Archives - August, 2018



30 Aug 18

Optimism that laboratory testing group ALS, the former Campbell Bros, will weather the downturn in the resources sector better than others helped push the shares higher on Monday, even though earnings to March were squeezed.
Nanjing Night Net

Earnings a share rose slightly for the year, to 66.44¢ from 65.90¢, with net profit ahead to $230.5million from $224.7million. After taking into account foreign exchange movements, profit fell to $200.1 million from $217.6 million.

Investor sentiment was buoyed by optimism that the downturn in the minerals sectors on earnings has been contained. The flow of samples to its geochemical laboratories slipped just 2 per cent for the full year, although this masked an 18 per cent second-half slump.

But aggressive cost cutting limited the impact, with staff in metallurgy and geochemical units cut by 29 per cent to below 4000 full-time positions. Even so, margins were squeezed, with the pre-tax profit margin dropping to 34.7 per cent from 36.3 per cent a year earlier.

Helping lift the shares was confirmation that the shift in its earnings mix had helped maintain earnings, brokers said.

This reflected the contribution from the life sciences unit and the fact that the latest downturn in mining has been slower in coming.

“In more recent years the focus for the company’s growth and diversification has been into new testing markets, including industrial testing, food and pharmaceuticals, as well as geographical growth of our environmental businesses,” chairwoman Nerolie Withnall said. ”This has reduced our exposure to the cyclical downturn in the minerals sector.”

The group’s core coal business is predominantly Australian-based where the industry ”is under considerable cost pressures”, with a sharp reduction in both exploration and pre-production drilling being experienced.

”Conditions are not expected to improve in the near future and the focus … is on laboratory rationalisation, cost cutting, and productivity improvements to ensure [profit] margins are maintained above 20 per cent,” managing director Greg Kilmister said.

The final dividend was raised 1¢ to 27¢ a share, franked to 50 per cent.

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30 Aug 18

Investors should not have been surprised by David Jones’ 2.2 per cent fall in third-quarter sales given that chief executive Paul Zahra had made it abundantly clear that he was chasing profit ahead of sales.
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And if one reads between the lines, Zahra is suggesting that the profit in the current half won’t be down anything like the sales – indeed it should increase.

Zahra said he could have stage-managed a sales increase by discounting, but he reckons that game is over for David Jones.

It’s understandable that investors are concerned that David Jones can’t achieve sales and profit growth at the same time, and Zahra needs to spend more time explaining how the company is working to increase growth. But it’s a tough juggling act. All retailers are guilty of feeding consumers’ addiction to discounting to chase sales. It started with the global financial crisis and was exacerbated by online competition.

To place customers in rehab and wean them off bargain buying is a tall order and one that requires a measure of collusive strategy among all the retailers.

Myer has come to the party to some extent, but has not asked its customers to go cold turkey.

While the industry in general has said it wants to ease up on discounting, it only takes one big player with an excess-inventory problem to push the others into price matching. Last weekend Myer held its super Saturday sale and DJs was forced to dive into the discount swim.

While not a direct competitor with David Jones, Target has its own excess-inventory problems that have been contagious throughout the industry – particularly those operating at the discount end of the spectrum. Thus each retailer is in part beholden to their competitors’ inventory management.

The drive to improve pricing power is behind the renewed war between David Jones and Myer to sign up exclusive brands.

”Our view is that the ongoing increase in the depth and breadth of discounting that we are seeing is unsustainable,” Zahra says, and plenty of brands are keen to sign department store exclusives to avoid getting caught in the discounting trap.

On top of pricing issues there is the general overlay of purchasing inertia born of a lack of consumer confidence. Until a few months ago confidence had been rising but last month it fell off a cliff.

Better confidence was a big factor in the market, pushing up retail shares over the past nine months. There is now enough evidence to show that the market got ahead of itself and retail share prices will continue to ease back until signs re-emerge that customers are coming back.

Until recently the view in the retail industry was that the Reserve Bank cutting interest rates would be the trigger to entice customers to open their wallets.

