Hopes for euro solution lift stocks

THE sharemarket hit a near-three-month high yesterday after Germany’s government said it would support the European Central Bank’s bond-buying program, and as investors hoped Spain would call on the European Union for a full bailout.
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It was enough to see riskier assets become more popular, with resource stocks making the biggest gains.

The dollar surged above US106¢ after the Reserve Bank kept the cash rate steady at 3.5 per cent.

The benchmark S&P/ASX 200 Index closed up 19 points, or 0.4 per cent, at 4291.6.

Economists had expected the RBA to keep the cash rate steady, with most tipping it would cut rates one more time by the end of the year.

But the RBA said economic growth was around trend and core inflation around the bottom of its target range, leading some to conclude that there would be no more cuts this calendar year.

“We’ve got one more rate cut in there, we’ve actually formally got it in September, but I don’t think it’s going in September now,” said NAB chief economist Alan Oster.

“I think it’ll probably be in a couple of months, and it’s not impossible that you won’t even get it. We may be very close to the bottom of the [rate cut] cycle.”

Banks had a good day after rates were kept steady, with Westpac climbing 23¢, or 1 per cent, to $23.68. Commonwealth followed close behind, rising 44¢, or 0.8 per cent, to $56.82.

Some of the first companies to report on last financial year posted results below market expectations.

Leighton Holdings was the first big company to release its full-year profit, disappointing the market, as did hearing device maker Cochlear and toll road operator Transurban.

Leighton shares dropped 25¢, or 1.5 per cent, to $16.48. Cochlear fell $3.40, or 5.1 per cent, to $63 and Transurban lost 9¢, or 1.5 per cent, to $5.94.

Equipment maker Bradken’s 49 per cent rise in net profit sent its shares up 58¢, or 11.2 per cent, to $5.74.

Resources were stronger, with BHP Billiton up 16¢ at $32.16, and Rio Tinto 72¢ higher at $54.85.

BlueScope Steel was the best performer among the market’s top 100 companies, up 1.5¢, or 5.7 per cent, at 28¢.

With Agencies

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Ansell keen to stretch reach with buy

Expanding: Ansell said France’s Comasec was a good fit for the company.CONDOM and glove maker Ansell said it is looking at further acquisitions across the globe after snapping up the French glove giant Comasec for €101.5 million ($119 million) in a deal that highlights Ansell’s optimism on Europe.
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Comasec, owner of the famous European glove brand Marigold, turned over €100 million last year. It has manufacturing operations in Portugal and Malaysia and more than 1200 staff.

Ansell, which will release its full year results next week, said the deal will add to its earnings per share this financial year. It is made more attractive by the fall in the euro against the US dollar, which is Ansell’s currency.

The chief executive of Ansell, Magnus Nicolin, told a teleconference yesterday: ”What we particularly like about the company are its products. They have a number of products that we don’t have, so they complement us in the utility space, in some of the food area.”

Shares in Ansell closed 44¢ higher at $13.54, valuing the company at $1.77 billion.

The Comasec transaction follows three bolt-on acquisitions since April last year worth $US45 million.

Mr Nicolin said Ansell was looking across Europe, North America, Latin America and Asia for opportunities. ”We have, as you know, a strong focus on emerging markets and obviously would welcome opportunities to look at companies in those kind of markets. But the fact is that there are fewer opportunities in the emerging market environment,” he said.

Mr Nicolin said that while no players operating in debt-laden Europe could completely shake off the continent’s economic woes, Comasec had been less affected than other companies in their marketplace.

And despite the well-documented challenges in Europe, it remains the ”biggest single marketplace for industrial hand protection and medical and sexual wellness [condoms.] So it’s a big market.

”So it’s obviously a bit of a mixed bag, and for that reason we feel that this is as good a time as any to make this investment. We also believe, I believe, that Europe will come through these difficulties and will be having a growing economy in all these markets again.”

The Comasec chief executive, Pascal Berend, whose father founded the business in 1948, said the company was pleased to join forces with Ansell. ”This combination will generate many opportunities to accelerate growth and innovation while continuing to provide quality products and services to our customers,” he said.

