Archive | Archive – world business

Snapshot on world business, week to 11 March 2001

Latest: Temasek looks at US Phillipines bases, Australian dollar dives and Japan talks crisis, Australian gdp falls.

9 March 2001

Singapore Government-controlled Temasek Holdings has offered to turn two former US military bases in the Phillipines into major logistics and trans-shipment hubs. Subic Bay, the former US naval base, could become a regional container port, and Clark air base would become a regional logistics centre.

Australia’s currency has taken a dive, to a low of US50.65c, and Japan seems at last to be acknowledging that its economy has headed towards crisis, helped there by the belief that the cracks could be smoothed over. Along with that realisation comes a flight from the yen, which fell to a 19-month low against the USA dollar. The finance minister, Kiichi Miyazawa, told a parliamentary committee Japan’s finances were close to collapse. Japan chose stimulus packages as its way out of the 1987 collapse, but debt has reached 130% of gross domestic product.

8 March 2001

Australian gross domestic product fell 0.6% in the December quarter, cutting the annual growth rate in half to 2.1%. GST got plenty of blame, helping to lower the rate of construction. The Reserve Bank cut 0.25% off the cash rate, taking it to 5.5%.

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Snapshot on world business, week to 15 June 2003

14 June 2003

Connecticut-based United Technologies Corp has offered 75p/share, a 13% premium on the pre-announcement close, for London-based Chubb plc in a $US1 billion bid recommended by both boards. Chubb provides electronic survey & fire protection products & services. UTC’s divisions include Otis elevators and Carrier heating, ventilation & airconditioning.

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Snapshot on world business, week to 23 June 2002

18 June 2002

A union survey in Singapore has found the city state is losing 8000 jobs/year because it lacks cheap expansion space. Those jobs are going elsewhere in Asia, particularly China.

17 June 2002

Those who will be gloomy keep finding new portents… Northern Trust economist Paul Kasriel in the US gleaned from the latest flow-of-funds data released by the Federal Reserve that household debt is now at its highest point in 50 years compared to cash in the bank. In the 1950s, households held $1.60 in deposits for every $1 of debt, but now they hold only 60c for that dollar of debt.

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Snapshot on world business, week to 4 February 2001

Latest: US appeals lamb tariff ruling, Chinese Aluminium aims for listing, “Dark and stormy…”, US corporate losses flow.

3 February 2001

The US has appealed a World Trade Organisation decision that its lamb tariffs against Australia and New Zealand violated international trade rules. It imposes a 9% tariff on the first 14,500 tonnes from New Zealand, graduated up to 40% above that.

Chinese state-owned aluminium producer China Aluminium Corp (Chalco) is aiming for a second quarter listing after reorganising its six producing companies. Combined, they could be fifth biggest in the world, producing 700,000 tonnes of aluminium/year.

2 February 2001

Keep in mind “It was a dark and stormy night…” when you hear and read US economic news for the next few months, because that’s how it’ll all be pitched. The Wall St Journal got out its Snoopy quotes book this week to set the tone: “Consumer confidence plunged this month to 114.4, the lowest level in more than four years. Dark expectations for US economic performance in the next six months weighed on the index.” Does it make you weep? Perhaps if they remember their boom lasted far longer than it reasonably should have, and the latest ½% interest rate cut by the US Federal Reserve is a continuation of a policy maintaining the unreal, they’ll realise the occasional fall is natural and get on with life at a sustainable level. Meanwhile the manufacturing index took a tumble and one firm talked about sending staff home on Fridays. Carless days beckon.

30 January 2001

Corporate loss reports and downsizings are starting to pour out of the US: AT&T a $US978 million fourth-quarter loss after $US2.7 billion of writeoffs, mostly for Excite at Home; Xerox reported a $US198 million fourth-quarter loss which it had already warned of; OfficeMax warned it would make a fourth-quarter loss and will close 50 stores. DaimlerChrysler will put six factories on standby and cut its workforce by 26,000, or about 20%. It reported a third-quarter loss of 579 million euros ($NZ1.2 billion).

