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News : International Last Updated: Nov 26, 2012 - 9:21 AM


Markets: Origin reports slow start to financial year 2013; Eurozone finance ministers to meet on Greece again
By Finfacts Team
Nov 26, 2012 - 9:17 AM

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Antonis Samaras, Greek prime minister, and Angela Merkel, German chancellor, meeting in Athens, Oct 09, 2012.

Origin Enterprises, the agri-services group, today issued a trading updateand it reported a slower start to its 2013 financial year as on-farm activity in Ireland and the UK was impacted by a sustained period of unseasonably wet weather resulting in a delayed autumn harvest and challenging arable crop planting conditions.

Origin Enterprises Q1 sales increase 11.2%: Liam Igoe of Goodbody comments - - "Origin reported an 11.2% increase in revenue in its Q1 IMS this morning. As expected, this mainly reflected currency appreciation (7.8%) and price increases in most of its agri-products.

In the core integrated agronomy business there was "good sales of agronomy services and seed applications" in this seasonally quiet period. The exceptionally bad weather over the past few months has delayed and disrupted winter planting in the UK, as anticipated and c.70% of cropping has been completed so far. This will result in a higher proportion of spring plantings which will skew the results even more into H2 this year (last year 86% of eps was attained in H2). The Polish integrated agronomy business performed "very satisfactorily" benefiting from both higher margins and volumes. The IMS states that the Associates performed as expected, though we note that the marine protein business delivered a "very strong performance" compared with last year.

We are retaining our forecasts at this early stage of the year following today’s trading update. A slower performance from the UK agronomy business in the winter period was anticipated and most of the growth in FY13 will be generated from the integration programme within the acquired businesses in AGRII (Masstock and UAP) along with the improved outlook within the marine protein associate.

We continue to recommend Origin as a Buy given its capacity to generate profit growth from internal developments in the near term, potential for international expansion in the medium term while its valuation metrics offer compelling value (PER of 8.3x cal. 2013, dividend yield of 3.6% and strong balance sheet with forecast net debt/ebitda of 0.6x)."

Economic View: Budget measures to be ironed out this week; Dermot O'Leary of Goodbody comments - - "With Budget Day only nine days away familiar media leaks are now coming thick and fast. On the taxes side, we already know that the introduction of a property tax will be the major contributor. Nevertheless, this will still be a controversial measure when it is introduced in the middle of next year.

With €3.25bn of new consolidation measures to be introduced, the government will need to finalise the menu of measures this week, with both the Minister for Finance and the Minister for Public Expenditure and Reform to present memos on possible options to cabinet on Wednesday. There appears to be some disagreement already between the parties on some of these options, with an extra 3% tax on incomes over €100,000 being pushed by the Labour Party but opposed by some in Fine Gael. Media reports this morning suggest that social welfare rates are back on the table by Fine Gael if higher taxes are to be part of the 2013 measures. Other unpalatable measures will have to be considered as there is very little in the way of low-hanging fruit remaining after four years of austerity measures.

Ahead of the finalisation of the measures, the Government White Paper on Friday evening will provide an estimate of the starting budget position after the important November tax returns are compiled. Clearly, there are a lot of issues to be resolved this week politically and there is likely to be some fallout resulting from any of the measures that are introduced."

Banks: PTSB in potential deal with the post office; Eamonn Hughes and Colm Foley comment - - "PTSB is in the process of closing 19 of its 92 branches and it now appears that it is in discussions with the Post Office to carry out banking activities, according to the Irish Independent. In addition, should the venture prove successful, it appears that PTSB may consider additional branch closures. The Post Office serves an estimated 1.7m customers of which 80% visit a branch on a weekly basis.

The Post Office already provides financial services activities for AIB and Danske Bank. AIB is in the process of reducing its branch network by 67 branches, whilst Danske is closing its entire 27 branch network. Also, Ulster Bank is closing 40 branches and there is some speculation that it may also consider the Post Office as an option to retain services.

Striking a deal for PTSB will allow the bank to provide some of the services through the Post Office that would have been forgone with it’s the branch closures. Nevertheless it will be interesting to see how the Post Office deals with the range of financial service providers now using its network, particularly if a deal is negotiated with Ulster Bank."

Banks: Burlington Hotel sells to Blackstone for just 23% of 2007 value; Hughes and Foley add - - "We don’t normally comment on every completed property transaction. However, we noticed the recent sale of the Burlington Hotel to Blackstone for €67m, 77% lower than the €288m paid for the hotel in 2007 at the peak of the property boom. The hotel has just over 500 rooms, the largest in the capital. A further €16m is to be spent on refurbishment, which post purchase will trade under the Hilton’s DoubleTree brand. The hotel is reported to have made a €5m profit last year.

The sale of the hotel, which was long associated with the excess of the property boom, highlights the extent of the peak to trough decline for some trophy assets in Ireland. Our base case for losses generated at the banks is based on 65% commercial property price declines and 60% on residential (-58% for owner-occupier properties and -65% for buy to let)."

Focus back on EU negotiations to release funding to Greece: Conall Mac Coille of Davy comments - - "Stock indices rose again on Friday, with the Euro Stoxx 50 Pr up 0.9% and the S&P500 up 1.3%. The gains on Friday meant US indices experienced their best weekly rally since June, with the catalyst being apparent progress in discussions between Democrats and Republicans to avert the US fiscal cliff in 2013.

An unexpected rise in the German IFO business climate survey also helped buoy market sentiment on Friday. The small rise from 100 to 101.4 was the first increase since February, and follows sharp declines in the survey reading through the second half of 2012. Nonetheless, markets still expect a small decline in the German Gfk consumer confidence survey, released today. Should German consumer confidence surprise on the upside, it could indicate that the improvement in stock market sentiment in Q4 is finally feeding into the real economy.

With few macroeconomic releases today, attention will return to EU negotiations to agree the next disbursement of funds to Greece. The sticking point in the negotiations has been the interest charged on the new bailout loans. However, with Greece already pushing through budget measures worth 7% of GDP, most commentators expect the EU/IMF to agree to release the next tranche of funds today."

Asia Markets

The MSCI Asia Pacific Index rose 0.3% Monday.

Japan's Nikkei 225 closed up 0.24%; China's Shanghai Composite Index fell 0.49%; South Korea's Kospi dropped 0.17%; Australia's S&P/ASX 200 added 0.25% and in Mumbai, the Bombay Stock Exchange's Sensex 30 climbed 0.22%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.14% in morning trading Monday.

The ISEQ  has slipped 0.05%.

CRH is down 0.54%; there has been no change in Origin.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.2957 and at £0.8092.

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.

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 last week the BDI closed up  6 points or 0.55% at 1,090 - -  the BDI is down 37.28% in 2012.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

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.

Crude oil for January 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $87.96 down 32 cents from Friday's close. In London, Brent for January delivery is trading on the International Commodities Exchange at $110.98. 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 at $23 - - 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.

That spread 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 narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,747.90, down $4.00 from Thursday's close (markets were closed Thursday) in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

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