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Markets News Wednesday: Dairygold reports strong 2010 results boosted by global food price rise; Heineken posts drop in Q1 earnings
By Finfacts Team
Apr 20, 2011 - 10:59 AM
Dairygold: The
Dairygold Co-op based in Mitchelstown, North Cork, today reported a jump in
turnover and profits in 2010, boosted by the rise in international food prices.
Operating profits were €18.9m, a €11.8m rise from 2009 and sales jumped almost
€140m to €693.6m.
Profits were also boosted by an additional €7.3m from share trading by the
co-op, which was related to the financing of the acquisition of 17 properties
from Reox Holdings. Reox was previously spun out of Dairygold.
The co-op says the property deals will reduce
Reox's outstanding liability to €19m.
Heineken: Dutch brewer Heineken today said organic revenue rose 3.6% in
the quarter, less than a 5.5% increase in volume.
The third biggest global brewer by volume,
reported a 30.7% plunge in net profit for the first quarter despite a rise in
sales from the purchase announced in January 2010 of Mexican group FEMSA (Fomento
Economico Mexicano SAB).
Heineken said that sales were strong in eastern Europe, Africa and the Middle
East, but that in general beer drinkers were being cautious with their money.
The brewer said it doesn’t expect to maintain
profit growth at the pace of the first quarter as it increases marketing
spending. Earnings before interest and taxes, excluding some items and the
effect of acquisitions, rose more than 20% in the quarter as the company spent
less on advertising and promotions.
Net profit was €151m, compared with €218m in the first quarter of last year. But
sales jumped 22% to €3.59bn, with a contribution of €518m from FEMSA.
Underlying beer sales were up 5.5%, mainly owing to a rise of 7.3% in central
and eastern Europe and a rise of 13% in Africa and the Middle East. In Europe,
the volume of sales only rose by 0.6%.
Gold Prices to Climb Higher: Jonathan Barratt, managing director at Commodity Broking Services thinks that gold prices will continue to rise while sovereign and inflation concerns exist:
Sweden: The
Riksbank, Sweden's central bank,
said today that the Swedish economy is continuing to grow at a good pace and
the labour market is improving steadily. Underlying inflation is currently low,
but is expected to increase as economic activity strengthens. At the same time,
CPI inflation is now high as a result of rising mortgage rates. The executive
board of the Riksbank decided to raise the benchmark interest rate by 0.25
percentage points to 1.75% to stabilise inflation close to the target of 2%.
Economic View: A “national speculative mania”:
Goodbody chief
economist, Dermot O’Leary, comments today - - "A failure of financial
regulation, a state of denial on the risks to financial stability at the Central
Bank, “silent” external auditors, a herd mentality at the banks to chase profits
and a “national speculative mania”. These are the key reasons highlighted for
Ireland’s banking crisis in the latest Government-commissioned report by Peter
Nyberg, released yesterday.
The 104 page report is heavy on detail and analysis on the events from
2003 until 2009, but is rather unremarkable in its conclusions, some of which
have been discussed at length over recent years in any case. The report is quite
tame on pinpointing specific blame for the crisis, as it would have needed
thousands of willing participants for the boom to grow to the extent that it
did. From the point of view of putting closure on the banking crisis, the
inability to place blame is disappointing, as this is something that the Irish
public needs and deserves to see.
It will, therefore, be up to the government to take the findings of the report
and implement the required changes. To be fair, many important reforms have
already taken place that draw a line under the most damaging period in Ireland’s
economic and banking history. For example, the Central Bank and Financial
Regulator functions have been totally revamped, while the wholesale change will
be introduced to the Department of Finance to ensure that it is fit for purpose.
Most important of all is the restructuring of the banking system that is in
train as a result of the wind-down of Anglo Irish Bank and Irish Nationwide and
the restructuring of AIB, Bank of Ireland, EBS and Irish Life and Permanent as a
result of the recent exercise carried out as a condition of the IMF/EU
programme.
If a report was written about the lessons of the crisis in 2009 and 2010, its
conclusion would be that a failure to resolve the problems in the banking sector
can quickly compound problems for the economy and for the sovereign. From that
point of view, while lessons will be learned from the Nyberg Report about ways
to avoid future crises, more important lessons should be drawn first on
resolving the current one."