But the recent rate cut appeared to have the opposite effect – it was seen as a sign the economy was more sluggish and in need of additional monetary stimulus.

The fall in the value of the dollar has only further damaged confidence, but it should work in favour of DJs, which buys in goods in local currency and competes with US online importers.

Zahra says the election might be the trigger to restore confidence. That could prove to be optimistic.

Prime minister-in-waiting Tony Abbott will be confronted with the same economic concerns that Julia Gillard has – a slow-growth economy and a growing deficit.

Consumers didn’t appreciate the cuts Treasurer Wayne Swan announced in the budget but shadow treasurer Joe Hockey is not suggesting any profligacy if the Coalition wins power.

Zahra would be better devoting his energy to things he can control. The move to attract Chinese tourists to stores by introducing its UnionPay card is a step in the right direction. Investors might ultimately be better served by Zahra’s strategies of managing gross margins in a weak consumer environment and waiting for the economy and consumer sentiment to turn.

The least controllable of the factors that play into discretionary spending is the weather and this season’s apparel sales have been softer because winter has been later. It is only in the past week that colder temperatures have emerged.

The best-performing category for David Jones in the three months to April was bikinis rather than jumpers.

This story Administrator ready to work first appeared on Nanjing Night Net.


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30 Aug 18

Australia’s mining investment boom has probably peaked but the ride down does not look too frightening, according to the Australian Construction Industry Forum.
Nanjing Night Net

The forum’s semi-annual forecasts, compiled with the help of ACIL Allen Consulting and Deloitte Access Economics, show engineering construction plateauing rather than collapsing, slipping 2.5 per cent this financial year, then 0.8 per cent in 2013-14 and 0.6 per cent in 2014-15.

”New projects are still being commissioned,” said forum executive director Peter Barda. ”Just not as many and not as big. There is no doubt that in some sectors demand is off and prices are down but there is still ongoing demand for the things we’ve got to sell.

”We are pretty confident looking out three to five years. Beyond that it is difficult. Firms can and do make sudden decisions to stop what they are doing. But for the moment the world has not stopped, the world continues to need energy and minerals and we continue to be lucky enough to be in a position to provide them at a globally competitive price.”

While engineering construction companies would need to get used to lower or zero growth at a still exceptionally high level of activity, residential and commercial construction was set to climb.

”There has been little investment in shopping centres for some time, since before the global financial crisis. All of a sudden the big institutional investors who own the shopping centres are starting to think they look shabby. They are facing competition from online retailers and from big-box retailers, and they are starting to spend to smarten them up.”

Things were also picking up in warehousing and logistics. ”The way that supermarkets and others want products delivered is changing. It’s like mining: the name of the game is building facilities that shave fractions of a cent per tonne kilometre off the transport cost.”

The forum expects non-residential construction to climb 7 per cent in 2013-14 and then 1.2 per cent in 2014-15.

Residential construction is expected to climb 7 per cent in 2013-14, followed by a further 7 per cent in 2014-15. NSW will grow much faster than the rest of the nation, and Victoria much more slowly after recent strong growth.

Not all construction workers displaced from mining projects would find work in building construction because the skills were different. But building construction was much more labour intensive.

”It doesn’t take as many people to bring a mine to market as it does a shopping centre,” he said. ”You don’t find too many people who want pretty railway lines, but people do want pretty showrooms and pretty homes.”

This story Administrator ready to work first appeared on Nanjing Night Net.


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30 Aug 18

ANZ will soon make a critical appointment that could signal a potential successor to chief executive Mike Smith, when it names the next head of its Asian and international arm.
Nanjing Night Net

After previous Asia boss Alex Thursby resigned this month, the bank is well advanced in finding a new head of its international and institutional banking division, with an announcement expected in the coming weeks.

As the bank seeks to expand aggressively into Asia, it is tipped by analysts to appoint an external candidate to replace Mr Thursby, who has quit ANZ to become the boss of the National Bank of Abu Dhabi.

Given ANZ’s heavy emphasis on Asia, analysts say whoever gets the job will also be seen as a potential next chief executive of the entire group. Mr Smith, who previously ran the Asian arm of global bank HSBC, has signalled he intends to stay on as chief executive for another two to three years.

