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News : International Last Updated: Jan 16, 2013 - 11:01 AM


Markets: Japan grounds Boeing Dreamliners; C&C reports improved performance
By Finfacts Team
Jan 16, 2013 - 10:54 AM

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Boeing's 787 Dreamliner launch customer All Nippon Airways Co (ANA) made the inaugural commercial flight of the new widebody aircraft in late Sept 2011 and on Wednesday, Oct 27, the ANA 787 Dreamliner had its first revenue flight, over four hours, from Tokyo's Narita International Airport to Hong Kong International Airport. After more than 3 years of delays due to production and design problems, ANA flew its first jet from Boeing's plant in Everett, Washington State, on Sept. 27, to Tokyo. Jim McNerney, Boeing CEO, said Sept 27, the day of the handover to ANA, that the point at which each Dreamliner will turn cash positive "is a number of years out in front of us," but will come before 2020. McNerney said "the business we're in is huge sums [for making the airplanes] in the beginning and then an annuity for the next 25 to 35 years. That's the business model we have."

Japan's two main airlines have grounded their Boeing 787 Dreamliners after one was forced to make an emergency landing because of battery problems.

All Nippon Airways (ANA) grounded its fleet of 17 Dreamliners when its flight NH 692 from Yamaguchi Ube had to land shortly after take-off. Japan Airlines said it would ground its fleet of seven 787s from 16 January until further notice.

In recent weeks, Boeing has encountered problems with and its key Dreamliner planes, which are mid-range and fuel efficient aircraft. There have been fuel leaks, a cracked cockpit window, brake problems and an electrical fire.

ANA said a "Boeing 787 made an emergency landing at Takamatsu Airport due to aircraft malfunction. All passengers have escaped from the aircraft using the evacuation slope. This was categorized as serious incident by Ministry of Land, Infrastructure, Transport and Tourism."

Rupert Wingfield-Hayes of BBC News, in Tokyo said: "There have been six separate safety incidents with Japanese owned 787s in the last week and a half. But they are not all equal.

The incident today was by far the most serious. Smoke inside an aircraft while in-flight is always a serious matter...It also looks like this incident may not be isolated. It appears very similar to an electrical fire on board a Japan Airlines 787 in the United States last week.

The source of that fire was the 787's Lithium Ion battery pack. All the way back in 2007, the US Federal Aviation Administration expressed concern about the installation of Lithium Ion batteries on board the 787 because of their known problem with so called 'thermal runaway.' It's a problem that has caused mobile phones and laptop computers to catch fire in the past."

The 787 is not the only aircraft to use Lithium Ion battery packs. The Airbus A380 uses a smaller number of Lithium Ion battery packs and the Airbus A350, a counterpart to the Dreamliner, will use a much larger number."

C&C, the beverage group, today reported in an interim management statement, an improved trading performance in Ireland as volumes grew 1.8% in the three months to November after a weak summer trading period.

C & C Group Guidance maintained after Q3 IMS: Liam Igoe of Goodbody comments - - "C&C maintained its Q3 profit guidance at the lower end of the €112-118m range (Goodbody €112.4m). The Vermont cider business will add €1.5m to this for FY13. Divisionally, the performances were broadly as expected, with Ireland more positive than anticipated while GB remains difficult, with declines less than in H1. The Christmas period was “mixed” with continued good trading in the Republic of Ireland and in the UK, Tennents was “resilient” and “muted” elsewhere.

In the Republic of Ireland cider volumes were up 0.9% compared with a decline of 6.6% in H1 as the bad weather effect over the summer was absent. Pricing pressures remained with net revenue down 3.5% (-12.3% in H1).

In the UK Magners volumes fell 11.7% and Gaymer by 12.3%. These are much improved on the -17.4% and -20.4% in H1, though are still high. C&C comments on how the UK LAD market remains tough and high promotional activity continues in the off-trade. New Gaymer fruit variants are proving popular though other Gaymer brands continue to decline.

Tennents saw volume declines of 3.6% (-6.3% in H1) but net revenue sales were up 7.5% as C&C continues to push up prices as expiring contracts come up for renewal.

International cider & beer volumes were up 28.1% (revenue +32.2%). Within this, Magners in North America was up 16% while there were some “distribution issues” in Australia and performance in other territories was “encouraging”. In relation to Vermont Hard Cider Company, C&C says it continued to deliver strong volume growth.

There were no major surprises in the update. Ireland performed somewhat better than we expected while the UK cider business remains challenged, even if improved from H1. The UK should move close to flat from Q1FY13 as the negative impact of the loss of some of the UK supermarket multiples business peters out. C&C is making good headway in the Irish market. Forecasts remains essentially unchanged except for a marginal (+1%) increase in respect of the Vermont acquisition. Overall we remain positive on C&C after the Q3 update and while a positive surprise in Ireland is offset by a continuing difficult UK market, stabilisation should be evident here from FY14. In the meantime, its international business, and particularly US cider holds out prospects for positive newsflow in the coming quarters"

Economic View: Some policy advice from the periphery; Dermot O'Leary of Goodbody comments - - "Spanish Prime Minister, Mariano Rajoy, offers up some sensible economic advice for European policymakers in an interview in this morning’s Financial Times. It’s just a pity that none of it will be listened to.

