Archive | Archive – world business

Snapshot on world business, week to 24 December 2000

Latest: Korean bank merger on, Daewoo split, CGNU sells in Canada, Halim secures position at expense of Renong minorities, Chinese timber market lifts, Buffett buys industrial businesses, Swiss into Wallenberg, rolling more slowly.

24 December 2000

South Korea’s Kookmin Bank and Housing & Commercial Bank have agreed to merge into a $US127 billion entity despite strikes by the staffs of both banks.

Daewoo Corp’s creditors have agreed to split its trading & construction business in three — foreign trader Daewoo International, Daewoo Engineering & Construction, both to list in Korea on 13 February and each with about 67% debt, and a bad debts company.

23 December 2000

Insurer CGNU (former in May by the merger of CGU, out of Commercial Union and General Accident, and Norwich Union) has agreed two Canadian sales: Commercial Union’s life business to Manulife Financial for $C138 million ($NZ207 million) and Norwich to American International Group (AIG) for $C159 million ($NZ238 million). CGNU’s remaining Canadian businesses, CGU Group Canada and Pilot Insurance, hold 12% of the property and casualty markets.

Renong Berhad chairman Halim Saad has increased his stake in the company from 16.5% to 69%, Renong has raised its stake in United Engineers (Malaysia) Berhad from 38% to 54%, after an assets-for-shares exchange, and the Renong share price has dropped 39% in the past month to 98.5 ringgit (NZ59c), making for an unhappy but powerless turnout of minority shareholders at Renong’s annual meeting this week. Mr Halim said he would buy out the minorities, but not until May 2002. Other companies run by associates of the Malaysian prime minister, Dr Mahathir Mohamad, which have propped up majority interests at the expense of minorities this year include Genting Bhd and Resorts World Bhd.

China’s timber market lifted in the last quarter with an upsurge in major construction and retrofitting of houses. Demand is for teak, cherry, oak, beech and walnut for decorative uses. Chinese log imports hit a record 10 million m³ in 1999, but large quantities were stockpiled.

Warren Buffett’s Berkshire Hathaway has bought its fourth industrial business since June, taking over building products groups Johns Mandiville for $US1.9 billion ($NZ4.3 billion) at $US13/share, compared to $US15.65/share in a failed leveraged buyout five months ago. Berkshire Hathaway, which missed the technology boom bus, has also bought brickmaker Justin Industries, carpetmaker Shaw Industries and paint group Benjamin Moore.

20 December 2000

Swiss investor Martin Ebner has bought 5% of Investor, the investment vehicle of the Swedish Wallenberg family, for SF700 million ($NZ970 million) through BZ Group. The Investor group includes telecom company Ericsson and electrical engineering group ABB.

19 December 2000

General Motors said last week it would lay off 10% of its North American and European workers, and phase out its Oldsmobile division next year.

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Snapshot on world business, week to 8 July 2001

Latest: Nufarm sets NZ-delist meeting date, Arthur Yates doing fine in Perth, Australian Tax Office action hits agribusiness syndicators, James Hardie sells US gypsum mine.

8 July 2001

Nufarm Ltd will hold the special meeting to delist in New Zealand at the Southbank Sheraton in Melbourne on 6 August. The company argues it will get back into the Australian top 200 index if New Zealand share sales are conducted in Australia, and that this will help it attract institutional investor support.

Yates Ltd horticultural subsidiary Arthur Yates & Co, now registered in Perth, should make a significant turnaround in its June-year result but the group’s agribusiness investment subsidiary, Yates Equity, achieved low sales after Australian Tax Office action against no-recourse tax-effective products eliminated the traditional end-of-year product demand.

Melbourne-based Timbercorp Ltd’s $A93 million of revenue in the June year generated $A25 million of net profit after tax, well down on March forecasts after Australian Tax Office action against agribusiness investment projects without product rulings dating back several years. Negative market sentiment was highest in the last fortnight of June, traditionally the peak selling period for Timbercorp’s projects. Timbercorp said its projects had tax certainty, but its eucalypt and almond projects closed undersubscribed.

Australian Plantation Timber Ltd, of Perth, expects ebitda of $A37 million on $A80 million revenue for the June year, down on its March forecast after the tax office action against tax-based schemes, but said it would still plant 15,300ha of trees this winter, the second biggest planting in its nine-year history.

James Hardie Industries Ltd has signed to sell its Las Vegas gypsum mine to US-based developer WL Homes for about $US50 million. James Hardie said a year ago it planned to exit the US gypsum business and began a formal sale evaluation process in May. The business will make a $US9 million ebit loss for the June quarter, when James Hardie said US wallboard prices fell to an unsustainably low $US60-65/1000ft². Prices at the end of the quarter rose $US10-15/1000ft². The company expects its US fibre cement business to increase ebit for the June quarter by 25% over a year ago.

