In anticipation of a possible carbon tax proposed by the Gillard Government, we have collected carbon footprint data for a number of ASX-listed companies.
Not surprisingly, the disclosing companies are either larger capitalisation companies and/or those companies that have been leaders in environmental and/or socially responsible areas.
It is our view that these companies are a good representation of the indicative trends of the effect of carbon tax on Australian companies and thus the Australian equity market.
The following represents a preliminary view of the affects of the carbon tax on profits. Clearly, there are major negotiations to take place before the tax is implemented and there will be many offsets.
Having noted the above, we believe the following outcomes are the most salient points for investors to understand:
Which companies are most at risk by a carbon tax?
The total carbon emission in term of tonnes as well as the percentage of the FY13 NPAT at $20/tonnes for carbon is shown in the below table. We highlight those companies in which the proportion of the carbon tax to their net profit after tax is greater than 10 per cent in red and more than 25 per cent in red bold font.
Table: Carbon emission figures for top companies (representing approximately 70 per cent of the ASX300 and the proportion of their NPAT if carbon is tax at $20/tonnes.)
Source: IRESS, Company's latest sustainability and annual report and Broker Research (JPM and GSJBW).
We will be updating the required return to take into account this most recent information and continue to monitor for further fine-tuning if required should this carbon tax materialise in the future.
Vincent Chin is a senior analyst with Clime. Clime Asset Management and MyClime are part of Clime Investment Management (CIW). MyClime is Australia’s premier online share valuation service. For a free two-week trial, click here.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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