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Insurance Australia Group Limited (IAG) expects to deliver an insurance margin towards the upper end of its 9–11% guidance for FY10 if the operating conditions experienced in the first quarter continue. Managing director and CEO, Michael Wilkins, said he was pleased with the group’s progress to date.

“In the first quarter, we’ve seen the underlying performance of the business continue to improve and we’ve had the added benefit of narrowing credit spreads,” Mr Wilkins said.

“If the operating conditions experienced to date continue for the remainder of the year we will be on track to report a full year insurance margin approaching the upper end of our 9–11% guidance.”

Mr Wilkins added that the guidance remains subject to the group’s normal caveats around natural perils and investment markets.

“We also expect to achieve our previous guidance of underlying GWP growth in the range of 3–5%,” he said.

”However, reported GWP is likely to be affected by the strength of the Australian dollar.”

IAG’s improved performance has been accredited to higher premiums, the full benefit of operating efficiencies in Australia and ongoing cost control across the group, improved performance from CGU and New Zealand, and reduced exposure to the underperforming UK private motor market.

At the close of trade Thursday, IAG shares were trading at $3.70.

Macquarie Group Limited (MQG) posted a $479 million net profit for the six months to 30 September, up 79% from the prior six months. The investment bank foreshadowed that it was expecting a similar result for the second half of the year.

Macquarie said the net profit result was down 21% from the previous corresponding period, however operating income, before write-downs and impairment charges, came in at $3.5 billion, up 9% from the first half, and down 11% on the previous corresponding period.

The bank said a general recovery in the stock markets around the world, as well as strengthening metal prices had been the key drivers behind the recovery.

Managing director and CEO, Nicholas Moore, said the bank had continued to be hit by writedowns.

“Our first half result reflects improved market conditions and the diversification and global reach of our businesses,” Mr Moore said.

”However, the result was impacted by a number of one-off items and equity accounted gains and losses resulting in a net charge of $414m.”

The bank reported profits from all of its divisions with the exception of the Real Estate Banking Division.

Meanwhile, earnings per share for the half year was $1.50, up 60% on the prior half-year but down 31% on the previous corresponding period.

The bank also said that it had been hit by the strengthening Aussie dollar with reported assets under management decreased by $27 billion to $216 billion as a result.

”The pro-forma impact on AUM, taking into account the Delaware Investments acquisition and the MAp internalisation – both of which are anticipated to be finalised post balance date – resulted in a significant increase in AUM to approximately $345 billion,” the bank added.

Capital at 30 September 2009 was $11.5 billion, which was $4.5 billion in excess of the group’s minimum regulatory capital requirement.

The balance sheet for the company was helped by several important, but one-off, gains including the internalisation of Macquarie Airports and Macquarie Leisure Trust.

The bank also banked gains from the takeover of Macquarie Communications Infrastructure Group by Canada Pension Plan Investment Board.

Looking ahead, Mr Moore said that the positive effects of strong in ECM and credit businesses would taper off in the second half.

“We currently expect the profit for the second half of 2010 to be broadly in line with the first half but this remains subject to market conditions and significant swing factors and excludes the impact of one-off items,” Mr Moore said.

Mr Moore noted that FY10 trading was likely to be characterised by fewer one off items, a higher compensation ratio and increased effective tax rate consistent with historic levels, lower earnings on capital reflecting lower global interest rates and higher cost of funding.

At the close of business Thursday, Macquarie shares were trading at $49.25.

Sims Metal Management Limited (SGM) reported a 77% drop in profit in the September quarter versus the previous corresponding period (“pcp”). The metal recycler said profit for the quarter totalled $33.3 million, which was on the back of a 49% fall in revenue to $1.8 billion in the same period.

Sims reported a 68% drop in EBITDA to $92.3 million and 79% fall in EBIT to $53.6 million.

CEO Daniel W. Dienst said the company noted that in the first quarter there was sequential improvement in ferrous pricing coupled with improved scrap intake, particularly as the company re-asserted itself in the marketplace for unprocessed scrap.

“Non-ferrous markets were relatively firm and our Sims Recycling Solutions business executed well,” Mr Dienst said.

Sims said it purchased 3.6 million tonnes and shipped 3.5 million tonnes of scrap metal in the quarter, down on the 4.2 million tonnes purchased and 4.2 million tonnes shipped the pcp.