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Snapshot on world business, week to 10 November 2002

9 November 2002

Emerging markets rose despite the global bear market and their valuations are starting to look attractive again, especially in parts of Asia, which is experiencing a recovery in earnings, Foreign & Colonial Emerging Markets Investment Trust plc said in releasing its results for the September year. The trust’s net asset value rose 6.1% to £92.46 million, or 53.81p/share, compared to a 5.4% rise by the international benchmark, the S&P/IFC investable composite total return index, but its share price discount to net asset value rose from 16.7% to 17.8%. Since balance date, net asset value has risen 7.8% to 58.2p. Earnings/share fell from 0.2p to a 0.1p loss. The trust’s gearing at year’s end fell from 11.6% to 0.4% but the board is looking at borrowing again to exploit opportunities. “We are confident that emerging markets will continue their recent outperformance of developed markets in the medium term,” it said.

5 November 2002

Christoph Amberger, publisher of Taipan, wrote for the Daily Reckoning newsletter this week: “In the first couple of trading days in October, latent losses on shares held by the 12 largest commercial banks in Japan jumped by a stomach-churning 46% to $US41 billion, according to the Daiwa Institute of Research. With the Nikkei 225 at the 8600 level, the capital-to-asset ratio of these banks is a bit more than 9%. That’s a smidgen above the minimum 8% required for banks to operate internationally. A drop of the Nikkei below 8000 — a mere 7% drop below today’s close at 8686 — and some banks may indeed find themselves behind the 8 ball very, very soon.” He added: “US banks are coming to grips with their own hangovers caused by the binge of leveraging cable, telecom & internet companies to the hilt while the going was good. They now find themselves saddled with the assessment that 13% of all outstanding loans are either in default or unlikely to be repaid. Risky loans, according to a survey by the Fed, rose to $US236.1 billion in the year ended 30 June, up from $US192.8 billion a year before.”

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Snapshot on world business, week to 10 June 2001

Latest: US productivity falls, government bond mountain next Japanese target, S&P says $NZ972m to fix Chinese banks, semiconductor prices stabilise, techie guru warns on knowledge economy stampede, India sets up incubator for home IT consumption.

6 June 2001

US non-farm productivity fell 1.2% in the first quarter, compared to rises between 2% and 8% in the previous six quarters. Hours worked rose 2.2%, real pay rose 0.9%, unit labour costs rose 6.3% while non-labour costs fell 3.2%, and manufacturing productivity fell 2.1%, the first fall for that statistic since 1993.

After reconstruction of Japan’s banks, the next target is the country’s government bonds, offering 1.28% for 10 years (though in real terms, taking out the discount for deflation, more like 5-6%), almost entirely held by Japanese investors, representing 146% of Japan’s gross domestic product and 18% of the world’s gdp — and representing a time bomb, according to Goldman Sachs Asia, which says 65% of Japan’s tax receipts go straight to the interest bill. The Japanese Government created a public debt mountain combined with its near-zero interest rates, to pump up the economy in the early 90s.

Standard & Poor’s has confirmed its estimate that it will take at least 3.3 trillion yuan ($NZ972 billion) to turn round China’s banks. S&P said half their loans were non-performing and only one-third of those could be recovered. The Bank of China reckons it’s got is non-performers down from about 39% to just under 29%.

At The Dismal Scientist, they think around all sorts of economic issues. Latest word is that semiconductor pricing is stabilising, but that global sales will be held down for several more months by low pricing.

Governments should not deliberately push for the creation of the knowledge economy but focus on building the necessary conditions for it to happen naturally, Taiwan Semiconductor Manufacturing founder and chairman Morris Chang Chung-mou told the Hong Kong General Chamber of Commerce.
Because the knowledge economy wasn’t about knowledge but about converting knowledge to profit, not all countries had to strive to be original innovators to develop a knowledge economy, he said. As long as governments established the right social and economic environment, incentive-driven individuals would develop and execute business ideas on their own initiative, creating the knowledge-based economy. His three key conditions: an education system that encouraged independent thinking and life-long learning, a social system that encouraged self-reliance and an economic system which ensured fair competition.

India exports $US7 billion of software/year, but doesn’t have technology to meet local needs. Now a joint venture has been set up by the country’s IT ministry and the Massachusetts Institute of Technology to address the issue through the $US1 billion Media Lab Asia project. MIT has its own Media Lab technology incubator and set one up in Dublin last year.

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Snapshot on world business, week to 6 July 2003

5 July 2003

US factory jobs have fallen 15%, by 2.6 million to 14.7 million, in 2 years and the unemployment rate rose to its highest level in 9 years, up from 6.1% in May to 6.4% in June.