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Snapshot on world business, week to 16 September 2001

Items on World Business this week:
16 September 2001

Harvey Norman Holdings Ltd reported group consolidated net profit after tax of $A105.1 million on $A2.5 billion of aggregated sales from the Harvey Norman franchised chain, its own New Zealand stores and other entities in the June half. Sales rose 10.4%.

Renong Berhad shareholders have voted to sell the Malaysian conglomerate’s 38% of infrastructure group United Engineers (Malaysia) to the Government, collecting 1.4 billion ringgit to cut back its 20 billion ringgit debt.

Foodland Associated Ltd increased sales from its retail & wholesale operations by 6.4% to $A3.47 billion for earnings before interest, tax & amortisation up 7.1% to $A132.7 million for the year to 29 July. The contribution from Farmers in New Zealand fell, while Progressive Enterprises’ sale of a substantial property portfolio last year cut income and borrowings costs.

10 September 2001

Taiwan’s government has decided to spend an extra $NT500 billion ($NZ33.6 billion) over the next five years on 21 infrastructure projects to upgrade its industrial base, including mass transit and other transport systems, urban renewal, some conservation measures and alternative energy schemes. That’s a 16% increase on the budgeted $NT810 billion ($NZ54.4 billion) for this year, but implementation has been falling short of budget — by 33% two years ago, 14% this year.

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Snapshot on world business, week to 16 November 2003

11 November 2003

Investment Dealers Digest says some investment banks have started sending select stock research services to India and many more are seriously examining the option. Consultant AT Kearney puts the number over the next 5 years at 500,000 and Deloitte expects 850,000 North American positions to be exported. It raises regulatory issues in the US, also raises a question on succession when the work of junior analysts is all exported.

US unemployment fell from 6.1% to 6% in the 3rd quarter, and new jobs grew by 125,000 in September & 126,000 in October. GDP is expected to reach 2.9% over the full year, rising to at least 3.8% next year.

From the Daily Reckoning newsletter, a hedge fund analyst put this together about the state of the US economy: “In the first quarter of 2003, total credit growth ran at a $2.362 trillion annual rate. The rate of increase in total debt was 7.4%. The correlating percentage increase in nominal gdp was 3.82%. At first blush, this seems bad but perhaps not insurmountable. Until you realise that total debt is 3 times larger than gdp to begin with, so a rate of growth twice as fast as gdp means the absolute debt is growing 6 times as fast as gdp. It is interesting to note that the estimated market value of all real estate plus the total equity market capitalisation of all American corporations has fallen to the lowest percentage of all outstanding domestic debt in the 50-year statistical record. Each dollar of debt now has only US72c of collateral behind it.” Perhaps that explains, at least partly, what the $NZ is doing at a 6-year high of US62.2c.

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Snapshot on world business, week to 3 June 2001

Latest: Harvey Norman files Rebel bid, another Hudson rejig.

2 June 2001

Harvey Norman Holdings Ltd, through subsidiary Becto Pty Ltd, has offered Rebel Sport Ltd shareholders 83c/share, provided it can get at least 50% of the company. Perhaps looking to take advantage of short-term thinking among Rebel investors, chairman Gerry Harvey said in the offer statement: “Retail trading conditions remain very difficult.” The offer expires on 25 July. Harvey Norman has a 69% ratio of current liabilities to current assets, leaving working capital at its December balance date of $A226.5 million.

28 May 2001

In another Jihong Lu/Savoy Equities-related restructure, Sydney-based Hudson Investment Group Ltd wants to buy the rest of Hudson Pacific Group Ltd, offering one share and A6c for every two shares. Hudson Investment already owns 54.7% of Hudson Pacific. Last week, Hudson Timber & Hardware (the company that was the Australian investment channel into the Britomart development in Auckland) bought a hardware company from Savoy Investment.

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Snapshot on world business, week to 28 April 2002

27 April 2002

Australia & NZ Banking Group Ltd increased after-tax operating profit 17.3% to $A1.05 billion in the March half, and earnings/share by 18.8% to A66.3c. The bank’s raised its interim dividend (fully franked) 18.2% to A39c and showed an increase in return on equity from 19.6% to 21.6%.

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Snapshot on world business, week to 28 January 2001

Latest: More steel alliances, mergers accounting basis changes, Lucent $US1b loss and restructure to follow, Lone Star to buy Tokyo Sowa bank, Greenspan supports tax cuts.

