchange rates, Australia’s largest gaming machine manufacturer held its AGM to address slumping revenues and plunging profits.

Aristocrat had previously forecast 10 to 20 percent net profit over 2011 and this was reiterated at the AGM to a welcome shareholder response.

However, the record highs being enjoyed by the Australian dollar and a bleak US economic outlook have seen the gaming giant’s revenue drop 7.9 percent, with profits experiencing similar falls.

CEO Jamie Odell explained that every one cent increase in the Australian currency against the greenback equates to an annual profit loss of $1million.

The company’s growth guidance was estimated assuming an average exchange rate around parity.

Aristocrat believes that sales will gain momentum due to new products in Australia and the United States.

“We anticipate that performance will be heavily skewed towards the second half [of the year], as new product releases gain momentum,” said Mr Odell.

Although games and sales in the US provide the majority of Aristocrat’s earnings and revenue, the company intends to improve its domestic performance, too.

“In Australia, 2010 results were unacceptable. Sales performance fell due to a lack of widescreen offering, weak game performance in NSW and Queensland and a portfolio that was too heavily focused on 1c games. Revenue for the year declined 33.8 percent and profit fell 68.3 percent compared to the prior corresponding period,” reported Odell.

The dramatic local performance may have in part been the result of Aristocrat’s own policies, explains chairman, Ian Blackburne: “Over several years, the company had lost focus on innovative product and became complacent, which gave our competitors the opportunity to steal market share. We now find we are facing the most intense competitive conditions ever.”

The situation has had dramatic effects on the company’s share price listing, despite Aristocrat’s concession that its share price is one of the most volatile on the Australian stock exchange.

Last month share value slumped 18 percent as the Australian dollar surged and American game manufacturers Bally and WMS announced weak quarters in what is also Aristocrat’s biggest market.

The combination of reduced American profits and the realization of lost market share may serve to bolster Aristocrat’s intentions at home.

Yesterday shares closed unchanged at $2.73 – down thirty percent from the high of around $3.90 experienced towards the end of 2009.


The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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