Core European economies continue to grow strongly as debt crisis
continues: Davy economist, Conall Mac Coille, - -
"Purchasing manager
indices (PMIs) for both the euro area manufacturing and services
sectors indicated a robust pace of growth into the second quarter of
2011. The PMI manufacturing index rose to 57.7 from 57.5 – well
ahead of expectations of a decline to 57. The services PMI fell
marginally, as expected, to 56.9. That said, the euro area PMIs
indicated that GDP growth in Q4 2010 should have been stronger than
the final 0.3% out-turn, although this may in part reflect the
negative impact of bad weather conditions.
The EU Commission measure of consumer confidence released
yesterday (April 19th) fell for the second month in a row. So
although there has been little impact on overall growth in the core
European economies thus far, there may be some small impact on the
consumer. Yesterday, Greek bond yields at two-year maturities rose
to above 20% for the first time as concerns about a potential
restructuring of Greek sovereign debt intensified. Similarly,
two-year yields on Portuguese debt rose to their highest level in 15
years.
In contrast, US treasury yields continue to shrug off any
negative impact from the Standard and Poor's downward revision to
its view of the longer-term US credit outlook. The US ten-year yield
closed at 3.38%, at similar levels to those preceding the S&P
announcement. In part though, the strength of US treasuries reflects
safe haven flows from the turbulence in European debt markets,
specifically speculation that Greece may be forced to restructure
its sovereign debt liabilities. The current market focus on the
Greek sovereign position must be all the more frustrating to
European policymakers given that it has been prompted by loose talk
from German officials rather than by any move from ratings agencies.
Stocks rose in the US yesterday following news that housing
starts rose to 550,000, well ahead of expectations. Building permits
data suggest that housing starts may rise further in April to close
to 600,000. Today, markets may focus on the existing home sales data
which are expected to show a marginal rise to 5m in March. A
stronger number could be taken as a positive sign for consumer
confidence.
Nevertheless, overall activity in the US housing market
remains weak with the current level of housing starts an enormous
76% below peak levels. So although US GDP growth is likely to remain
strong in the first half of 2011, this is not likely to translate
into a rebound in the US housing market."
US
Markets
In New York Tuesday, the Dow
rose 65 points or 0.53% to 12,267.
The S&P 500 added 0.57% and
the Nasdaq advanced0.35%.
Asia
Markets
The
MSCI Asia Pacific Index gained 1.5% Wednesday.
Japan's
Nikkei 225 rose 1.76%; China's Shanghai composite index added 0.27%;
Australia's S&P/ASX 200 Index climbed 1.37% and the Bombay Stock Exchange's Sensex index
increased 1.35% in Mumbai.
The BDI
closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index
averaged 59% lower in 2009 than a year earlier.
On
Thursday, July 15, 2010, the index fell for the 35th straight session, by 9
points, or 0.537%, to 1,700 points,
Bloomberg report.
On Friday July16th, the BDI rose 20
points or 1.12% to 1,700 to break the 35-session losing streak.
On
Tuesday this week, the BDI slipped 13 points or 1.01% at 1,271.
The Financial Times reported
earlier in January, that Australia’s flooding and fears of ship oversupply has
pushed down a gauge of the cost of hiring ships to carry coal, iron ore and
other dry bulk by nearly half since October to the lowest level since the
aftermath of the financial crisis. The Baltic Dry index, the widely watched
measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak
reached on October 27, 2010.
Crude oil for May 2011 delivery is
currently trading on the
Chicago York Mercantile Exchange (CME/Nymex) at $109.65 per barrel, up
$1.37 from Tuesday's close. In London, Brent for May delivery is trading on the
International
Commodities Exchange at $122.86. The North
Sea benchmark accounts for two-thirds of the global market.
The
margin between the US benchmark WTI (West Texas Intermediate) used on the New
York Mercantile Exchange and Brent is over $13.
The FT
said in early February that a surge in oil inventories in Cushing, Oklahoma,
where WTI is delivered into America’s pipeline system, has depressed the value
of the benchmark against other yardsticks. The
International Energy Agency said on Thursday that with “few relief valves” to
cut the stock overhang in Cushing, the price dislocation “may persist for months
[or years] to come”.