The company said scrap intake and shipments increased 28% and 16% respectively versus the June quarter.

”We achieved significantly improved results in our first quarter due to the benefits from cost-cutting initiatives undertaken in fiscal 2009, a steadier pricing environment and a return to more normalised trading conditions,” Mr Dienst said.

”While profitable, we note continued margin pressures as industrialised, scrap-generating economies of the world suffer from an economic downturn that has diminished intake, placing upward pressure on buy prices.”

Briefly looking at the regions, the company reported a 55% drop in sales revenue in North America and a 32% drop in both Australasia and Europe.

As of 30 September 2009, Sims said it had net debt balances of approximately $290 million, representing approximately 10% of total capital.

The company said in the early part of the second fiscal quarter, ferrous markets have weakened while non-ferrous markets remained firm.

“As the economies around the world find their footing, the company expects volatility and a continued challenging operating environment in its second fiscal quarter, which is traditionally slower due to the Northern Hemisphere winter and the holiday periods,” Sims said.

The company said the rapidly changing market conditions make it difficult to provide further guidance.

At the close of trade yesterday, Sims shares were trading at $20.20.

Directors' Interest Notices
29 October 09

Symbol	Shareholder	+/-	Prior	Now
APN	Pierce Patrick Cody		158,027	104,550
AIO	Geoff Kleemann		0	50,000

 

Substantial Shareholder Changes 
29 October 09

Symbol	Shareholder	+/-	Prior	Now
AUN	National Australia Bank Limited		-	5.15
CEY	Bank of America Corporation		5.13	6.29
ELD	ANZ Banking Group Limited		5.08	-
IOF	ING Group		6.26	7.44
MDT	Commonwealth Bank of Aust.		7.13	6.11
MIG	Ontario Teachers’ Pension Plan		11.7	-
OSH	Capital Group Companies, Inc.		-	5.13
PGA	Orion Asset Management		10.12	9.07
PRY	Perpetual Limited		7.52	8.60

All movements are percentage changes

Wall Street rallied as third quarter GDP figures revealed the US economy grew for the first time in a year and more than anticipated. Financials rallied on a positive day across the board.

GDP grew at a 3.5% annualised rate in the third quarter after falling 0.7% the previous quarter. Economists expected 3.2% growth.

The better than expected result was attributed to a number of factors, including a slowdown in the pace of businesses reducing inventories and the impact of government stimulus programs.

Meanwhile, new unemployment claims dropped from 531,000 the previous week to 530,000 last week. Forecasts were for a decrease to 525,000. Continuing claims fell from 5,945,000 to a better than expected 5,797,000 last week.

The Dow Jones rose 199.89 points, or 2.05%, to 9,962.58, the S&P 500 added 23.48 points, or 2.25%, to 1,066.11 and the NASDAQ picked up 37.94 points, or 1.84%, to 2,097.55.

Financials returned to the black after a being in negative territory for the past week. All of the major banks were between 3% and 6% higher, including Citigroup and Bank of America, which rallied 5.6% and 4.4%.

Tech bellweather Apple rose 2.1%, while Microsoft and IBM added 0.7% and 0.9%.

Exxon Mobil added 0.2% despite reporting a 68% drop in quarterly earnings on the back of lower prices. The country’s largest oil producer also missed both revenue and earnings estimates.

ConocoPhillips and Chevron gained 3.7% and 2.7%.

NYMEX light crude oil for December rose US$2.41 to settle at US$79.87 a barrel.

Procter & Gamble climbed 4% after the consumer products provider beat quarterly and earnings estimates. The company also increased the low end of its FY10 earnings forecast.

Aluminium producer Alcoa surged 9%, while others gainers included Caterpillar, Boeing and General Electric with rallies of 4.8%, 3.4% and 3.1% respectively. 

COMEX gold for December delivery rose US$16.60 to US$1,047.10 an ounce.

Barrick Gold and Newmont Mining climbed 7.1% and 3.6%.

European Markets

European stocks rose on the back of the US economy returning to growth. Financials and miners were the major improvers.

