Left Field

Headline: Pepsi piles pressure on Coke

Australian Financial Review, pg 46. Sue Mitchell. 29 April 2009.

Coca-Cola Amatil (CCA) is under renewed pricing pressure in the $4 billion soft drink market following Asahi Breweries $1.18 billion acquisition of Schweppes Australia this month. A new wave of discounting started in supermarkets that raised the price gap between Coca-Cola and Pepsi to over 50 percent from 40 percent earlier this year, and 25 percent four years ago. Analysts indicated that Schweppes increased discounting in the weeks leading up to the ownership change and had funded the latest price cuts as a last-minute move to increase volumes and market share. Woolworths sold 1.25 litre bottles of Pepsi and Pepsi Max at 50 cents off the normal price compared with Coca-Cola, while Schweppes lemonade and Solo varieties retailed at large discounts to CCA’s Sprite and Kirks brands. One analyst said Asahi would need to make money and was likely to become more rational on price as they paid a large price for the Schweppes business.

Citigroup and Merrill Lynch said CCA buys soft drink concentrate in Australian dollars, while Schweppes buys this in United States dollars. CCA chief executive Terry Davis believes Japanese beverage companies paid Alan Bond’ prices to get entry in the local non-alcoholic beverage market, but would not make proper returns unless pricing moves to more normal levels. Asahi paid $1.185 billion for Schweppes, the second-biggest player in the local market with brands such as Pepsi, Schweppes, Spring Valley and Soho. Suntory paid $1.26 billion for Frucor Beverages, which leads the market in energy drinks with its V brand. Lion Nathan and Japanese shareholder Kirin made a $7.6 billion offer for CCA last year, but CCA’s major shareholder, The Coca-Cola Company squashed the deal. Kirin has now focused on buying the 54 percent it doesn’t already own in Lion.

Headline: Bad debts mar NAB's $2bn profit

Australian Financial Review, pg 1. Matthew Drummond. 29 April 2009.

National Australia Bank has posted a cash profit of A$2 billion for the first-half, down 9.4 percent compared with the same period last year due to A$1.8 billion of bad debt charges from loan losses. Chief executive Cameron Clyne said yesterday that the blow-out in losses to small and medium sized businesses, A$330 million above market expectations, was a sure sign that the country was going into the recession. He also said that any future interest rate reductions from the Reserve Bank of Australia may not be passed on to customers due to increases in the costs of wholesale funding for the bank. The NAB cut the dividend by 25 percent, as did the Australia and New Zealand Banking Corporation, with conjecture that Westpac will do the same shortly. The current economic troubles should push up the bad debt charges for the banks with Citibank projections showing that the peak expected in 2010 will only be a third the size of the peak reached during the 1992 recession.

Joseph Healy, head of NAB’s business banking, said current defaults were predominantly in retail business. Nab Capital, the investment banking arm, posted one of its best results with a 30.2 percent improvement in revenue. The approach of NAB in the United Kingdom, according to Mr Clyne, will be to work through’ the recession and then build as the economy recovers. Suggestions have come from fund managers that NAB could buy banking assets in the UK when prices bottom out. Mr Clyne said that assets from nationalised banks were potential purchases. Lynne Peacock, UK chief executive, put the main problem for the UK branch as 2 billion of mortgages that we causing the banks interest rate margins to contract. NAB shares fell A76 cents to close at A$21.28 in yesterday’s trading.

Headline: Bank profits hold up, but had debts clous outlook

Australian Financial Review, pg 1. Matthew Drummond. 27 April 2009. Major banks are managing to hold their profits steady, despite wiping off almost $6billion in bas loans, as they enjoy the spoils of higher margins and increased market share.

Headline: Business divided on climate change

Australian Financial Review, pg 7. John Breusch. 20 April 2009.

