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News : International Last Updated: May 28, 2013 - 12:44 PM


Markets: Origin Enterprises reports fall in quarterly revenues
By Finfacts Team
May 28, 2013 - 10:59 AM

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As the Senate debates bipartisan immigration reform legislation, President Barack Obama and Vice President Joe Biden meet with DREAMers who have received Deferred Action and US citizen family members of undocumented immigrants, in the Oval Office, May 21, 2013.

Origin Enterprises, the agri-services group, today reported in a trading update a 5.2% fall in revenues for the third quarter.

Revenues for the nine months to the end of April rose by 3.8% to €995.7m from €959m with bad weather especially in the UK blamed.

Liam Igoe of Goodbody comments - - "Origin Enterprises FY13 eps maintained despite weather factors Origin Enterprises has reported in its IMS that underlying Q313 sales (to end April) were 4.6% lower yoy (-8.4% volumes and +3.8% prices) due to adverse weather. Much of this will be recouped in Q4 and we expect that the financial implications of any residual impact will be offset by a continuing strong performance from associates. Origin’s core UK Agronomy operation suffered the brunt of the “weather effect”. Crop protection volumes were down by double-digit percentages, but some of this should be recovered in Q4. The Polish agronomy operations (Dalgety) saw good organic growth while fertiliser sales increased (+5% yoy in Q3) after a surge in demand after the weather improved towards the end of April. The marine protein JV continued its strong performance into Q3 on the back of higher prices and margins while Valeo Foods is performing as expected.

We are retaining our eps forecasts, though reducing the consolidated profits by €1.7m and increasing the associates by an equivalent figure – we forecast these short term trends to reverse next year. We continue to rate Origin a Buy in view of its structural growth story, earnings resilience in the face of adverse conditions, strong financials and modest rating."

Bank of Ireland Enters MSCI All-World Index at end of this week:  Eamonn Hughes of Goodbody comments  -- "Bank of Ireland is set to enter the MSCI World All-Share Index later this week, on May 31. Potentially c.1bn shares need to be purchased which is c.3% of the share count, but given the relatively tight shareholder structure, it will be closer to 6% of the actively traded free float (and c.20% of the trading in the name over the past 3 months). The shares are up strongly year to date (and 37% since our Buy call) and now reside at our trough TNAV of 19.3c.

There is likely to be a capital raise of c.€1bn at some stage later in the year to repay the government’s preference shares and whilst likely to be dilutive, recent sector experience has seen stocks re-rate subsequently as the market warms to improving capital metrics should it involve reducing State interests. However, BOI must navigate potential stress tests in the autumn which may see investors more reticent about getting involved ahead of the tests.

The stock should get a kicker from the index inclusion but a TNAV valuation is looking stretched for a bank losing money this year and just the right side of breakeven in 2014. Medium term TNAV and pre-provision profit growth rates warrant premium multiples for BOI but the stock is now trading on a 15-20% premium (TNAV and PPP) to UK peers and c.10-30% premium to European peers. The longer term story looks pretty good on the name but its recent squeeze is starting to stretch valuations in the short term."

Banks: Kennedy Wilson close to large investment in Irish property; Eamonn Hughes and Colm Foley of Goodbody comment  -- "Press reports this morning appear to confirm recent speculation that Kennedy Wilson (KW, the 1% shareholder in Bank of Ireland) is close to securing a portfolio of 16 properties for a cash sum of €306m. On May 20th, the vehicle which owns the properties, Opera Finance, and formally connected with Treasury Holdings, indicated that KW’s all cash offer had been endorsed. Bondholders in the vehicle must vote on the sale, where KW was the highest of 3 bids all over €300m. The portfolio includes some high profile buildings such as the Stillorgan Shopping Centre, the BOI headquarters and the KPMG building in the city centre. The rent roll delivers a c.8% yield on the purchase price.

Market speculation in recent weeks has centred on KW successfully acquiring the portfolio, so there is unlikely to be much surprise by developments over the past week. Nevertheless, property market participants have suggested that success in acquiring this portfolio will give KW critical scale in Ireland which may see it considering forming a REIT (Real Estate Investment Trust) at some stage in the future (a point also picked up in some editorials over the weekend).

Economic View: Shift from austerity to growth gathering pace; Dermot O'Leary, chief economist of Goodbody,  -- "The slow and belated shift in European policy from austerity to growth appears to be gathering steam. Various reports over recent days suggest that policymakers are looking at ways to both slow down the process of deficit reduction as well as reports that even Germany is willing to help to spur growth in the bloc.