Ansell recently appointed John Bevan, the chief executive of Alumina, to its board and earlier made Glenn Barnes its deputy chairman. Fund manager Perpetual has increased its stake in the company to 11.2 per cent from 10 per cent.

Citi has tipped Ansell to be net cash positive this financial year in the absence of new share buybacks or acquisitions. An analyst, Alex Smith, said Citi liked Ansell on valuation grounds. The company’s shares are down 6.9 per cent for the year to date.

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Innovate, globalise: how CSL avoids earnings rut

DEPARTING chief executive of CSL Brian McNamee, whose performance in building a global company now capitalised at $20 billion could be argued to have earned him the right to offer advice to Australian companies – the majority of which are stuck in an earnings rut.
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His answer is innovate, globalise and focus on productivity – salient words from a manager with the gravitas and the track record to deliver a broader perspective.

While there are some examples, particularly among our big mining, companies of innovation and globalisation, there are plenty more that have ridden the back of operating in the Australian market as monopolies or oligopolies. There answer to productivity of late has been to cut staff or wages.

The strong Australian dollar, the weaker economic environment and structural changes caused by the digital revolution have exposed a large proportion of Australian companies that had been cushioned into inaction.

Thus it is not surprising that, with the exception of CSL, the 2012 reporting season has gotten off to a pretty poor start.

Even with continuous disclosure there are plenty of companies that have already come in below expectations.

The market has been looking for 2012 earnings to fall by about half a per cent. But this includes dominant resource companies whose profits will fall much more.

Before the reporting season started, the non-resource sector was expected to post earnings growth of about 5 per cent. But there may be equity strategists (the big picture people in investment banks) that will be wondering if even the 2012 forecasts were on the optimistic side.

The bottom line is that it is hard to find the bright spots on the horizon for companies about to deliver earnings over the next couple of weeks.

Manufacturing at large is unlikely to offer any upside surprises. The dollar in particular has decimated the growth for this group and will result in many experiencing falling profits and will push some into losses.

Retail has already heralded its many challenges – the first is consumer confidence and the second is the structural competition from the online area.

Harvey Norman is the first of the big retailers to report and its earnings reflected these factors. Its move out of consumer electronics is clear evidence of the the extent to which the internet has been responsible for price deflation.

The optimists are hoping to get some positive blip from the government’s stimulus package flowing through to retail sales.

But if history is any guide, it won’t be sustainable. Government handouts do end up in the cash registers and in the poker machines, but once used up spending patterns return to normal.

The media is likely to be an equally sad tale – particularly the traditional media – print and TV. They have been squeezed by the pincer of internet induced audience fragmentation and sluggish or falling advertising revenue.

Aviation – a sector dominated by Qantas – will be ugly as domestic competition is putting pressure on yields and Qantas’ international brand continues to bleed. Building materials shouldn’t produce much joy as construction activity, particularly in residential, has been weak.

The financial services sector while sturdy is feeling the headwinds of slow credit growth and a high cost of funding. The only major bank to report in this period is the Commonwealth Bank, but it should set the tone for the remainder, which report in three months.

There are a couple of bright spots. Healthcare is one nominated by several analysts. CSL has already produced a solid result. Cochlear, however, disappointed the market due to costs associated with a recall of a product.

But this company should also be put in the clever, innovative and global group. It now has around 65 per cent of the global market in hearing bionic implants and ploughs plenty back into research and development. Its chief executive, Chris Roberts, was particularly upbeat in his commentary on the expectations for 2013. Nonetheless, the stock was trashed in yesterday’s trading.

The resource sector, while still churning out massive amounts of cash, has already been sold-off by the market this year, with expectations that most of the established players will report profit falls thanks to weaker commodity prices.

However, the mining services sector is predicted to be a brighter spot on the earnings horizon given the already committed expansions and new projects in the mining industry pipeline.

Given that markets always focus on the future, the driver of shares should now be what kind of recovery can be made across Australian listed companies in the current 2013 year.

The investment bank experts are looking for earnings growth of around 10 to 12 per cent in this period. But it’s a fair bet these will be revised down after the current reporting period is over in a month.