The UK benchmark FTSE 100 added 57.30, or 1.13% to 5,137.72. The French CAC40 gained 50.24 points, or 1.4% to 3,714.02, while the German DAX rose 91.18, or 1.66% to 5,587.45.

Lloyds jumped 7.5% as it revealed potential plans to avoid a government-backed asset insurance scheme before the end of the year.

Royal Bank of Scotland surged 9.5%, while Barclays and Standard Chartered rallied 3.5% and 3.7%.

Deutsche Bank climbed 5.6% after reporting profit in all of its divisions. However, Germany’s largest bank said provisions for credit losses more than doubled year-on-year.

Commerzbank and Societe Generale advanced 6.2% and 5.9%.

Insurers Allianz and Prudential put on 3.6% and 4.9%.

Miners gained ground as metals prices rebounded, including a 3.7% rise in the price of copper.

Xstrata regained most of the previous sessions slump, with a 7.4% gain. Antofagasta and Anglo American rallied 4.3% and 5.6%.

Rio Tinto and BHP Billiton added 4.2% and 2.8%.

Energy stocks were mixed as the rise in the price of crude was countered by concerns of weak demand and operational issues. Royal Dutch Shell fell 2.9%, while BG Group dipped 0.3%.

BP and Total added 0.4% and 0.1%.

Japanese Markets

The Nikkei lost ground Thursday as poor corporate earnings and slump in commodity prices saw investors flee the market. Despite the decline, the banks surged as investors favoured them to the exporters.

The Nikkei 225 retreated 183.95 or 1.83% to 9,891.10.

Japan’s number one bank, Mitsubishi UFJ Financial, surged 4.5%. Smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group climbed 4.1% and 1.6% respectively.

Chipmaker Advantest Corp slumped 6.6% after orders slumped. NEC slumped 8.3% after posting a loss.

TDK lost 2.3%.

On the positive side of the ledger, Japan Airlines jumped 2.7% as the airline seeks direction and financial surety.

Truck maker Hino sank 8.7% after saying it would post a loss almost double predictions.

Hong Kong Markets

The Hang Seng is poised to rebound strongly this morning following yesterday’s huge decline. Investors grew nervous on the prospect of tighter lending controls implemented from the Central Bank.

The Hang Seng lost 496.59, or 2.28% to 21,264.99.

Bank of China lost 2.7%, while Bank of Communications slumped 5.4% after third quarter profit figures fell short of expectations.

HSBC gave up 1.2%.

Petrochina lost 4%, after it too posted less-than-expected profit figures for the third quarter. CNOOC and Sinopec shed 4.5% and 1.3% respectively.

Geely Automobile bucked the trend, adding 2.1% after the automaker as it emerged as the strongest bidder to secure Volvo from Ford.

Zijin Mining lost 4.1% despite posting a solid profit, while China Coal retreated 3.3%.

The Australian stock market extended declines to a fourth straight session as a combination of weak commodity prices, poor earnings and uncertainty hanging over US markets rattle investor confidence. The market shed 2.4% Thursday, bringing the weekly losses to around 6% so far.

The fall was somewhat anticipated following a weak lead from global equity markets, while reports out of the US that General Motors could still require government assistance and US Airways was cutting 1,000 jobs rekindled pessimism about the economic recovery.

In economic news, according to Australian Property Monitors the median price on houses in capital cities increased 3.7% during the September quarter. In the same period prices for units jumped 3.4%.

At the end of the day, the All Ords dropped 112.1 to 4,575.2, while the ASX/200 fell 110.4 to 4,574.7. Over 3.5 billion shares worth around $7.2 billion had changed hands.

The Materials and Resources sector lost 3.4% following further weakness for base metals prices. In the UK, Rio Tinto shed 6.9%, while BHP Billiton lost 6.1%.

Rio Tinto fell $3.12, or 4.9% to $60.98 amid reports it is in talks with China's Chinalco related to a joint investment in Mongolia's Oyu Tolgoi copper and gold resource.

BHP Billiton shares shed $1.27, or 3.3% to $37.13.

Goldminer Newcrest dropped $1.45 to $32.46 after the company said the strong Aussie dollar was impacting earnings.

Lihir shed 8c to $2.98.

Building products supplier Boral edged 11c lower to $5.70 as it received a broker upgrade from Credit Suisse.

Amcor outperformed, gaining 3c to $5.69.

