THE results from Qantas and CSL show two very different faces of life in the time of global financial cholera -- and two important aspects of our business and economic future.
They are two very different companies. They unveiled very different results. The Qantas profit was slashed by almost 90 per cent. CSL's leapt 63 per cent, and was still up a highly respectable 23 per cent on an underlying constant-currency basis.
Yet they were both exceptionally good results. Not simply in the turbulent context of the past year. Not surprisingly of course, with more headwinds for the airline, albeit CSL had its own major 'issue'.
But also in a much more basic ongoing sense. Each has demonstrated the globally competitive strength of the business and operational models they have built. Importantly, in businesses which by definition can't be 'outsourced' to China or India.
Now CSL is no longer an 'Australian company' in the sense of doing most of its business here. That's mostly in the northern hemisphere and especially the US.
Indeed if its proposed merger with fellow US plasma group Talecris had gone through, operationally it would have become effectively a US company.
But it is very much an Australian company in terms of its shareholders. Some 60 per cent of its register is local and its retail shareholding base doubled over the past year. Over 112,000 Australians now have a big interest in its future. That's a big number for a company that lacks the high public profile of a CBA, Telstra or Woolworths.
And very much an Australian company in terms of its management. Brian McNamee has been CEO for 20 years -- back to the dying days of the old Commonwealth Serum Laboratories.
While you might say this -- potentially, dangerously -- about all long-serving successful CEOs, it really is hard to conceive of CSL without him. Although it must obviously be, eventually.
It's the peculiar blend of business acumen and specialist technical knowledge that McNamee has. There is no way that CSL could be be led like most companies by a generalist CEO. That's to say, led even just effectively, far less successfully.
Even more extraordinary -- and clearly effectively so -- is that his right-hand man Tony Cipa has been CFO, chief financial officer -- for 19 years, also going back to the old CSL!
I doubt that there's ever been another partnership in a major Australian company as long. Particularly not in these days of higher executive turnover 'governance models' and head-hunting.
Qantas is completely different. Apart from anything, it is entirely located 'in' Australia. Either flying people around the country or into and out of it.
Its success is in part relative -- it made a profit. In an industry that finds it tough to make money in the best of times and is chewing through it like figurative quinine in this time of GFC.
But it also is a triumphant validation of the 'two flying brands' business model put in place with Jetstar by former CEO Geoff Dixon.
Jetstar was the stand-out performance in the result -- effectively vindicating the appointment of founding CEO Alan Joyce to succeed Dixon as group CEO.
Jetstar contributed more than half the operating profit -- some $107 million against just $4 million from Qantas itself. I say 'just' -- but even that's outstanding.
The simple profit number though, far understates the value of Jetstar in the group. For it's also underwriting both the main airline dynamic and securing the group outcome.
It's not overstating it to say that it's essentially Jetstar that has been the main driver, keeping the group share of inbound passengers around 30 per cent against the aggressive arrival of Emirates, Etihad, Tiger and the others.
And done so in a way that -- the extraordinary circumstances of the last eight or so months aside -- has minimised the loss of yield under relentless price pressure. With the Qantas group uniquely able to mix and match the offer and aircraft use.
Further, the more bums that arrive on Qantas/Jetstar seats, the more that will feed into the domestic network -- where the two-brands offer works again on all those levels.
Qantas is now in an extraordinarily strong position in the global airline business. It's one of only three airlines -- the others are Southwest in the US and Lufthansa -- that has an investment-grade rating from Moody's.
Mirroring, not exactly either incidentally or coincidentally, our four big banks. Let me hasten to add, lest I upset those bank CEOs/CFOs, Qantas is a few notches down from their pristine Double-As.
So CSL and Qantas have come through the GFC in somewhat different fashion -- but both, I suggest, very successfully. They are now both brilliantly placed in their respective contexts to maximise the hoped-for global upturn. And to do as legitimate major global players.
CSL is not going to grow a major global business in Australia. But it's future success remains hugely important to Australian investors.
Geographically Qantas is the exact opposite. Its future success feeds directly into the broader economy on all sorts of levels. If ever there was a credible candidate for a 'national champion' it is it.
CSL Price at posting:
$31.92 Sentiment: LT Buy Disclosure: Held
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