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Fording the downturn

So far Toyota’s been the star.GLOBAL downturns are the fault lines around which our automotive industry has always reinvented itself. In theory, managers should restructure their businesses and businesses should change hands whenever it improves productivity.
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Alas human nature intervenes. Corporate dreams are dreamt and restructuring is delayed … until the alternative is collapse. Way back in 1931, as the Great Depression savaged output at a South Australian automotive body manufacturer called Holden, US giant General Motors came to the rescue. The rest, as they say, is history.

VW, Leyland, Chrysler, Nissan and Mitsubishi all withdrew from car making in Australia – VW handing over to Nissan, Chrysler to Mitsubishi – long after they’d ceased to be healthy, all during crises for their parents and/or amid global downturns.

And here we are again.

After a ritual acknowledgment of the conventional wisdom that Australia is no good at making cars, the pundits peel off into ”protectionists” (sometimes dressed up as ”innovation” buffs) – who want to keep the industry alive with additional assistance – and ”free traders” who don’t. Count me among the free traders. But I’ve never bought the line that Australia couldn’t make cars without assistance.

Yes, some low-wage countries are gearing up production and, yes, our domestic market isn’t huge. But while lower-income countries will continue to grow market share in smaller, lower-quality cars, the bulk of production continues to be in high-income countries, particularly for larger, better cars. And though our market is small, so is Sweden’s. But Sweden has provided a volume base on which unique products have been built, which have then acquired export niches.

Toyota and Holden’s Australian operations have tapped into their parents’ global brands and marketing networks permitting rapid export growth. Rather than slaving away for decades building one’s presence in foreign markets, subsidiaries of global giants can win contracts with head office to supply specific market niches.

So far Toyota’s been the star, focusing all Australian production on one car line – the Camry/Aurion – manufacturing up to 150,000 units annually (right now it’s below 100,000) and consistently exporting more than half its production. Yet the Camry car line is produced in Japan and the US and if it comes to be produced in lower-cost locations, they could become preferred suppliers, first to our export markets, and ultimately to Australia.

Holden seems better placed because it manufactures unique vehicles around which more durable export niches might be able to be built. Our high exchange rate and the termination of the Pontiac brand have cruelled Holden’s exports recently, though it retains a monopoly on producing large rear wheel drive cars within GM’s network.

And then there’s Ford. Since the embarrassment of exporting the small, leaky, poorly finished convertible Capri to the US in the early 1990s, Ford US has shown scant interest in its Australian subsidiary’s entreaties to get serious about export from Australia. To utilise its assembly capacity it did some fine re-engineering of its Falcon car line to also produce the Ford Territory. But with flagging domestic Falcon sales and no serious exports, total volume is now around a third of Toyotas and Holdens which is hopelessly unviable. In fact Ford Australia still has great automotive assets, but they are not – and cannot be – strategically important for its current parent. Nevertheless they could be really valuable to up-and-coming Chinese or Indian car makers.

And while new Asian car makers gear up to export millions of small and medium-size cars, they’ll have little interest in making large cars like Falcons and Fairlanes. If they owned Ford’s Australian assets they’d get a foothold in our market and, more importantly, a large, sturdy, luxurious, rear-wheel drive car to badge with their own global marque. Would it be good public policy to subsidise such a transfer? Probably not. But since the current plan is to keep throwing good money after bad, let’s make that assistance conditional on a new owner or at least major equity partner and a global sourcing plan.

This idea was high-risk politics for as long as Ford was muddling through. But now the writing’s pretty much on the wall, the indignity of begging Ford to do us the favour of taking our money to hang around a little longer looks politically riskier still.

Nicholas Gruen is CEO of Lateral Economics and a speaker at the Victoria at the Crossroads? conference on August 23-24. vu.edu.au/events/conference-victoria-at-the-crossroads.

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Down-to-earth look at rural land ownership

Illustration: John Spooner.I HAVE surveyed the foreign investment ”debate” and it’s a curious one. Everybody is making sense. ANZ boss Mike Smith is saying we can’t turn our backs on overseas capital when we have trillions of dollars of growth to fund. He’s right, but we have always been open to foreign investment.
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Opposition Leader Tony Abbott is out there with the Nationals behind him saying we need to more closely monitor agricultural and rural land acquisitions in part by lowering the dollar hurdle for reviews, and he’s right, too.