Centamin Egypt fell 6.9% to $2.15. The gold miner applied to de-list from the Australian Stock Exchange this morning to focus on Canadian and UK stock exchanges.

Energy stocks weakened 2.9% as crude futures fell to a two-week low due to an expected increase in gasoline stocks and a strengthening greenback.

Woodside and Santos shed $1.70 and 42c to $46.69 and $14.90 respectively.

Paladin fell 4.9% to $4.28 following a downgrade to its full-year production guidance.

ANZ shed 50c to $22.85 after reporting an 11% drop in full-year profit to $2.94 billion.

Two price target upgrades in broker reports this morning did little to help NAB’s share price, which weakened 78c to $29.05.

The big four were between 2.3% and 3% in the red as the Banks and Financials sector lost 2.8%.

Investment bank Macquarie Group shed $1.68, or 3.3% to $49.25. It is the first time the bank has closed below $50 since September 15.

Suncorp-Metway slumped 3% to $8.61 as its shareholders call for the resignation of chairman John Story.

Bank of Queensland lost 57c to $11.93.

Several major Property Trust stocks were over 4% lower, resulting in the sector falling 4.4%.

Westfield slumped 40c, or 3.2% to $1.445.

Consumer Discretionary weakened 2%, with media stocks the most heavily sold.

Fairfax dropped 4.8% to $1.58 and Newscorp shed 36c to $15.13.

APN News & Media fell 4.2% on a broker downgrade.

Flight Centre jumped 61c to $17.01 on solid 1Q earnings. Travel stocks have been posting strong results this week as consumers travel abroad on a strong dollar.

Consumer Staples eased 0.2% lower. Woolworths gained 17c to $28.65, while Foster’s and Coca-Cola Amatil added 3c and 9c to $5.55 and $10.51 respectively.

Wesfarmers lost 10c to $27.95.

Industrial heavyweights Leightons, Qantas and Macquarie Airports were lower by 1.6%, 2.5% and 3.2% respectively.

The sector weakened 1.6%.

A 44c advance to $31.90 from CSL sent the Healthcare sector 0.5% higher.

Telstra added another 2c to be trading at $3.31, its fourth straight day of gains. The broader Telecommunications sector gained 0.4%.

Around the region, the Nikkei 225 lost 180.1 to 9,895.0 and the Straits Times Index weakened 19.0 to 2,630.0. Across the Tasman, the NZSE50 shed 7.2 to 3,195.6. The Hang Seng retreated 525.7 to 21,235.9.

Spot gold was trading at US$1031.50 per ounce, and the Aussie was buying US$0.8990. 

 

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ANZ full-year profit drops 11%
Australia and New Zealand Banking Group posted a statutory profit of $2.94 billion for the year ended 30 September 2009, down 11% on the prior year. The bank said it was facing a number of headwinds in 2010 including a stronger Australian Dollar and a less favourable market environment.

At the end of the day, ANZ shares were trading down 50c to $22.85.

Flight Centre upbeat on outlook
Flight Centre said the group had recorded a pre-tax trading profit in the order of $34 million for the first quarter of FY10. Despite the company saying that they were ahead of guidance, the management reaffirmed the previously announced full-year guidance of between $125 million and $135 million.

At the close, Flight Centre shares were up 61c to $17.01.

Programmed to acquire KLM
Programmed Maintenance Services announced its intention to acquire KLM Group and to undertake an equity raising to fund the acquisition. Programmed said it had signed a 'Takeover Bid Implementation Agreement' with KLM under which Programmed would make an off-market takeover bid to acquire all of the issued shares in the design, installation and maintenance of integrated electrical and communications systems business for $28.1 million in cash.

Programmed's shares were halted at $4.30, while KLM shares were down 0.5c to 44.5c.

Strong A$ squeezes Newcrest
Newcrest Mining said that the strong Aussie dollar was impacting earnings. The miner explained that as the gold price closes the gap on the US dollar sales revenue and margins would be squeezed.

At the finish, Newcrest shares were down $1.45 to $32.46.

BT profit dips 11%
BT Investment Management reported an 11% drop in profit for the year ended 30 September 2009 versus the previous corresponding period. The company posted a profit of $12.7 million.

