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Aristocrat shares plummet as CEO exits

Jul 30, 2008 7:17 PM

Staff & Wire Reports | Shares of Aristocrat Leisure Ltd., the world’s second largest slot manufacturer, fell the most in five years in Sydney after the company cut its profit target as much as 23 percent on weaker economic conditions in Australia and the U.S.

Annual operating profit is expected to fall to between $190 million and $200 million (Australian dollars), the Sydney-based company said yesterday in a statement, compared with $247.9 million in fiscal 2007. Aristocrat shares slumped 20 percent, cutting the company’s market value to $2.2 billion ($2.1 billion in U.S. dollars).

The result comes after Chief Executive Officer Paul Oneile earlier this week said he won’t renew his contract when it expires at the end of the year. Oneile, hired in December 2003, will continue in the role until his contract ends.

Aristocrat cited a slumping economy in both Australia and the U.S. as reasons for the downturn.

"Pretty much everything’s getting worse for them," said Will Seddon, who helps oversee about $500 million at White Funds Management in Sydney, including Aristocrat shares. "Consumers are quite stretched so casino operators are less likely to replace existing machines in this environment."

International Game Technology, the No. 1 slot manufacturer in the world, on July 17 forecast earnings that trail its previous estimates and warned the economic conditions that are reducing the level of gaming are likely to continue in to 2009.

"The immediate outlook is pretty poor," Seddon told Bloomberg Financial News. "Macro issues are hurting everyone in the sector. Conditions are deteriorating in the U.S. and Australia, and things aren’t great in some of their emerging markets either."

Aristocrat said a stronger local currency had also had a negative impact on earnings. The Australian dollar gained 8.2 percent against the U.S. currency this year, the fourth-best performer among the 16-most traded currencies. It reached a 25- year high of 98.27 on July 15.

For complete details and further developments, check next week’s GamingToday beginning Tuesday, August 5.