2 July 2003

Consumer gardening company Yates Ltd, now based in Sydney, will record an $A9 million book loss after selling most of its forestry interests to Sustainable Forestry Management Ltd (a British company registered in Bermuda) for $A14 million. Sustainable Forestry Management is building a global portfolio of forestry assets. The Yates forests will be managed by ITC Project Management Ltd, a subsidiary of Australian Plantation Timber Ltd, which specialises in developing & managing timber plantations for investors, and has 75,000ha under management. It, in turn, is 50% owned by Integrated Tree Cropping Ltd, which is 50% owned by Futuris Corp Ltd.

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Snapshot on world business, week to 8 September 2002

5 September 2002

“Chainsaw” Al Dunlap, former chief executive of Sunbeam Corp, now 65, has agreed to pay a $US500,000 fine and agreed never to serve as an officer or director of a public company again. He also paid $US15 million to settle a shareholder claim, but neither admitted nor denied Securities & Exchange Commission charges that he engineered an accounting fraud to inflate Sunbeam’s profits after it hired him in 1996 to turn the company round. Sunbeam reported that turnaround in 1997, but later restated its results and filed for bankruptcy. The SEC said Mr Dunlap & Sunbeam’s chief financial officer used various techniques to overstate 1996 losses that could be blamed on past management, and overstate 1997/98 profits.

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Snapshot on world business, week to 15 April 2001

Latest: DBS Bank buys Dao Heng, banana war over, Harvey Norman offer for Rebel Sports.

15 April 2001

Singapore Government-controlled DBS Bank has become the fourth largest bank in Hong Kong after merging its Kwong On Bank with Dao Heng, controlled by Hong Leong Malaysia through 71%-owned Guoco Group. Guoco will retain a 20% share by a DBS offer of cash and shares in a DBS holding company.

13 April 2001

The US and European Union have ended the nine-year banana tariff war. Wow? The significance is in the change for international trade brought by the Bush Administration, which moved from the previous US stance of demanding an end to all quotas and has agreed to lift punitive retaliatory tariffs from 1 July. The European Union has agreed to a transition of modified quotas and tariffs until 2006, when all banana quotas are to be lifted. Next up: the battle over US subsidies to major exporters, which have also brought European retaliation.

9 April 2001

Harvey Norman Holdings and Rebel Sports have agreed a deal for Harvey Norman to buy the whole of Rebel at 83c/share.

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Snapshot on world business, week to 18 November 2001

18 November 2001

Guangzhou wants to put together five infrastructure projects costing 50 billion yuan to make it southern China’s main communications hub and put it more strongly in competition with Hong Kong. It’s already announced plans for a deepwater port at Nansha, will have a new international airport at Baiyun for 25 million passengers in 2003, and also plans two new underground train lines and a light rail project.

You probably heard the squeals from all over Australia by unionists proclaiming Qantas an anti-Australian airline as it announced job cuts of 1500-2000 on Thursday. Our prime minister probably knows how the chants go after her Melbourne experience over the Ansett chop.

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Snapshot on world business, week to 29 February 2004

23 February 2004

CB Richard Ellis Group Inc, which went private in 2001, wants to float $US150 million of stock. Its 1st task will be to pay off debt, including the $US38.3 million of 16% 2011 senior notes. The CB side of the business was floated in 1996 and merged with Richard Ellis in 1998. It was called CBRE Holdings Inc until 5 December, and CB Richard Ellis Services Inc until 17 February. The company described itself under “risk factors” in the SEC filing as a highly leveraged company, adding that this “could increase our vulnerability to general economic downturns and adverse competitive & industry conditions, placing us at a disadvantage compared to those of our competitors that are less leveraged.” It increased 4th quarter revenue 65% to $US621.3 million, but went from a $US15.1 million profit in 2002 to a $US10.1 million loss, mostly because of $US28.9 million of amortisation expense plus $US27.2 million of integration charges resulting from its takeover of Insignia Financial Group Inc. Revenue for the year rose 39.3% to $US1.6 billion, ebitda rose 8% to $US63.4 million despite the integration costs, but with $US60.4 million of amortisation charges & $US50.4 million of integration charges for the 12 months CBRE went from a $US18.7 million profit to a $US34.7 million loss.

I took this piece off the end of a Motley Fool radio show interview with Overstock.com chief executive Patrick Byrne. The link to the whole interview is at the end of this item. Mr Byrne: “I decided when I was sick, when I had cancer… of course I didn’t know if I was going to get better or not, and then there were brief periods when I was out of the hospital and I started thinking, ‘If I am just going to assume I am around for about 3 to 6 months more, what would I do if I knew today, if God whispered in my ear, “You are going to be around 6 months.”‘ Then I started living my life that way and it was kind of hard to break the habit. I realised about 10 years later that not only was I still viewing my life that way, but it is probably a good thing. Because if every day you wake up saying, ‘If I only had 6 months left to live, what would I do today?’ someday you are going to be right. In the meantime, you are not going to spend a bunch of time watching TV.”
Website: The Motley Fool.com: Why can’t a ceo tell the truth?

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