At the bell, BT Investment shares were down 1c to $3.01.

Paladin downgrades production guidance
Paladin Energy downgraded its full year production guidance from 6.6Mlb to a range of between 5.6Mlb and 6.1Mlb following a slower than expected ramp-up at Langer Heinrich and Kayelekera during the September quarter. The uranium miner said overall production for the September quarter was 744,188lb compared to a total of 727,716lb in June quarter.

At the end of the day, Paladin shares were down 22c to $4.28.

Lihir Gold lifts gold reserves estimates
Lihir Gold said that its reserves at Lihir Island increased by 7.5 million ounces by 30 June 2009. The gold miner reported ore reserves had hit 28.8 million ounces.

At the close, Lihir Gold shares were trading down 8c to $2.98.

Avoca Resources Limited (AVO) produced more than 50,584 ounces of gold at a cost of $428 per ounce in the September quarter, the junior gold miner said Thursday. Meanwhile, gold sold for the September quarter was 49,517 ounces at an average price of $1,158 per ounce. Avoca in the June quarter produced 4.2% more gold, however sold 6% less.

Sino Gold Mining Limited (SGX) reported gold production of 48,025 ounces at a cash operating cost of US$409/oz for the September quarter. The company said the drop in production compared to the previous quarter was a result of the suspension at its White Mountain operations since early August. The suspensions were a result of a group of farmers seeking compensation on the basis that water discharged from the underground mine was causing them concern. Sino Gold anticipates operations at White Mountain to restart soon. The company said guidance for the combined 2009 production from the Jinfeng and White Mountain Mines is 210,000oz of gold at a cash operating cost of less than US$400/ounce. The company added that forecast 2009 production is expected to be reduced by approximately 6,000oz of gold if production at White Mountain remains suspended in November 2009 and a similar amount if production remains suspended in December 2009. At 30 September 2009, the Sino Gold had available cash of $107 million.

Local shares had slumped 1.9% by noon Thursday as concerns grew louder that a global economic recovery may not eventuate as soon as once believed. The fall was somewhat anticipated following a weak lead from global equity markets, while the Aussie dollar was trading below US90c. 

In economic news, according to Australian Property Monitors the median price on houses in capital cities increased 3.7% during the September quarter. In the same period prices for units jumped 3.4%.

At midday, the All Ords dropped 93.6 to 4,593.7, while the ASX/200 fell 89.4 to 4,595.7. Over 1.6 billion shares worth around $3 billion had changed hands.

The Materials and Resources sector fell 3.2% following further weakness for base metals prices. Zinc was down 5.4%, while copper slid 2.3%.

Rio Tinto dropped $3.01, or 4.7% to $61.09 amid reports it is in talks with China's Chinalco related to a joint investment in Mongolia's Oyu Tolgoi copper and gold resource.

Rio and BHP Billiton shares slumped in the UK overnight. At home, BHP shares had shed $1.21, or 3.2% to $37.19.

Goldminer Newcrest dropped $1.02 to $32.89 after the company said the strong Aussie dollar was impacting earnings.

Lihir shed 7c to $2.99 as it said reserves at Lihir Island increased by 7.5 million ounces by 30 June 2009.

Building products supplier Boral edged 1c lower to $5.80 as it received a broker upgrade from Credit Suisse.

Amcor outperformed, gaining 10c to $5.76.

Energy stocks weakened 2.5% as crude futures fell to a two-week low due to an expected increase in gasoline stocks and a strengthening greenback.

Woodside and Santos shed 2.5% and 2.3% to $47.16 and $14.97 respectively.

Uranium miner Paladin fell 4.2% to $4.31 following a downgrade to its full-year production guidance.

A broker downgrade had little impact on coal miner Felix, which was only 3c lower at $17.37.

ANZ shed 50c to $22.85 after reporting an 11% drop in full-year profit.

Two price target upgrades in broker reports this morning did little to help NAB’s share price, which weakened 64c to $29.19.

The big four were between 2% and 2.1% in the red as the Banks and Financials sector lost 2.1%.

Investment bank Macquarie Group shed $1.36, or 2.7% to $49.57.

Suncorp-Metway slumped 3.3% to $8.59 as its shareholders call for the resignation of chairman John Story.

Several major Property Trust stocks were over 3% lower, resulting in the sector falling 2.6%.

