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Michael Noonan, Irish minister for finance and Jack Rostowski, Polish minister for finance, at the Ecofin meeting of EU finance ministers, Brussels, July 11, 2012.
Grafton, the UK and Irish building materials group group turnover for the six months to the end of June rose by
4% to €1.05bn, mainly resulting from a favourable rate of sterling over the euro, the
company said in
a trading update for the first half of 2012 today.
Grafton said that its "operating performance was satisfactory in demanding market
conditions primarily as a result of internal initiatives against the backdrop of
cyclically low levels of activity in its markets. Results for the half year
(before rationalisation costs) will be in line with expectations."
saidthat turnover in its Irish merchanting business was down about 9%
due to a further decline in spending on housing repair and maintenance.
Robert Eason of Goodbody commented:
"Grafton has issued a trading
update for the first six months in which it is guiding sales to have
increased by 4% to €1.05bn (in-line with Goodbody Forecasts) and that “results
for the half
year (before rationalisation costs) will be in line with expectations”. Our FY
of €64m (+13% yoy) is split €30m H1 (+16%) and €34m H2 (+10%).
Sales trends at a divisional level are also as expected. In the UK lfl sales
are up 1.4%,
reflecting a strong start to the year (+4% Jan-Feb) but slowed into Q2 due to
documented adverse weather in April / June. Given that lfls were up 1.7% in
Jan-Apr, it implies
a solid close to the half year.
Irish merchanting sales were down 9% in the period which is consistent with
reported for Jan-Apr. It is of note that the impact of lower sales has been
mostly offset by cost
savings. After a difficult first four months in Irish Retail (sales down -16%),
the half year was
helped by good trading in May leaving sales down 12.5%.
This is an encouraging statement which is in line with our forecasts and show
management is delivering on the self-help in a market where activity levels
depressed. While the statement contains limited newsflow to act as a catalyst in
short-term, we still see the potential for the share-price to double in the
given targeted group margins of 7.5% versus the current level of 3%."
Economic View: The hard work begins; Dermot O'Leary, chief economist
of Goodbody comments -- "Most of the reporting in Ireland of the latest
EcoFin meeting has focused on successfully
negotiating a deadline for a deal on the treatment of Ireland’s bank debt. This
is exactly what
Finance Minister Noonan hoped for going into the meeting and that is exactly
what he got.
Technical negotiations will now begin with a final decision expected on the
issue by October.
Now the hard work starts. Irish officials will focus on two lines of attack.
First is the Irish
government stakes in the viable banks (AIB, Bank of Ireland and Irish Life and
The Irish Times reports this morning that an EU fund may take a direct stake in
Our reading of the latest EcoFin meeting is that there is still significant
who will actually hold the liability in such cases. While European Commission
stated that the liability will be taken away from the sovereign in question,
Minister Schäuble is of the view that the sovereign requesting the aid will
still be on the hook.
This is a fundamental difference in views that we would have concerns about.
This view also has implications for the achievement of Ireland’s second goal
- - reducing the
burden resulting from the promissory notes. We think it is likely that a deal to
extend the term
over which the promissory notes are paid off will be struck but it is a massive
stretch to think
that the burden will be removed from the sovereign entirely.
The October deadline was pushed so that clarity could be given on this issue
the twelve-month funding window that the IMF requires for disbursement of funds.
decisions on easing Ireland’s bank debt burden however cannot be made in
Delays at a European level in relation to the moves towards banking union could
potentially disrupt this deadline."
Banks: AIB receives 20 offers for UK loan portfolio;
Eamonn Hughes and
Colm Foley comment -- "AIB has received strong interest in its €500m UK
property portfolio according to an article in the Irish Independent this
morning. The bank has received up to 20 bids from a number of hedge funds,
private equity firms and banks, with offers ranging from 50c – 65c in the euro.
The bids are part of the €20bn deleveraging plan as set out by the Central Bank
post the recapitalisation of the banks.