Agriculture is being swept up in the same boom that has lifted our miners, for the same reason – burgeoning Asian demand. It is a strategic industry on the cusp of a sustained period of high growth, and a point of natural advantage for this economy, like mining.

Australia has enough leverage to argue terms, and enough skin in the global game to want to monitor acquisition trends closely: it’s no accident that Labor is also considering establishing a national register of foreign-owned agricultural land.

Abbott was also right when he said in Beijing last month that it would ”rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business”.

He could have made the point more clearly, but Treasurer Wayne Swan has responded to the same concern by requiring that foreign investment from state-owned enterprises be tested to ensure that it is arm’s length.

The new chairman of the Foreign Investment Review Board, Brian Wilson, said it best this week when he told the Dow Jones news wire that Australian businesses should be run on a commercial basis, ”and not as an extension of the policy, political or economic agenda of a foreign government”.

That’s a fairly simple proposition. No developed country would disagree with it, and it does not mean that state-owned or state-linked Chinese companies cannot invest in this country as part of a broader national plan to secure crucial commodity supplies. A partial template for such investment in fact already exists, in the direct equity stakes that Japanese groups took in Australian resources projects here in the 1970s and ’80s. They shared the development risk, and received their returns not only as investors, but as customers.

Last year’s foreign investment rejection of the partly government-owned Singapore Exchange’s $8 billion attempt to take over the Australian Securities Exchange was only the second time a major acquisition had been sunk by a national interest veto since 2001, when the Howard government blocked Shell’s takeover of Woodside.

There were 42 other deals rejected in 2010-11, all of them in real estate, and FIRB approved more than 10,000 investments worth $176.7 billion, compared with $139.5 billion in 2009-10: not exactly a lockout.


T’S said that in troubled times investors look for companies that are safe as a bank, but in these troubled times banks don’t necessarily fit the bill. But companies that own and operate toll roads that charge on a CPI-plus formula are very close to the defensive sweet-spot, as Transurban demonstrated yesterday.

The group’s official result for the year to June 30 was marred by a $138 million write-down of the Pocahontas Parkway, a US toll road that Transurban acquired in 2006. It leads to empty fields that in 2006 were expected to become suburbs: America’s property crash intervened.

Total toll revenue for the group rose as usual, however, by 5.7 per cent to $765 million. Traffic growth was actually quite subdued, at 1.9 per cent on the CityLink tollway in Melbourne that accounts for 41 per cent of group revenue, for example – but Transurban’s toll pricing formulas allow it to raise prices by at least the rate of inflation.

The group’s lucrative sideline as a tollway constructor delivered another $286 million of revenue, a 30 per cent increase over the year to June 2011, total revenue rose by 11.4 per cent to $1.15 billion, and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 9.1 per cent higher at $784 million – but there’s some other numbers that reveal what sort of beast Transurban is.

One is the ratio of EBITDA to revenue: at 45 per cent it’s outstanding. Another is the free cash flow the group throws off, and the relationship it has to Transurban’s investor payouts. At least 95 per cent of the uncommitted cash flow is distributed to investors.

Free cash rose by 11 per cent to $433 million – or 29.8¢ a share – in the year, and Transurban lifted its distribution by 9.3 per cent to 29.5¢.

Traffic volumes are still being affected by tollway renovations and subdued economic conditions but Transurban is predicting a distribution of 31¢ in 21012-13, and you can see how it is going to happen.

Former BHP chief financial officer Chris Lynch took over as chief executive of Transurban in April 2008 and by the time he handed the reins to former Lend Lease chief operating officer Scott Charlton last month, he had pulled Transurban’s gearing down to 45 per cent, cut costs and turned on Transurban’s inflation-protected cash flow machine.

Charlton can and is expanding the group’s toll road franchise. His main job is to keep the cash flow machine revving, however, and it’s very doable.

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ANZ could be winner in US fallout

HOT on the heels of HSBC’s admission of money laundering, Asian-focused Standard Chartered has become the latest lender to fall foul of tough US sanctions.
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The string of revelations against the two banks plays into the hands of ANZ, the Australian lender attempting to grow aggressively through Asia.

The New York State Department of Financial Services alleged overnight that for almost a decade London-based Standard Chartered ”schemed” with the government of Iran and hid from regulators about 60,000 transactions involving at least $US250 billion.