Mirvac slumped 4.9% to $1.445.

Consumer Discretionary weakened 1.2%, with media stocks the most heavily sold.

Fairfax dropped 3.9% to $1.595 and Newscorp shed 2.4% to $15.12.

APN News & Media fell 3.8% on a broker downgrade.

On the positive side Consumer Staples put on 0.2%. Woolworths gained 19c to $29.01, while Foster’s and Coca-Cola Amatil added 6c and 16c to $5.58 and $10.58 respectively.

Wesfarmers lost 1% to $27.78.

Industrial heavyweights Leightons, Qantas and Macquarie Airports were between 2.7% and 2.9% lower.

The sector weakened 1.5%.

A 53c advance to $31.99 from CSL sent the Healthcare sector 1.1% higher.

Telstra added another 2c to be trading at $3.31. The broader Telecommunications sector gained 0.4%.

Around the region, the Nikkei 225 lost 184.3 to 9,890.8 and the Straits Times Index weakened 43.9 to 2,605.1. Across the Tasman, the NZSE50 shed 22.3 to 3,180.5.

Spot gold was trading at US$1,031.05 per ounce, and the Aussie was buying US$0.8969. 

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ANZ full-year profit drops 11%
Australia and New Zealand Banking Group posted a statutory profit of $2.94 billion for the year ended 30 September 2009, down 11% on the prior year. The bank said it was facing a number of headwinds in 2010 including a stronger Australian Dollar and a less favourable market environment.

At lunchtime, ANZ shares were trading down 48c to $22.87.

Flight Centre upbeat on outlook
Flight Centre said the group had recorded a pre-tax trading profit in the order of $34 million for the first quarter of FY10. Despite the company saying that they were ahead of guidance, the management reaffirmed the previously announced full-year guidance of between $125 million and $135 million.

Half way through the day, Flight Centre shares were up 5c to $16.45.

Programmed to acquire KLM
Programmed Maintenance Services announced its intention to acquire KLM Group Limited (KLM) and to undertake an equity raising to fund the acquisition. Programmed said it had signed a 'Takeover Bid Implementation Agreement' with KLM under which Programmed would make an off-market takeover bid to acquire all of the issued shares in the design, installation and maintenance of integrated electrical and communications systems business for $28.1 million in cash.

Programmed's shares were halted at $4.30.

Strong A$ squeezes Newcrest
Newcrest Mining said that the strong Aussie dollar was impacting earnings. The miner explained that as the gold price closes the gap on the US dollar sales revenue and margins would be squeezed.

At noon, Newcrest shares were down $1.05 to $32.86.

BT profit dips 11%
BT Investment Management reported an 11% drop in profit for the year ended 30 September 2009 versus the previous corresponding period. The company posted a profit of $12.7 million.

Half way through the day, BT Investment shares were up 2c to $3.04.

Paladin downgrades production guidance
Paladin Energy downgraded its full year production guidance from 6.6Mlb to a range of between 5.6Mlb and 6.1Mlb following a slower than expected ramp-up at Langer Heinrich and Kayelekera during the September quarter. The uranium miner said overall production for the September quarter was 744,188lb compared to a total of 727,716lb in June quarter.

At midday, Paladin shares were down 18c to $4.32.

Lihir Gold lifts gold reserves estimates
Lihir Gold said that its reserves at Lihir Island increased by 7.5 million ounces by 30 June 2009. The gold miner reported ore reserves had hit 28.8 million ounces.

By lunch, Lihir Gold shares were trading down 7c to $2.99.

Flight Centre (FLT) said the group had recorded a pre-tax trading profit in the order of $34 million for the first quarter of FY10. Despite the company saying that they were ahead of guidance, the management reaffirmed the previously announced full-year guidance of between $125 million and $135 million.

The travel agency said the quarter was marked by several highlights. These include profit growth in all markets except North America and parts of Asia.

The company reported strong results in Australia with strong margins supported by expanded market share in corporate business accounts.

Despite North America recording a loss last year, Flight Centre said it was expecting to break even this year.

This year Flight Centre reaffirmed its goals of modest growth, hoping to open around 100 outlets this year.

At 1131 AEDT, Flight Centre shares were down 10c to $16.30.