At a 35% discount this compares to the overall 7.9% discount Bank of Ireland
took on its €10bn deleveraging programme, while Ulster bank recently received
17c in the euro for a loan portfolio from Kennedy Wilson & Deutsche Bank. The
PCAR/PLAR assessment has accounted for an overall deleveraging target of 25-30%
and given that most European banks are attempting to de-lever at the same time
(sales expected to reach €1trillion) it is not all that surprising to see such
significant haircuts offered."
The sixty-four billion euro question: Conall Mac Coille, chief economist at
Davy, comments - - "Yesterday's statement from EU finance ministers helped
sentiment in risk markets. The key point was the re-stated commitment to use the
ESM more flexibly to address bond market tensions and also the agreement for an
interim €30bn loan for Spain before the final €100bn bailout is approved. The
European 50 Pr stock index closed up 0.6%.
However, concerns remain about what exactly has been agreed by EU leaders.
German Finance Minister Wolfgang Schäuble indicated yesterday that the final
liability for any capital injections into Spanish banks will continue to lie
with the government. This means that after any capital injections from the ESM,
a fall in the value of equity would have to be met by the Spanish government,
creating a large contingent liability (rather than fully fledged sovereign debt)
despite the €100bn bailout. However, in seeming contradiction to the German
finance minister, EU officials indicated that no sovereign guarantees would be
In Ireland, a naïve debate has emerged on how much of the €64bn cost of
recapitalising Ireland's banks should be met by the ESM. There has been little
recognition that any capital injections by the ESM will be expected to return
value, and there has been no indication in any EU statement that the ESM will be
allowed to make simple fiscal transfers by making capital injections where there
is no prospect of a return in value.
Indeed, the uncertainty on Spain's bailout reflects concern from EU officials
on how the value of the ESM's capital injections may be protected. The prospect
of the ESM potentially ploughing tens of billions of equity capital into a dead
bank such as IBRC has never been part of the EU debate.
So the €34.7bn cost of recapitalising IBRC will stay with the Irish
government. Of the remainder, we expect the Irish government could eventually
sell stakes in Bank of Ireland and Allied Irish Banks worth around 5-8% of GDP.
However, clearly these sales would fall well short of the 30% reduction in Irish
government debt that some commentators have suggested is now likely."
In New York Tuesday, the
Dow fell 83 points or 0.65 to 12,653.
The S&P 500 fell 0.81% and
the Nasdaq slid 1.00%.
The MSCI Asia
Pacific Index lost 0.2% Wednesday.
Nikkei 225 dropped 0.08%; China's Shanghai Composite rose 0.51%; Korea's Kospi
index fell 0.17%; Australia's S&P/ASX 200 declined 0.04% and in Mumbai, the
Bombay Stock Exchange's Sensex 30 Index fell 0.51%.
The skyscrapers and
immaculate beaches of Singapore's seaport look out on one of the world’s largest
parking lots: mile after mile of empty cargo ships, as far as the eye can see.
Similar fleets bob at anchor,
with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And
dozens of newly built ships float empty near the giant shipyards of South Korea
and China, their owners from all over the world reluctant to accept delivery
during one of the worst markets ever for the global shipping industry.
As recently as six weeks ago
large freighters that can carry bulk commodities like iron ore or grain were
fetching charter rates of $15,000 a day. Now, brokers and owners say, the going
rate is $6,000 a day. If any customers can even be found.
between the US benchmark WTI (West Texas Intermediate) used on the New York
Mercantile Exchange and Brent is almost $14 - - The Globe and Mail says that for
the past 10 months, Canadian producers - - whose prices are tied to WTI - - have
been taking steep discounts for their oil compared with international crude
prices that are benchmarked against North Sea Brent, which can be shipped more
readily. In the past, WTI tended to trade at a small premium to Brent, because
it is easier to refine.
hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then.
After plans for more pipeline capacity at Cushing, Oklahoma, the differential