The Federal Government is preparing to introduce its emissions trading scheme (ETS) legislation into parliament, as business opposition to the ETS grows due to the economic crisis and fears of job losses. Hydro Aluminium Kurri Kurri, which is owned by Norway's Norsk Hydro, said that a planned $4 billion expansion of its Hunter Valley-based smelter would have to be abandoned if the ETS went ahead as is, with a 20 percent renewable energy target. Westpac Banking Corporation, however, did not believe the economic downturn was sufficient reason to change the scheme, saying its was designed as a market-based mechanism and has 'significant safety valves and price buffering measures in place to respond to current economic conditions.' Climate Change Minister Penny Wong goes to Washington this week to attend the Major Economies Forum on Energy and Climate.

Headline: Qantas profit in freefall

Australian Financial Review, pg 1. Jeffrey Hutton. 15 April 2009.

Qantas Airways chief executive Alan Joyce yesterday downgraded the carrier's full-year profit forecast by 80 percent as losses from international operations continues to mount up. Qantas will cut up to 1750 jobs, ground planes and defer aircraft orders in attempts to cope with the global slump in demand for business and first class travel, which took hold after the collapse of investment bank Lehman Brothers in the United States last year. The competitive situation for Qantas is another challenge faced by the carrier, with Delta Air Lines beginning to fly the route to North America in July and Tiger Airways, which is 51 percent owned by Singapore Airlines, planning to fly between Sydney and Melbourne charging $68 on one-way fares. Yesterday's profit downgrade led Standard & Poor's to lower its rating on Qantas's debt to BBB.

Headline: Telstra sidelines Trujillo on broadband

Australian Financial Review, pg 1. Ben Woodhead. 14 April 2009.

Telstra has established a special board and management committee to deal with national broadband network (NBN) issues as part of a new approach, as planning starts for Australia’s proposed $43 billion NBN. Telstra was not on the list of tenders for the government’s $4.7 billion fibre to the node network. Sol Trujillo, Telstra’s controversial CEO, leaves the company at the end of June and is not a member of the committee created on April 4. The committee members are Telstra chairman Donald McGauchie, directors John Stocker and Peter Willcox, chief financial officer John Stanhope, enterprise and government group director David Thodey, and strategic marketing group managing director Kate McKenzie.

Headline: Bankwest to cut 400 jobs

The Australian - online. Staff Reporter. 30 March 2009.

BANKWEST will cut 400 jobs from its workforce due to the economic downturn, its parent company Commonwealth Bank says.

About 250 roles on the west coast of Australia and 150 on the east coast will be made redundant this year.

The decision comes after four years of rapid expansion that has seen Perth-based Bankwest increase its workforce from 3340 to 5100.

Link

Headline: Mystery behind sale of sass & bide stake

Australian Financial Review, pg 13. Hannah Tattersall. 27 March 2009.

In filings with the Australian Securities and Investments Commission, fashion company sass & bide say it has sold 70 percent of its parent company, Boogie & Boogie, to David Briskin and Daniel Besen. In the filings, the company said it sold the stake to the two investors to secure a $1.5 million loan, which it had been unable to source from its existing bank, Australia and New Zealand Banking Group. However, the company's founders, and Mr Briskin, who became chief executive last week, say the filings are incorrect and the two founders 'retain control of the business.' Sass & bide is the best-selling young women's designer brand for upmarket retailer David Jones.

Headline: Our top banks may be winners from credit crisis

The Australian- online. Richard Gluyas . 23 March 2009.

A tentative view is beginning to form that the global banking system, having been on high alert since last year's collapse of Lehman Brothers, might be over the worst of the financial crisis.

Not only that, Australia's Big Four banks could possibly emerge from the carnage on improved footings, with enhanced pricing power and fatter margins as competition withers. That helps explain why the majors easily outperformed the broader share market last week, even taking into account Friday's breather caused by renewed inflationary fears from the US Federal Reserve's decision to pump cash into the system by buying Treasury bonds.

Headline: China steel lockdown hits exports

The Australian - online. David Uren. March 2, 2009.

Dozens of freighters carrying Australian iron ore are stalled outside Chinese ports amid a collapse in demand for steel, dashing hopes that Chinese industrial demand will protect Australia from the worst of the global recession.

Tumbling Chinese exports and renewed stock market lethargy indicate that efforts by Chinese leaders to defy the global economic crisis are struggling.