While the bank has considered internal candidates to replace Mr Thursby, an outsider from a large Western bank with a heavy Asian presence, such as Standard Chartered Bank or HSBC, is seen as more likely.

Macquarie analyst Mike Wiblin said he thought ANZ was more likely to appoint an external candidate to the Asian post, to deepen the bank’s management ranks and provide another potential successor to Mr Smith.

”If it was going to be someone external, it might be someone who is more chairman-like, given the Asian strategy is already well developed,” Mr Wiblin said.

Unlike its domestic rivals, ANZ has an explicit goal of obtaining 25 to 30 per cent of its income from the Asia-Pacific region, Europe and America by 2017.

Bell Potter analyst T.S. Lim also said an outsider was more likely, arguing that the bank would need someone with top-level connections across government and business circles in the Asia-Pacific region. ”Asian banking is relationship banking, so they’ll want someone who has been there and done business for a long time,” he said.

”Things get done with a handshake sometimes. This is what HSBC and Standard Chartered are good at.”

Mr Smith has also fuelled expectations of an external appointment by saying ANZ might ”poach” a banker and describing himself and Mr Thursby, a former Standard Chartered banker, as ”Asian insiders”. Three weeks ago Mr Smith also said he hoped to announce the appointment in ”a few weeks’ time”.

The executives filling Mr Thursby’s role, head of Asia Gilles Plante and markets boss Steve Bellotti, are also well regarded in the market.

This story Administrator ready to work first appeared on Nanjing Night Net.


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30 Aug 18

Green gold: Virginia Plain’s umi budo dish. Photo: Eddie JimFormer research scientist turned ”aquaculturist” Clive Keenan is the only commercial producer of umi budo in Australia and he is not keen to have competition. Asked how he grows the edible seaweed, Keenan laughs. ”That’s a secret,” he says. ”We tried a lot of different methods until we came across the perfect conditions.”
Nanjing Night Net

Keenan produces the seaweed, also known as ”sea grapes” or ”green caviar”, on his aquaculture farm, Coral Coast Mariculture, west of Bundaberg in Queensland. The product been attracting attention since it was released on the market in April and presented to a who’s who of chefs and the public at the Noosa Food and Wine Festival this month.

The seaweed, Caulerpa lentillifera, which forms in tiny salty spheres, was originally farmed in Okinawa, Japan. There, it is known as ”the longevity seaweed” because of its high mineral and low calorific content. In Japan, and in the Philippines, where it is also grown, the seaweed is served with vinegar, as part of a salad, or offered as a bar snack.

Despite preferring warmer temperatures, umi budo has found its way onto menus at Huxtable, Akachochin and Virginia Plain.

”At the moment, I’m using it on kingfish sashimi with Campari salt,” Andy Harmer, head chef at Virginia Plain, says.

”A lot of my customers haven’t seen it before, so they’re surprised by the burst of flavour, but the feedback has all been positive.”

James Campbell, head chef at MoVida Sydney, says he was introduced to seaweed recently by chef Frank Camorra and is using up to two kilograms a week.

”It doesn’t sound like much, but you need only a small amount,” he says. ”I’m using it on an oyster with finger lime, which not only gives that visual interest, because of the contrast of the grapefruit-pink fingerlime and the vibrant green of the umi budo, but also a burst of seawater against the citrus which is amazing.

”I’m thinking about ways to use it with caviar on a dish, too. Unlike fish roe, which is soft sphere, it’s quite firm, then just pops in your mouth and I think that textural contrast would be quite special.”

Michael Canals, director of food wholesaler CQ Foods, says there has also been ”enormous interest” from fruit and veg suppliers.

Seaweed needs clean water and a mild tropical climate to grow. Keenan says his farm’s position, on a pristine saltwater creek flowing out to Hervey Bay, is ideal.

”Under perfect conditions, we are capable of producing 275 tonnes a year.” he says. ”We’ve already had inquiries about exporting it.”

This story Administrator ready to work first appeared on Nanjing Night Net.


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