Aristocrat year profit up 3.4 percent

Before today the stock had slumped 44 percent from a record us$ 16.34 a year ago on concern the firm would be unable to increase profit in the face of smoking bans in Australia and lower Japanese demand. Aristocrat, which gets three-quarters of sales from outside Australia, is also battling a currency that gained 11 percent against the US dollar in 2007.

“The headline number is ahead of what people were looking for and there’s a lot of relief at that given their headwinds,” said Matt Hoult, who helps manage us$ 5.4 billion at ABN Amro Asset Management Ltd. in Sydney.

The higher currency cut annual earnings by us$ 17 million. In constant currency terms, profit rose 11 percent, Aristocrat said. “2007 was a particularly challenging year for the industry,” Aristocrat's CEO Paul Oneile said in a statement.

Second-half net income fell 9.8 percent to us$ 112.12 million on lower earnings in Aristocrat’s three biggest markets of Australia, Japan and North America.

Second-half earnings before interest and tax from Japan fell 28 percent to us$ 2.68 million as gaming operators shunned new pachislo machines because they’re less popular with gamblers.

Japanese regulators imposed new rules curbing payouts on pachislo from July 1 last year, forcing operators to remove older, more popular machines. The games, which are different from pachinko machines, have spinning wheels similar to slot machines and instead of coins use tokens that are exchanged for prizes.

The company sold 29,843 machines in all of 2007, with demand accelerating in the final quarter. “There appears to have been a positive change in operator sentiment,” Aristocrat said.

Japan’s Sega Sammy Holdings Inc., which has a joint venture with Aristocrat to make pachislo machines, this month said it will report a full-year loss and cut about 400 jobs, citing a slump in gaming equipment sales.

Oneile is boosting spending on game development to win sales in markets such as Macau, where Aristocrat is already the biggest slot machine supplier to casinos including those run by Las Vegas Sands Inc. and Wynn Resorts Ltd.

Earnings from other international markets surged 41 percent to us$ 32.44 million.