The claim argues that Standard Chartered reaped hundreds of millions of dollars in fees from the transactions.

A 27-page filing by the New York regulator is tied to an order for Standard Chartered executives to appear at a US hearing next Wednesday.

”[Standard Chartered’s] actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes,” the filing said.

Standard Chartered risks having its New York licence revoked – essentially preventing it doing business in the US. It could also be required to submit to ”independent, on-premises monitoring” of client transactions by an organisation nominated by the New York regulator – and it may incur a big fine, to boot.

Under US law, transactions with Iranian banks are strictly monitored and subject to sanctions because of government concerns about possible financing of Iran’s nuclear programs and allied terrorist organisations.

As an emerging rival in the Asian region, ANZ arguably stands to benefit from any loss to the reputation – and operations – of Standard Chartered.

For its part, Standard Chartered issued a statement that it ”strongly rejects the position or the portrayal of facts as set out” in the Department of Financial Services claim.

”The group does not believe the order issued by the DFS presents a full and accurate picture of the facts,” the statement said.

All this, including the prospect of strict US monitoring, is something that could represent a major turnoff for Standard Chartered’s Asian-based clients.

Bigger rival HSBC is also likely to be distracted for the medium term after its apology last week for ”shameful” systems breakdowns that failed to stop it laundering money for terrorists and drug barons. Most of the affair relates to HSBC’s Mexican operations, and Europe’s biggest bank has set aside $US700 million for potential fines in the US.

HSBC will also spend $US400 million beefing up compliance around the world, something that could again put emerging market customers offside.

While HSBC and Standard Chartered have substantially bigger franchises through Asia, ANZ has been targeting business and trade clients of both banks as part of efforts to expand its balance sheet through emerging markets, particularly in east Asia.

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Cochlear profit hit by recall

Heard the news? Cochlear’s results didn’t thrill the market.THE headline 68 per cent slump in profit was a blaring advertisement of how challenging the year had been for Cochlear.
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Not surprisingly, the $3.59 billion hearing implant maker was keen to focus on the future, rather than the surprise recall of a key implant that resulted in a 5 per cent loss of market share and a $101.3 million write-down.

”I think that where I’m upbeat – and the result is a disappointing result, because you don’t want to do $56 million [profit] – but where the result is a very, very good result is what it says about the future,” chief executive Chris Roberts, who received a pay cut, said yesterday.

”And life’s all about the future. What this result says is that we were able to maintain our strategy, investing in this market, investing in research and development et cetera. We didn’t have to go back and shut down projects and lay people off.

”We don’t want to have problems like this, but I think we’ve dealt with it in a credible way.”

The result did not meet analysts’ expectations, leading to a $3.40 (5.1 per cent) decline in Cochlear’s share price. The shares closed at $63. Revenue for the year to June 30 was down 4 per cent to $779 million and implant unit sales fell 6 per cent on 23,087, although there was a marked improvement in the second half.

Goldman Sachs described the announcement as ”OK overall – noting too exciting”.

After a long dispute with the Australian Manufacturing Workers’ Union, Dr Roberts lashed the Fair Work Act, saying Labor’s industrial relations laws were ”never about” improving productivity. Instead, he said they were a reward for the union movement’s successful campaign against the Howard government’s WorkChoices legislation.

”The problem for me is that … reregulating the labour market was put in the context of collective bargaining driving productivity, and that is intellectually dishonest to suggest that. I think it would have been far more honest to say, look, providing a workplace that’s much more pro-union is about the political arm of the party paying back the industrial arm of the party for getting them elected.”

Fair Work Australia recently found Cochlear had not engaged in a ”course of conduct which offends the good faith bargaining requirements”, but erred in not allowing the union access to the company’s lunchroom. The parties are now in talks.

”The company has fought hard and has taken every procedural point. However, unfortunately, that appears to be a reflection of the adversarial nature of the relationship between the parties,” the industrial umpire said.

