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News : International Last Updated: Jul 7, 2011 - 8:44 AM


Markets News Wednesday; CRH spent €186m on acquisitions/ investments in H1 2011.
By Finfacts Team
Jul 6, 2011 - 8:52 AM

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A young girl salutes President Barack Obama as he shakes hands along a ropeline with members of the military and their families at the White House, July 4, 2011.

CRH: The international building materials group CRH announced today that it spent about €186m on acquisitions and investments in the first half of this year, compared with €133m in the same period last year.

CRH (Reduce, Closing Price €15.01): Acquisition spend on track; David O'Brien, analyst at Goodbody, commented - - "CRH has reported that it has spent €186m on 21 acquisitions / investments in the six months to June end, which compares to €367m on 14 deals in H210 and €133m on 13 acquisitions in H110. The announced deals should add incremental sales of c.€130m. In addition to the completed spend of €186m, CRH has agreed to acquire VVM Group, a materials business in Belgium but is subject to regulatory approval. Including VVM total acquisition spend increase to c. €300m.

Total spend inclusive of the VVM deal, is split 49% European Materials, 34% US materials, 7% European Distribution & Products, 10% US Distribution and Products. While the level of spend has fallen from H210 to H111, this is the first time since 2008 that acquisitions have been carried out across all divisions. The Group has completed its disposal plan with proceeds totalling €345m, which included the divestment of Trialis distribution business in France.

We have forecast spend of circa €600m during FY11 increasing from €520m in FY10, which the company are well on its way to completing. While the impact of these updates on current year numbers is limited, it is encouraging to see deals across all divisions, despite the uncertain macro economic backdrop. As there was no update on the trading environment, we look forward to management comments at the release of the H111 results in August."

Economic View 1: Paving the way for a tough budget; Juliet Tennent, economist at Goodbody, commented - - "Despite the exchequer returns for the first half of the year being in line with Government forecasts, the Minister for Finance Michael Noonan has raised the prospect that a tougher than expected budget will be necessary in December.

The original plan as laid out in last December’s four year plan was for consolidation of €3.6bn in 2012 with a further €3.1bn in both 2013 and 2014. The 2012 target was to be met by an increase in revenues of €1.5bn and a decrease in spending of €2.1bn. However, Minister Noonan is now talking in terms of €3.6bn being the minimum saving required in 2012 and has mentioned that it could be as much as €4bn. In this context, the Minister has acknowledged that the scope for delivering further consolidation will get more difficult as adjustments totalling around €15bn have already been made since 2009 leaving less scope to identify further areas to cut expenditure. In addition, consumer spending is already weak and further burdening the taxpayer will do nothing to counter that.

Minister Noonan also emphasised that the margin that Ireland is being charged for the bailout loans is excessive, he estimated a profit to the lenders of €9bn over the lifetime of the facility, and said that it makes rebalancing the economy more difficult.

While the Minister is starting to manage budgetary expectations for 2012 at this early stage, it is also likely that he is preparing the way for another attempt at getting the interest rate on the bailout loans lowered when EU/IMF visit later this week."


Economic View 2: Portugal has rating cut to below investment grade by Moody’s; Juliet Tennent added - - "Further evidence that the Eurozone debt crisis is far from over came yesterday evening when Moody’s cut Portugal’s credit rating to Ba2 with a negative outlook. This four notch downgrade means that Portugal is now rated below investment grade by Moody’s. It is still rated just above investment grade by S&P and Fitch, although the latter has it on negative watch. Moody’s cited concerns that Portugal, like Greece, may need additional funding and that private sector involvement could be a pre-condition for any further funding.

While Ireland has thus far managed to maintain its investment grade status, contagion risks are highlighted by this latest ratings move from Moody’s. Moody’s currently has Ireland at Baa3 with a negative outlook, which is the lowest investment grade rating. While Fitch and S&P have the sovereign rated marginally higher at BBB+."


