PRESS DIGEST-Australian Business News - June 5
Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy.
THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)
A joint venture consortium involving billionaire James Packer's Crown Ltd (CWN.AX) has abandoned plans to build a A$5.5 billion casino and hotel complex in the United States. "The recent upheaval in credit markets has made it increasingly difficult…to develop a commercially viable project on what remains an attractive location on the Las Vegas strip," said chief executive Rowen Craigie. Crown, which had a 37.5 percent share in the consortium, will write off its A$44 million investment. Crown is 38 percent owned by Mr Packer. Page 19.
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Industrial and resources operations in Western Australia (WA) face a shortage of energy supplies after an explosion on Tuesday shut down a gas pipeline owned by Apache Energy. The blast severely disrupted production at Apache's gas processing facility on Varanus Island. Managing director Tim Wall said yesterday the company was focusing on "our people, the environmental side and getting the incident under control." Apache, WA's second-largest gas supplier, invoked force majeure clauses with major customers. Page 19.
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Tunnel operator Connector Motorways has posted a loss of A$9.86 million for the 12 months ended December 31, amid continuing underperformance by its Lane Cove Tunnel in Sydney. The company reported a loss of A$3.9 million a year earlier. Customer receipts of A$26.8 million and a A$20 million compensation from the New South Wales Roads and Traffic Authority failed to offset payments to Connector's contractors, suppliers and staff. Observers expect the Lane Cove Tunnel to be put up for sale. Page 21.
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Appliances conglomerate GUD Holdings (GUD.AX) has sold its iconic Victa lawnmower brand to United States-based engine maker Briggs & Stratton for A$23 million. More than 7 million Victa machines have been sold in Australasia since 1952. Managing director Ian Campbell blamed increasing competition from Chinese imports and the prolonged drought for the move. He said Briggs & Stratton, from which Victa engines were sourced, made an offer for the lawnmower business three months ago. Page 23.
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THE AUSTRALIAN (www.theaustralian.news.com.au)
The Australian Securities Exchange (ASX) said yesterday that its probe into broker Tricom could take up to a year to complete. The investigation was sparked by Tricom's failure on January 29 this year to settle on time trades worth A$84 million. "When you have breaches of matters that are quite complex…they are quite involved investigations," said ASX supervisory head Eric Mayne. Meanwhile, Danish bank Saxo is expected to take a 35 percent stake in Tricom at the end of a due diligence process. Page 21.
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Chinese steel trader Sinosteel has bought 16.2 million shares of takeover target Midwest Corporation MIS.AX from a party believed to be Malaysian-based investor Vital Rays Investment. The move lifts Sinosteel's stake in the West Australian iron ore miner to more than 28 percent -- a development that may have implications for rival bidder Murchison Metals' (MMX.AX) reverse takeover proposal for Midwest. Sinosteel had offered A$6.38 per share for Midwest, but the Murchison deal valued Midwest at more than A$7 per share. Page 22.
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Funds manager Basis Capital's Aust-Rim fund has secured A$37 million from its offshore feeder fund, the Pac-Rim Opportunity Fund. Basis Capital was engulfed in a crisis last year when the United States sub-prime crisis triggered a collapse in the value of two of its funds, including the Aust-Rim fund, originally worth A$355 million. "This is an important development as it lays the foundation for Basis Capital…to return some capital to Aust Rim Fund unitholders in the future," the Sydney-based fund said in a note to investors yesterday. Page 23.
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Troubled financial services group Challenger (CGF.AX) has bought a A$1.3 billion annuities portfolio from AXA Asia Pacific (AXA.AX). The acquisition by Challenger's asset management arm lifts the James Packer-backed group's share of the annuities market to more than the existing 42 percent. "The [annuities] business will be highly efficient and competitive in a market where there is continuing demand for quality guaranteed retirement income streams," chief executive Michael Tilley said yesterday. Page 17.
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THE SYDNEY MORNING HERALD (www.smh.com.au)
Problem-hit power station owner Babcock & Brown Power (BBP) (BBP.AX) has flagged asset sales to cut the A$360 million of debt it is struggling to refinance. After announcing yesterday the refinancing of A$2.7 billion of a total A$3.1 billion debt, chief executive Paul Simhauser said BBP would focus on "progressing asset sales to deliver an optimal capital structure that is more consistent with the current environment." BBP shares fell heavily two weeks ago when it revealed a A$300 million shortfall in its capital requirements. Page 31.
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Deloitte says cost overruns at mining projects could be because of miners' failure to foresee the long mining boom. According to Deloitte senior mining analyst Bhavesh Morar, "you may do your project costing today and your feasibility analysis today, but the capital spend is unlikely to occur for another two or three or four years." The report says a shortage of skilled labour was another problem. It says the projects were less attractive for skilled workers as "the mines are not in the most glamorous places in the world." Page 31.
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Grocery retailer Woolworths' (WOW.AX) new customer loyalty card has been taken up by well over a million shoppers since its debut last week. Customers can collect fuel discounts on the Everyday Rewards Card, which also offers entry into a weekly prize draw and a national draw worth A$10,000. Woolworths senior customer relationship executive Richard Umbers said the card could in future be used to target offers to specific shopper segments, but "at the moment we are concentrating on building it around the sweepstakes and the [fuel] discount." Page 33.
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The former Federal Liberal member for Braddon in Tasmania, Mark Baker, is driving a consortium of 200 farmers and food producers to launch a A$150 million export food brand, Produce of Heaven. The grouping, which includes King Island Foods, Petuna Seafoods, Tasfresh and Ghost Rock Winery, was formed in response to rising competition from cheaper imports. Produce of Heaven will cater to premium consumers in Dubai, Hong Kong, Taiwan and India. About 80 percent of Australia's frozen and packaged vegetables come from Tasmania. Page 33.
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THE AGE (www.theage.com.au)
Broker Goldman Sachs JBWere (GSJBW) expects the rapid take-up of mobile broadband devices to put pressure on the growth of fixed-line broadband. GSJBW yesterday raised its market penetration estimate for wireless broadband for the year to June 30 to 106 percent from 102 percent, while cutting its target for fixed-line broadband to 63 percent from 66 percent. "This reflects the beginnings of…wireless broadband substitution," GSJBW said in a note to clients. Page B2.
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Deutsche Bank has cut its 12-month share price target for Fairfax Media (FXJ.AX) to A$3.50 from A$4.35, but retained its hold recommendation on the stock. The broker told clients yesterday that a structural shift [away from] print is most evident in the large metro markets…which are key markets for Fairfax. Deutsche Bank senior analyst Andrew Anagnostellis said "we expect traditional media to only average around 1 percent [growth] in the next two years, with newspapers and free-to-air television likely to be the weakest." Page B2.
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The cold chain division of Victorian-based transport group Pure Logistics has gone into receivership. The division, which transports frozen and chilled goods nationwide, has been under pressure from high fuel costs. "We will continue to operate the business whilst seeking expressions of interest," receiver Janna Robertson, of corporate restructuring firm KordaMentha, said yesterday. ANZ Bank is a major creditor of Pure Logistics, which is owned by private equity player ABN Amro Capital. Page B3.
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The quarterly Sensis Business Index shows improvement in business confidence in Victoria, even as national business confidence slumps to a seven-year low. The report reveals business confidence among the state's small and medium businesses rose by 10 percent to about 50 percent. "Some of the reasons we're seeing [higher business confidence in Victoria] is businesses are having plenty of work still coming up, whereas demand's been affected in some of the other states," report author Christena Singh said yesterday. Page B3.
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