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Analysts expect depressed US gas prices to continue

THE bargain-basement US gas prices that forced a $US2.8 billion devaluation of BHP Billiton’s Fayetteville shale assets last week look set to continue for the short-to-medium term, analysts say.
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Wood Mackenzie head of oil and gas Noel Tomnay told BusinessDay last week that the US market was ”disconnected from the rest of the world” with the Henry Hub gas price trading around $US3/mmbtu while European prices were at $US8-9/mmbtu and Asia-Pacific spot prices at $US14/mmbtu.

Mr Tomnay said the Henry Hub price would not reach the $US5/mmbtu range for six to eight years, when new LNG export projects would link the US market to the rest of the world.

”We do see quite a lot of LNG coming out of the US and Canada,” he said, ”perhaps not quite 100 million tonnes per annum [as in Australia] as not all projects proposed will go ahead, and by the time you have shipped from the gulf coast to Japan it ends up costing $US11-12/mmbtu.”

For its part, BHP expects the gap between natural gas prices in the US and elsewhere will narrow in the longer term. The Henry Hub price was $US3.20/mmbtu at the end of July, up 67 per cent from its April 19 low of $US1.91/mmbtu.

Macquarie Bank head of oil and gas Vikas Dwivedi said the gas price may not have bottomed. ”The rally has been delivered by unbelievably hot weather. Then there’s been so much fuel switching, from coal plants turning off and natural gas plants replacing them. But these are both what I call ‘fast friends’. And these fast friends could disappear fairly quickly.

”If you don’t get real structural demand growth, via new homes or factories and industrial facilities that burn gas all the time, you’re not getting real demand growth.”

Mr Dwivedi said the April 19 low, ”may have been the bottom, I’m not calling for a massive meltdown in prices and I don’t think we’re going to go back down to sub-$US2 any time soon, but I’m hard-pressed to see how we continue to rally here, unless the weather helps out”.

”If we take a weather-normal view, the answer is the supply/demand balance is pretty bad. We need supply to really adjust downward,” he said.

Mr Dwivedi said there was factual and anecdotal evidence of new ”sticky” industrial demand for gas, from committed or planned investment in petrochemical plants, primary metals and automobile manufacturers.

”The most recent is methanol, which is an extremely energy-intensive chemical,” he said. ”There are a lot of proposals, a lot of interest. The one thing all these have in common is that they are all long lead-time projects. Nothing is going to show up of any real size in the next few quarters. We’re talking 2016-17, when a lot of new facilities will come on at the same time.”

A faster source of new gas demand was the potential acceleration of coal-fired power generator shutdowns. ”Right now there is roughly 30 gigawatts of coal plants who’ve already given formal notification they’re going to shut down,” Mr Dwivedi said.

He described the shutdowns as semi-permanent. ”The intent is for the shutdown to be permanent, but if they don’t knock the facility down, they can always re-start it – maintain a skeleton staff to just keep the rust off it. But the intent is to shut it down permanently.”

If gas prices rose substantially, he said: ”You could say, of all the coal plants that are shut down, maybe 20 per cent could come back on after a few months to a year – could be un-mothballed – but most of the rest will stay shut.”

That view is not universal. UBS commodities analyst Tom Price said fuel switching from coal to gas started happening when the Henry Hub gas price fell below $US3.50/mmbtu and, once it returned to those levels, ”we should expect a reversal of the trade”.

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Rubbery outlook for Ansell boss

THE Swedish chief executive of Ansell, Magnus Nicolin, seems to think one might have a more lucrative career predicting the direction of the European economy rather than running a latex glove and condom concern.
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At a media conference yesterday regarding Ansell’s €101.5 million ($118 million) acquisition of the French glovemaker Comasec, Nicolin was asked to provide his views on the European economy.

”If I knew exactly where it was heading, I wouldn’t be working here,” he said.

Transurban legacy

THE new chief executive of Transurban Group seems to think it is a tad premature considering what he wants to leave behind when he eventually departs the company.

When asked what kind of legacy he wanted to leave at Transurban, Scott Charlton assured analysts that he would keep a leash on his ego. ”I’m not trying to build an edifice to myself. I am not trying to build a Scott Charlton legacy,” said Charlton, who only started at the company three weeks ago.

The former Leighton and Lend Lease executive, however, did concede he was something of an infrastructure nerd.