28 January 2001

Japan’s second largest steelmaker, NKK, is talking to ThyssenKrupp of Germany about expanding their alliance. Japan’s biggest, Nippon Steel, has formed a technology link with Usinor of France. Both agreements so far are focused on the car industry.

26 January 2001

The US Financial Accounting Standards Board has dumped the pooling method of accounting for mergers, and adopted a revised purchase accounting method. Under pooling, balance sheets were combined, but this didn’t reflect the value of stock exchanged in a takeover. Under purchase accounting, companies had to write off goodwill over 20 years but now they will only have to write it off when they see an asset value decline, which means they can continue reporting larger profits until it suits not to.

Lucent Technologies, spun off from AT&T five years ago, will take a restructuring charge of $US1.2-1.6 billion and eliminate 10,000 jobs. It will lose 25% of its 123,000 workforce by that cut, selling the divisions that employ another 6000 and spinning off a components business employing 16,500. It turned a $US1 billion profit on continuing operations in the December 1999 quarter into a $US1 billion loss, and a bottom-line loss of $US395 million, compared to a $1.25 billion profit a year earlier.

Private Texan equity funder Lone Star Group will take over bankrupt Japanese bank Tokyo Sowa for a 27% discount on the face value of its loans, two months after a sale to WL Ross fell through. The Japanese Government will pump the bank up with ¥702 billion ($NZ13.8 billion) in new capital for the deal to proceed.

Federal Reserve chairman Alan Greenspan has told the US Senate’s budget committee the country’s economy is close to standstill, and that both debt reduction and tax cuts could be employed. That goes some way to supporting the new Republican president’s desire to bring $US1.6 trillion of tax cuts over the next decade.

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Snapshot on world business, week to 1 April 2001

Latest: Marks & Spencer cuts back, Delphi Automotive cuts back, CyberWorks makes $US886m loss,
Mitsubishi staring at $NZ5.3b loss this year, recommendation to ban Peregrine high-fliers for incompetence.

31 March 2001

British retailer Marks & Spencer will abandon its 38-store European chain, sell its Brooks Brothers clothing chain and Kings Supermarkets in the US, franchise its Hong Kong chain and cut about 4400 jobs. It also wants to improve the use of its £2.4 billion property portfolio, including leasing half its Manchester store’s building to competitor Selfridges.

Delphi Automotive Systems Corp, the world’s biggest car parts maker spun off by General Motors two years ago, will close nine of its 175 factories, cut its workforce by 5.5%, or 11,500 jobs, and make a $US400 million after-tax first-quarter provision. It expects, at best, to break even this year. Two-thirds of the cut will occur in the US, which significantly reduces Delphi’s average labour cost from $US19/hour when the company was spun off to $US16.25/hour. Average labour cost of the jobs being cut was $US30/hour.

Pacific Century CyberWorks, headed by Hong Kong magnate Li Ka-shing’s son Richard Li Tzar-Kai, made a $US886 million loss last year on consolidated operating profit of $US520 million, the result slashed by one-off provisions on internet and telecom subsidiaries. It wrote off $US22 billion of goodwill from its Cable & Wireless HKT purchase against reserves, sending shareholder equity to a negative $US1.8 billion.

Mitsubishi Motors expects to lose ¥270 billion ($NZ5.3 billion) this year after the local recall of a million cars and through restructuring, and a ¥100 billion loss in Europe, but intends to break even at operating level next year. Among plants with an uncertain future is its Adelaide operation, which will be decided by June.

27 March 2001

Accountability: Peregrine Holdings chairman Philip Tose and three other directors, all paid millions of US dollars a year, have been deemed incompetent in the just-released report of Hong Kong Inspector Richard Farrant, who completed his investigation 13 months ago. Peregrine collapsed in 1998 and the 1997 Asian financial crisis was the direct cause. No fraud was involved. But the inspector said they mismanaged the group, lent three-quarters of the group’s funds to two Indonesian businesses, and had not instituted good reporting or accounting procedures, risk management or internal audit. He said they should be banned from being directors, which could be for up to 15 years.

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