PRESS DIGEST-Australian Business News - July 1
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)
Discount retailer Target, part of the Wesfarmers (WES.AX) conglomerate, says it plans to keep stock levels and costs at a minimum until a recovery in the retail sector becomes more apparent. Managing director Launa Inman yesterday said, "you can always run and get additional stock and spend more on advertising; its easier to loosen the purse strings than to fall back.' Ms Inman also said the retailer has been working on improving its supply chain by reducing the number of suppliers while working more closely with them. Page 45.
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Premium department store David Jones (DJS.AX) has lifted its full-year profit guidance following an increase in sales, driven by the Federal Government's stimulus spending and a recovery in sharemarket stability. Less than six months after downgrading profit growth expectations to between zero and 5 percent for the full year, David Jones is now forecasting profit growth of between 8 percent and 12 percent. However, chief executive Mark McInnes warned that high growth is not expected next year, saying "ww'd be delighted if it was flat." Page 45.
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Independent grocery chain FoodWorks, which this week agreed to purchase 45 stores from rival Coles for A$35 million, says it will use its increased volume to seek better trading terms from suppliers. The purchase will increase the chain's aggregate annual sales from A$1.75 billion to A$2.2 billion. Chief executive Peter Noble said that although the company was large enough to create its own supply chain, "if you can get an effective supply-chain contract outcome that's transparent, why would you want to create your own?" Page 45.
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West Australian Premier Colin Barnett said he expects the proposed iron ore joint venture between mining companies BHP Billiton (BHP.AX) and Rio Tinto (RIO.AX) will lead to both groups moving their global headquarters to Perth within the next five to 10 years. "Both companies have about 30 percent of their global operations in Western Australia. It's all about Western Australia and it's all about iron ore," Mr Barnett said yesterday. The Premier has met with senior executives from both companies in recent weeks regarding the proposed joint venture. Page 46.
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THE AUSTRALIAN (www.theaustralian.news.com.au)
Tasmanian forest products company Gunns (GUN.AX) has admitted that it has not yet applied for Forestry Security Council (FSC) certification for the feedstock to its proposed A$2.2 billion pulp mill at Tamar. The company says it has instead secured Australian Forestry Standard certification, which Gunns says is recognised as equivalent. However, analysts say that Gunns' "preferred" candidate as a joint venture partner for the pulp mill, Sweden's Sodra, lists FSC certification as a prerequisite for any investment. Page 20.
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Mining company Iron Ore Holdings (IOH) (IOH.AX), which is 51 percent-owned by West Australian businessman Kerry Stokes, yesterday announced a new iron ore resource estimate for its Iron Valley deposit in Western Australia's Pilbara region. The new estimate has increased total resource expectations by 50 percent to 132.3 million tonnes, which IOH says could support a mine producing 10 million tonnes a year. Analysts say the company is likely to seek a joint venture with a major iron ore miner in order to gain access to infrastructure for the project. Page 20.
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Mining company Rio Tinto is believed to have warned the China Iron and Steel Association (CISA) that it is prepared to use clauses in contracts that allow Rio to cancel contracted volumes and instead sell the ore on the spot market. The "drop-dead" clauses come into effect if benchmark prices have not been agreed to by June 30. CISA, which is negotiating on behalf of Chinese steel mills, has been pressing for a larger price cut than the 33 percent agreed to by Japan, Korea and Taiwan. Page 20.
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Shareholders in Macquarie Communications Infrastructure Group MCG.AX, a list satellite fund of investment bank Macquarie Group, yesterday agreed to a A$1.64 billion takeover offer from the Canadian Pension Plan Investment Board. The original bid from the Canadian group of A$2.50 per security was later increased by the inclusion of a special A50 cent dividend after pressure from two institutional investors, Tyndall Equities and Lazard Asset Management. Page 21.
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THE SYDNEY MORNING HERALD (www.smh.com.au)
Analysts at investment bank UBS say they expect bad loan provisions from Australia's four major banks to reach A$16 billion for 2009, greater than the banks' forecast combined earnings of A$15.5 billion. The major banks gave presentations at a financial services sector conference last week in which none were prepared to say that the current bad debt cycle has peaked, suggesting that bad loans may not start falling for up to 18 months, as difficult conditions continue. Page 19.
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Finance company City Pacific (CIY.AX) yesterday confirmed that it has received copies of the ballot papers cast at last week's meeting of unit holders and is now reviewing them to verify that the vote was correct. The vote, to decide control of City Pacific's A$630 million First Mortgage Fund, was apparently won by Balmain Trilogy. However, City Pacific says it currently remains the responsible entity for the fund, and has launched legal action claiming Balmain Trilogy engaged in misleading and deceptive conduct. Page 20.
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Budget carrier Jetstar recorded 204,000 passengers on its international routes during May, a 51 percent increase compared to the same month last year. The result provided some positive news for its parent company, Qantas Airways (QAN.AX), which saw falls in passenger numbers on both international and domestic routes in May. The number of international passengers flying Qantas fell 14.5 percent in May compared to the same month last year, while domestic numbers were down 4.7 percent. Page 21.
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Dirk Morris, chief executive of investment fund manager BT Investment Management (BTT.AX), yesterday resigned. BT said Mr Morris has provided a strategic plan which would have required him to commit to a three-to-five-year period. However, no successor has been announced for the chief executive who headed the firm when it froze redemptions on its A$1.2 billion Global Return Fund. Westpac Banking Corporation, which owns 60 percent of BT, has not commented on Mr Morris's departure. Page 21.
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THE AGE (www.theage.com.au)
The Australian Securities and Investments Commission (ASIC) yesterday raided at least two financial planners in Sydney and Melbourne in connection with the sale of managed investment scheme products, according to sources. It is believed the raids were prompted by a complaint to ASIC from managed investment scheme provider Forest Enterprises which alleged that the planners had fabricated investors to purchase investments in Forest's schemes, a practice known as tombstoning. Page B1.
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Des King, the chief executive of oil refiner and retailer Caltex Australia (CTX.AX), says he is confident the Australian Competition and Consumer Commission will approve the company's bid to purchase over 300 service stations from rival Mobil in a A$300 million deal. Mr King, who is soon to return to parent company Chevron in the United States, says he believes the regulator is aware that the acquisition would provide increased competition to the current market leaders, Woolworths and Coles. Page B3.
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Australian Taxation Office (ATO) Commissioner Michael D'Ascenzo yesterday said that individuals with control over more than A$30 million, and companies with turnovers of between A$100 million and A$250 million, will be targeted for investigation by the ATO this financial year. The Commissioner rejected criticism of the tax office's approach to enforcement, saying "if the criticism is that we apply the law, and thereby promote certainty, we take it as a compliment." Page B5.
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Regional banks and smaller finance providers are pressing the Federal Government to provide further funding relief to help them compete with Australia's four major banks, whose share of new lending has risen to over 90 percent. The Government has already purchased A$8 billion in mortgage-backed securities, which smaller lenders have then used to provide new loans. However, the sector is believed to be pushing for a further injection of between A$12 billion and A$22 billion. Page B5. --