”I love the sector, I love the big assets. They are fun to be part of and as an engineer, I love the complexity of the networks and sort of how everything operates together. So the sector interests me and some people might see that as weird,” said the former designer of missile guidance systems.

On the issue of legacies, Transurban also disclosed that its former chief executive Chris Lynch enjoyed a tidy 9 per cent lift in remuneration in his final full-financial year to $7.36 million. In the lead-up to Lynch’s departure, the company stressed he resigned rather than being terminated. This means he will never have the chance to leave a legacy the same size of his predecessor Kim Edwards, who departed the group with a $5 million ”strategic milestone incentive plan bonus”, a $3.2 million ”business generation plan incentive”, a $1 million short-term incentive payment and a $5 million termination payment.

Music to their ears

MELBOURNE composer Noel Fidge has claimed to have ”reinvented” the modern musical by coming up what it is certain to be a new genre: an anti-gambling musical.

A Garden of Money, which will be staged in North Melbourne from August 23 for five days, revolves around a well-off stockbroker and his gambling addict wife.

But the recent track record of finance-related stage entertainment has been rather patchy. In 2010, a British play about the Enron collapse closed after just 15 performances on Broadway.

Labelled a ”flashy but laboured economics lesson” by the New York Times, Enron lost an estimated $4 million in the US.

However, EuroCrash! The Musical continues to power on after opening on the London West End last year. ”It is a parable, and a dreadful warning about what might happen if certain steps … to save the eurozone are not taken,” says the musical’s website.

AMP plummet

AMP chief executive Craig Dunn’s Christmas hamper might be a little lighter this year, thanks to the 40 per cent dip in the company’s share price to $4.05 since late 2009.

The company lodged a change of director’s interest notice disclosing that 777,778 performance rights granted to Dunn in March 2010 had lapsed at the end of July.

CEO bonus cut

ONE wonders whether the heavy engineering concern Bradken’s 49 per cent lift in annual profits will be enough to temper any of the remaining shareholder angst in relation to the remuneration of its senior executives.

Despite posting a better than expected $100 million net profit and 3.8 per cent lift in dividends for the year yesterday, the cash bonus paid to managing director Brian Hodges was cut from the previous year’s controversial $819,000 to $393,000. At last year’s meeting more than 20 per cent of shareholders voted against the remuneration report, where Bradken’s key management personnel were paid the equivalent of 17.5 per cent of Bradken’s operating cash flows. But while Hodges’ bonuses have been trimmed, his fixed pay is still well out of the RBA’s inflation comfort zone. His base pay for the year to June 30 rose a hearty 12 per cent to $1.28 million.

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RBA breaks silence on soaring dollar

The Reserve believes the dollar is soaring because foreign investors have settled on Australia as a safe place to park their money.THE Reserve Bank has turned to ”open mouth” operations in a bid to hold back the rising Aussie dollar.
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The Reserve inserted a sentence of exchange rate commentary into the statement released after yesterday’s board meeting in a conscious attempt to let the market know it thought the dollar was higher than could be justified by the usual metrics. The sentence said the exchange rate had “remained high despite the observed decline in the terms of trade and the weaker global outlook”. The Aussie-US exchange rate has climbed 6 per cent during two months in which base metal prices have fallen 6 per cent.

The Reserve believes the dollar is soaring despite the lower prices because foreign investors have settled on Australia as a safe place

to park their money. A big part of yesterday’s Sydney board meeting was given over to discussing the high dollar and what – if anything – to do about it.

One option – not ruled out – is to intervene in the foreign exchange market by selling dollars and buying foreign currency as the central bank has done on rare occasions in the past.

This option carries a risk of being stuck with foreign assets that would turn out to be bad investments, a criticism that can be levelled at China’s policy of investing abroad in order to hold back its currency.

The Reserve is taking the view for the moment that there is little evidence of broad economic damage flowing from the high dollar, meaning it can wait. Economic growth is strong, employment is climbing and inflation is low.

If needed, the Reserve would restrain the dollar in other ways, by feeding concern about the high dollar into its decisions about whether to cut interest rates; in the same way as it feeds concern about bank funding costs into those decisions.

For the moment it is watching the dollar, letting people know it is watching the dollar, and keeping its options open.

This story Administrator ready to work first appeared on Nanjing Night Net.

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