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Markets News Thursday: Australia adds 52,700 jobs in January - - the most in 3 years; Greencore sells malting business for €116.25m
By Finfacts Team
Feb 11, 2010 - 8:53:31 AM
Australian Prime Minister Kevin Rudd addressing Parliament in Canberra, Thursday, Feb 11, 2010.
The Australian unemployment rate was at 5.3% in January, as announced by the Australian Bureau of Statistics today. The seasonally adjusted unemployment rate fell 0.2% from December 2009.
The number of people employed in January increased by 52,700 to 10.966 million, seasonally adjusted, the ABS reported. This is the largest rise in employment since December 2006. The rise in employment was driven by a rise in part-time employment, up 36,900 persons to 3.314 million together with a rise in full-time employment, up 15,900 persons to 7.652 million. For the third consecutive month, the ABS reported the number of people unemployed had decreased, down 22,300 persons to 612,000 in January.
The ABS seasonally adjusted monthly aggregate hours worked series showed a fall in January, down 14.8 million hours to 1,518.1 million hours.The ABS participation rate in January remained at 65.3%.
Greencore:Greencore announced today that it has agreed to sell its malt business to Axéréal Union De Coopératives Agricoles in a deal worth up to €116.25m.
Greencore Malt comprises three Greencore owned malting businesses based in the UK (trading as Pauls Malt), Ireland (trading as Minch Malt) and Belgium (trading as Belgomalt).
GM has seven malting plants which have an annual output capacity of approximately 520,000 tonnes. It had revenues of €217.2m in 2009 with operating profits before interest and tax of €20.5m. The net proceeds from the deal will be used to reduce its borrowings and the deal is expected to be completed by March. The company also said that some of the group's property assets - - about 50 acres including lands at Athy, Co Kildare, which were formerly held within Minch Malt will not form part of the business to be sold.
In a trading statement, Greencore said before the company's annual general meeting today, that despite a challenging consumer environment last year, it had delivered a good performance overall.
Goodbody's Liam Igoe commented: "Greencore said in its AGM IMS (Interim Management Statement) this morning that its core UK convenience foods business is showing strong growth over the same period last year. In Q110, UK sales were 7.8% higher, with all of this accounted for by volume growth, particularly in ready meals and food-to-go.
In part this reflects easy yoy comps, as sales were 3.9% lower in Q109. Nevertheless, it does re-confirm strong and consistent sequential progress being made by Greencore over the past five quarters. The yoy increases will decline as the year progresses reflecting the improving conditions later in FY09 and we are holding with our forecast 3% annual growth rate in the UK. In addition, margin improvement has also continued into FY10, as reflected in our forecasts due to ongoing cost efficiencies and an improving product mix. In the US, meanwhile, organic growth of 30% was recorded in Q1. Greencore has sold its malt business to Axereal Union De Cooperatives Agricoles for a price up to €116m (some of it deferred). This, in our view is a fair value for the company and coincides with what we have in our SOTP valuation (€120m). The decision to sell makes strategic sense as it allows Greencore to focus on chilled convenience foods in the UK and USA.
Year-end debt will now be c.€180m and debt / EBITDA will be less than 2x EBITDA. This gives the company more flexibility in relation to its expansion plans, not only in the US, but also selectively in the UK, where the market is looking more attractive for manufacturers as the financial crisis is inhibiting industry capacity growth. We have revised our forecasts on the back of the disposal, which reduces full-year EPS by 4c from FY11 (proportionately less in FY10), in-line with what we had previously surmised when the disposal rumours first surfaced."
The market reaction to a potential bailout for Greece is more down to hype than reality, Lothar Mentel from Octopus Investments told CNBC Wednesday. Maurice Pomery from Strategic Alpha joined the discussion:
US
In New York Wednesday, the Dow dipped 20 points or 0.20 to 10,038.
The S&P 500 declined 0.22% and the Nasdaq dropped 0.14%.
Asia
China's Shanghai Composite inched up 0.10% Thursday and Japan was closed for a public holiday.
The MSCI Asia Pacific excluding Japan Index added 1.5%.
In Sydney, the S&P/ASX 200 gained 0.91% with the positive jobs report cheering investors.
Bloomberg reports that China’s lending surged to 1.39 trillion yuan ($203 billion) in January and property prices climbed the most in 21 months as banks extended more credit in anticipation the government will tighten monetary policy.
Lending was more than in the previous three months combined, data on the central bank’s Web site showed today. Property prices in 70 cities rose 9.5% from a year earlier, the National Development and Reform Commission said separately.
Warren Buffett and former US Treasury Secretary Henry Paulson had an economic 'power lunch' chit-chat, live at the Chamber of Commerce annual meeting in Buffett's hometown of Omaha Nebraska, this week:
Currencies
The euro is trading at $1.3776 and at £0.8828.
For live currency updates, check the right-hand column of the Finfacts home page.
The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
On Friday, the index rose 30 points or 1.12% to 2,715. The index dipped 4.7% in the week.
On Monday, the BDI rose 7 points or 0.3% to 2,722; on Tuesday, the index dipped 16 points or 0.16% to 2,706; the BDI dipped 76 points or 2.89% to 2,630.
Goodbody chief economist, Dermot O'Leary comments: Economic View; All eyes on the Brussels’ summit - -"“Help us to help you” is likely to be EU’s request to the Greeks today in return for its support in its hour of need. After a day of statement and counter-statement about what support is or is not agreed, today’s meeting of EU heads of state marks a pretty vital moment not only for Greece but for the euro-area as a whole, given the contagion risks that exist should Greece get into trouble in funding its budget deficit on international capital markets.
The latest reports suggest that no agreement has yet been reached on the type of support that will be provided to Greece, but Germany and France are leading the calls to provide a strong message of support. The head of the group of finance ministers in the euro-zone, Jean-Claude Juncker also stated overnight that he is discussing the options “so that we can come up with an answer that will satisfy the markets”. It will be far from a free lunch for the Greeks, as any support will be accompanied by strict conditions on fiscal austerity measures that will have to be introduced.
Although the situation was not as severe in Ireland last year, there are some lessons that can be learnt: (1) markets tend to react favourably to signs of real political will to tackle the fiscal problems; (2) the EU is more willing to be supportive when real action is being taken, as evidenced by the fact that an extra year was given to Ireland to get the budget deficit below 3%, and; (3) the strikes currently taking place in Greece are a reminder that when a crisis hits, tough decisions must be made despite the public backlash that it triggers. Most of this is in the hands of the Greeks themselves, but markets certainly seem to like the idea of support from their friends in the EU too, with yields on Greek ten-year bonds down close to 40bps yesterday. With implications for wider financial markets aswell, all eyes are on Brussels today."