Rajoy is rightly critical of the one-size-fits-all fiscal policies which are leading to contraction in the bloc overall and making it difficult for those countries that are attempting to rebalance their economies to engineer an export-led recovery. While Rajoy recognises that Spain is constrained in implementing expansionary policies due to the need to reduce its external and fiscal deficits, it says that countries that have the capacity should do so. Although not mentioned specifically, Rajoy is referring to Germany.

Data released from Germany yesterday backs up this point quite clearly. With growth disappointing in Q4, the German economy expanded by just 0.7% in 2012. Despite this weak growth, the country was still able to run a modest budget surplus last year. Moreover, further austerity measures are in the pipeline for Germany this year.

Ireland faces the same plight facing Spain currently. The domestic headwinds of private and public sector deleveraging have meant that domestic demand continued to be weak and has to be offset by contributions from net exports. Ireland has been successful in this regard, but the whole process would be made a lot easier if different policies were adopted in economies like Germany. With an election due in September, the status quo is likely to remain until then at the very least."

Ryanair Growth potential down south: Dónal O'Neill of Goodbody comments - - "Ryanair has this morning announced plans to open two new bases and services to two new airports in Morocco. The airline will establish bases in Fez and Marrakech, at which it will base three aircraft and operate 37 routes. It will also begin services to two new airports at Essaouira and Rabat with a total of 5 routes. Ryanair expects to carry up to 2.5m passengers annually in Morocco.

Elsewhere, CEO Michael O’Leary said Ryanair has plans to strengthen bases at Faro and Porto in Portugal, while it is also hoping to reach agreement with Vinci (who recently bought ANA) about setting up a base in Lisbon which is dominated by ailing flag carrier TAP and is under-utilised. Mr O’Leary said Ryanair plans to grow passenger numbers in Portugal from 3.5m currently to 10m over the coming years.

Having reduced capacity in Morocco by 30% to just below 1m seats between 2011 and 2012, Ryanair has clearly secured a favourable deal from local authorities in a market which has considerable growth potential. In Portugal, TAP has seen short haul capacity decline 5% since 2008 having ceded market share to Ryanair and easyJet. Lisbon in particular presents a great opportunity for Ryanair with European capacity from the airport still below 2007 levels. These announcements form a key part of Ryanair’s profitable growth strategy in countries and airports from which it can operate at an attractive cost base. We estimate that Ryanair will carry 80m passengers in the current financial year and it
is our top pick in the airline sector for 2013."

Irish trade data for November will provide more colour on impact of patent cliff: Conall Mac Coille of Davy comments -- "Stock indices were little changed yesterday (January 15th) following a mixed bag of macroeconomic data. The Euro Stoxx 50 Pr was down 0.5% but the S&P500 was up 0.1%. German statistical authorities indicated calendar year GDP growth of 0.7% in 2012, but consistent with a sharp 0.5% contraction in German GDP in the final quarter. In contrast, US retail sales (ex autos and gas) grew by 0.6% in December. This is the second month of robust spending growth in the US economy, allaying fears that a dip in confidence due to the US fiscal cliff negotiations may have hurt consumer sentiment.

Today, Irish trade in goods data are released for November. A key issue facing the Irish economy is how sharply the pharmaceutical patent cliff may push down on output and exports in the final quarter of 2012. This follows the 16% decline in manufacturing output in September, driven by the 34% fall in pharmaceutical sector output and with production remaining depressed through October and November. If output is flat in December, overall industrial production could decline by 8.3% in Q4. In Q3 2012, the 3.4% fall in industrial production reduced Irish GDP growth by 1%, although an offsetting rebound in services output led to overall GDP growth of 0.2%. So an 8% reduction in industrial production in Q4 could on its own push down Irish GDP by as much as 2% in Q4.

Today's trade data will show how goods exports have been affected in November. The sharp drop in goods export volumes in September reflected a 22% decline in pharmaceutical goods exports. Irish goods exports fell by 17.9% in September before a small rebound of 1% in October. This leaves aggregate goods export volumes at their lowest level since 2009 (excluding an erratic low in April 2012). As industrial production was flat in November, goods exports should follow suit and will fall by around 8% in Q4 2012."

US Markets

In New York Tuesday, the Dow Jones rose 26 points or 0.20%, to 13,535.

The S&P 500 climbed 0.11% and the Nasdaq slipped 0.22%.

Asia Markets

The MSCI Asia Pacific Index slid 0.6% Wednesday.

Japan’s Nikkei 225 Stock Average dipped 2.56%; China's Shanghai dropped 0.70%; South Korea's Kospi fell 0.32%; Australia's S&P/ASX 200 added 0.46%; in Mumbai, the Bombay Stock Exchange's Sensex 30 slipped 0.85%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.33% in morning trading Wednesday.

In Dublin, the ISEQ  is up 0.30%.

There is no movement in C&C.

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 $1.3289 and at £0.8291.

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 Tuesday this week, the BDI rose 3 points  or 0.39% to 765 - -  the BDI is up 9.44% in 2013.

Crude oil for February 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $93.33 up 2 cents from Tuesday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $110.55. The North Sea benchmark accounts for two-thirds of the global market.

Bloomberg reports that for the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.

Daily trading in Brent jumped 14% to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17% to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg. The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.

Brent, produced in the North Sea, is gaining favour among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past two years, reflecting everything from war in Libya to the embargo on Iran. WTI, the main grade in the US, has risen 9% as the nation, which prohibits crude exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point for Nymex futures.

Gold spot price

The spot price of an oz of gold is trading in New York at $1678.90, down $1 from Tuesday's close 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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