In the periphery, the Head of the eurogroup, Jeroen Dijsselbloem, has said that the EU may consider giving Portugal more time to meet its deficit targets if economic conditions worsen, while the European Commission will decide tomorrow whether it will give Spain until 2016 to bring its deficit to the 3% of GDP level.

In the core, German and French politicians, including Wolfgang Schäuble, will meet in Paris this morning and may announce plans to tackle Europe’s chronic youth unemployment situation. Meanwhile, Spiegel is reporting that Schäuble has written to his economics minister saying that he believes that Germany should offer bilateral aid to peripheral economies, with the story suggesting that this aid could come by way of low interest loans from the government-owned Kfw development bank. If this indeed comes to pass, it would represent a significant change to the German perspective on austerity.

According to this morning’s Irish Times, even Ireland may join those countries attempting to slow the process of austerity. Officials are reportedly examining the possibility of an additional €1bn being funnelled towards capital projects. Such a plan is made possible due to the fact that, under current official forecasts, deficit targets agreed with the Troika will come in better than expected.

It is worth noting that some support for growth policies in the euro area appeared following the election of Francois Hollande in 2012, but nothing came of it. This time around there is broader support for growth policies and there is a welcome momentum behind it."  

Irish retail sales and earnings data due today: Conall Mac Coille, chief economist of Goodbody, comments - - "This morning's data should provide a gauge of the strength of the Irish consumer at the start of 2013. We already know that retail sales fell back sharply in Q1. However, this fall was not entirely unexpected. Budget 2013 tax rises and spending cuts were always likely to hit consumer spending hardest in Q1. Earnings and labour costs data will provide the first indication of wage growth in the public and private sectors in 2013, following a 0.6% rise in 2012.
Fall in retail sales in Q1 not unexpected

This morning's data should provide a gauge of the strength of the Irish consumer at the start of 2013. We already know that retail sales fell back sharply in Q1 — by 3% quarter-on-quarter, or 1.9% excluding the volatile motor trades sector, in the first quarter. However, this fall was not entirely unexpected. Budget 2013 tax rises and spending cuts were always likely to hit consumer spending hardest in Q1. Our forecast for broadly flat consumer spending in 2013 (+0.3%) assumed that retail spending would contract in Q1. So the April data, due today, may give us an indication of the strength of the Irish consumer heading into Q2. Some bounce-back from the sharp fall in March may materialise. Volumes fell 1.9% in March, with the unseasonably cold weather in that month perhaps weighing on an already weak retail sector.

Earnings and labour costs for Q1 are also released this morning. The 0.3% fall in the final quarter of 2012 partially unwound some of the gains seen in previous quarters, but overall average weekly earnings were up 0.6% for the calendar year 2012 — the first rise since the series began in 2008. This compares to 1.7% CPI inflation last year, so real wages continued to fall. The national accounts measure for wages suggests earnings growth of 1.8% for the calendar year 2012, so the true path of wages is still uncertain, but they have certainly stabilised in the last number of quarters.

The outlook for Q1 is mixed. Private sector employment growth likely continued in the quarter which should feed into wage growth in the sector, but the cuts to the public workforce will weigh on employment and wage growth. The latest cuts agreed to the public pay bill will not become apparent in the data until Q2, which will limit overall inflation in the first half of the year."

US Markets

US markets were closed on Monday for the Memorial Day public holiday.

Asia Markets

The MSCI Asia Pacific Index of shares rose 0.3% Tuesday as the yean fell over 1% against the US dollar.

The Japanese Nikkei 225 rose 1.23%; the Shanghai Composite Index added 1.24%; Korea's Kospi 200 index gained 0.32%; Australia's ASX/S&P 200 rose 0.22%; in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.49%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.31% in mid-morning trading Monday.

In Dublin, the ISEQ is up 0.73%.

Origin Enterprises jumped by 9.62%.

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 $1.2906 and at £0.8554.

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 the BDI fell  2 points to 826 - -  UK markets were closed on Monday.

Crude oil for July 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $94.55 up 40 cents from Friday's close (markets were closed Monday). In London, Brent for July delivery is trading on the International Commodities Exchange at $103.54. 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 on the CME in Chicago at $1,392.50 up $5.70 from Friday's closing (markets were closed Monday).

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

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