Attention turns to Portugal:
Conall Mac Coille, chief economist at Davy, comments  --
"Following the decision by the Greek parliament last week to pass a new round of fiscal austerity measures, other peripheral economies have come back into focus. The spotlight has come to rest on Portugal following the news that Moody's Investors service has cut Portugal's credit rating from Baa1 to Ba2 (junk).

Unfortunately, Moody's reported the rationale for this decision is that the 'voluntary' private sector participation being negotiated for the new Greek funding package is likely to be a similar precondition for Portugal's EU funding support. That is, those investors who purchase Portuguese bonds might find themselves under pressure to roll over those bonds by the EU authorities upon payment of the principal. If so, presumably the same logic could be applied by the ratings agents to other peripheral European economies. That said, Moody's also said it had downgraded Portugal given the risks that it would be able to achieve its deficit reduction plan. So, with Exchequer returns for the first half of 2011 broadly on track, Ireland may not be treated in the same manner as Portugal.

In a slow day for macroeconomic data, the market may focus on today's Institute for Supply Management survey for the services sector in the United States. Regional surveys from the Dallas and Richmond Federal Reserves indicate that a slowdown is likely in June. Also, the market may focus on the Challenger jobs cuts survey released today, ahead of the official payrolls numbers on Friday. Non-farm payrolls rose by just 54,000 in May following increases in excess of 200,000 per month earlier in the year. The market currently expects a 100,000 rise in June, but these expectations may change following today's job cuts survey and the ADP employment report released on Thursday."

Greeks Will Stick With Euro: Finance Minister: Greek Finance Minister Evangelos Venizelos said Greece's part in the euro zone was "not reversible" in a first on CNBC interview Tuesday:

US Markets

In New York Tuesday, the Dow fell 13 points or 0.10% to 12,570.

The S&P 500 fell 0.13% and the Nasdaq gained 0.35%.

President Obama on Deficit Reduction:

Asia Markets

The MSCI Asia Pacific Index rose 0.3% Wednesday.

Japan's Nikkei 225 gained 1.10%; China's Shanghai Composite index lost 0.29%; Australia's S&P/ASX 200 rose 0.15% and the Bombay Stock Exchange's Sensex index slipped 0.02% in Mumbai.

Asia benchmarks

Finfacts Reports

God is a US ratings agency
Irish pension funds fell in June and first half of 2011
Bruton axes consumer agency board/ CEO job; Response to 'Rip-off Republic' became byword for waste
Claim cutting pensions tax relief will increase funding cost by 57%; Average Irish public sector annual pension 3.5 times private equivalent
SIMI says Irish car sales were up 31% in June; 30,000 cars sold through Scrappage Scheme
Volume of retail trade down by 1.1% in May in Eurozone and off 1.9% in 12 month period
Bank of Ireland launches €200m Agri Farm Investment Fund
Eurozone services recovery slowed further in June

In Europe, the Dow Jones Stoxx 600 has fallen 0.13% in early trading Wednesday.

The ISEQ is down 0.09% in Dublin.

CRH is off 0.20%; Elan is off 0.99%.


European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.4408 and at £0.8999.

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.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

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 rose 9 points or 0.63%  to 1,428.

The Financial Times reported 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 August 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $97.36 up 47 cents from Tuesday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $113.88. 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 $16.

The US Energy department recently said that growing volumes of Canadian crude oil imported into the United States contributed to record-high storage levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011 (86% of working capacity at Cushing), and a price discount for WTI compared with similar-quality world crudes such as Brent.  A discount for WTI is expected to persist until transportation bottlenecks impacting the movement of mid-continent crude oil to the Gulf coast are relieved. Consequently, the projected US refiner average acquisition cost of crude oil, which was about $2.70 per barrel below WTI in 2010,  is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above WTI in 2012.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,515.60 per oz, down 70 cents from Tuesday's close in New York.

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