egolinews.com

Philip Lowe, assistant governor to the RBA, said this morning that the Australian economy was in a reasonably solid upswing. Mr Lowe said however that the nature of the upswing would start to shift from public sector driven, through government stimulus packages, to a more private sector led recovery.

Speaking at the Australian Industry Group 10th Annual Economic Forum Mr Lowe said that public sector would decline as such investments as the Building Education Revolution tapered off, while improving Terms of Trade and higher commodity prices for the miners in particular would underpin private sector growth.

Refering to the housing market, Mr Lowe acknowledged that most indicators, such as clearance rates, pointed a buoyant property sector, however he cautioned that that was not the entire picture.

”Total housing loan approvals declined in October, November, December and January, with the declines broader than just for first-home buyers following the scaling back of the additional grants,” Mr Lowe said.

Commenting on the last six months, Mr Lowe recent data was on the firm side.

”Employment growth has been robust, business and consumer confidence is above average, the housing market has been strong, and there are signs that the period of business deleveraging is coming to an end,” Mr Lowe said.

Inflation, he said, would moderate, and was expected to be around 2.5% by the end of the year.

The inflation would be pegged back by the combined effects of slowing wage in growth, discounting amongst the retailers, and importantly more interest rate rises.

”In addition, as the Bank has noted a number of times, with the economy having relatively limited spare capacity, it is likely that interest rates will need to continue their gradual move towards more normal levels.”

Bringing his speech to a close Mr Lowe said that the flow-on effect from the GFC would continue to affect the economy.

”While we need to watch these flow-on effects carefully, the outlook for Australia appears to be considerably brighter than that for most other advanced economies,” Mr Lowe concluded.

Santos Limited (STO) shares climbed Thursday morning amid rumours Woodside Petroleum Limited (WPL) is set to make a takeover offer for the company. Media reports speculate that Woodside is considering a $15 billion bid for Santos with the primary aim being the access of its gas export interests. At 1045 AEDT, Santos shares were 51c higher to $14.88, while Woodside shares had dropped 26c to $47.16. While some analysts have dismissed the rumours as nothing more than market speculation, the rumours have reportedly been circulating for some weeks now.

Santos Limited (STO) shares climbed Thursday morning amid rumours Woodside Petroleum Limited (WPL) is set to make a takeover offer for the company. Media reports speculate that Woodside is considering a $15 billion bid for Santos with the primary aim being the access of its gas export interests. At 1045 AEDT, Santos shares were 51c higher to $14.88, while Woodside shares had dropped 26c to $47.16. While some analysts have dismissed the rumours as nothing more than market speculation, the rumours have reportedly been circulating for some weeks now.

Buccaneer Energy Limited (BCC) said it has executed a binding agreement to acquire a 87.5 – 100% working interest in a portfolio of 57,600 gross acres of onshore and offshore oil and gas leases from private US based company Stellar Oil & Gas, LLC for US$2.65 million. The company said the offshore leases adjoin and adjacent to significant production assets of multi‐nationals including ConocoPhillips and Chevron. Buccaneer said the estimated reserves include P10 reserve potential of 1.2 TCF and 149 million barrels of oil (MMBO), as well as P50 reserve potential of 598 BCF and 53 MMBO. The company expects drilling to commence in calendar 2010.  

Western Area NL (WSA) requested its shares be placed in trading pending an announcement to be made regarding a proposed issue of convertible bonds. The company said the trading halt is requested until the commencement of trade next Monday or earlier in the case an announcement has been made regarding the matter.

Cobar Consolidated Resources Limited (CCU) revised the resource estimate for its Wonawinta silver project to 47 million ounces of silver at an average grade of 71g/t. The previous resource estimate was 57 million ounces of silver at an average grade of 54g/t.

Cooper Energy Limited (COE) said it has been awarded a contract by PERTAMINA to operate and develop the Sukananti, Tangai and Bunian oil fields in South Sumatra, Indonesia. The company said the three oil fields have produced 1.08 million barrels of oil to date. Cooper Energy said it is looking forward to more fully developing the oil fields and recovering an additional 1 million barrels of oil. The company said its winning program consists of a signature bonus of US$861,888, 24 square kilometres of 3D seismic, a new development well, three well workovers and infrastructure upgrades. The expected total cost of the program over three years is US$6.8 million.

Strike Resources Limited (SRK) announced the appointment of former Polaris Metals managing director Ken Hellsten as managing director. The appointment followed the retirement of Shanker Madan as managing director as Mr Madan takes up his new role as non-executive chairman. The company said Mr Hellsten is a geologist with over 30 years’ experience in the resources industry, including employment in senior executive roles at BHP-Billiton, Centaur Mining and Ironclad Mining.

Bow Energy Limited (BOW) announced an initial certification of 2P gas reserves of 59 petajoules for its Blackwater CSG Field in Central Queensland, which exceeded gas reserve requirements to underpin the company’s Blackwater Power Project. The company said the initial 2P reserve represents only 5% of the 2P potential over the CSG Field. Bow said 2P reserves are yet to be assessed and defined over the balance of the Blackwater 3P area, representing 95% of the target. The company said it is continuing to drill additional appraisal wells on the Blackwater CSG Field to be followed by appraisal drilling on the adjacent Comet CSG Field.

Lihir Gold Limited (LGL) chairman, Ross Garnaut, said that while gold continues to exhibit its traditional volatility, the outlook remains fundamentally strong due to declining mine production and rising global demand. Mr Garnaut said that with the company’s gold sales completely unhedged and the company having a growing production profile in the coming years, the group has entered 2010 in an exceptionally strong financial position, with large cash assets held against likely investment demand, a portfolio of high-quality, low-cost, long-life assets, as well as a promising exploration pipeline to drive future growth.

Crown Limited (CWN) said it would be spending $212 million to upgrade the premium player facilities at the Crown Entertainment Complex. The company said the decision to make the investment was underpinned by strong growth in recent years of international premium player turnover.

Executive chairman, James Packer, said upon completion the facilities would rival the best in the world, allowing Crown Melbourne to compete in the competitive sector of the global tourism market.

He added that the major capital expenditure would be a significant benefit to Australian tourism, capturing a greater share of emerging markets, such as China.

Crown Melbourne’s CEO, David Courtney, said the new development would result in a number of new private gaming salons, an upgrade and expansion of a VIP room, improvements to spa facilities, a refurbishment of villas and new non-gaming facilities for members.

Crown said the project would be completed in the first half of 2012.

“The expansion has been facilitated by the amendments to Crown Melbourne’s licence which were part of an agreement which was ratified by the Victorian parliament late in 2009,” the company said.

“That agreement saw an increase in the number of tables permitted under Crown Melbourne’s licence and an increase on tax in gaming machines.”

As at 1036 AEDt, Crown shares were down 15c to $8.24.

Crown Limited (CWN) said it would be spending $212 million to upgrade the premium player facilities at the Crown Entertainment Complex. The company said the decision to make the investment was underpinned by strong growth in recent years of international premium player turnover.

Executive chairman, James Packer, said upon completion the facilities would rival the best in the world, allowing Crown Melbourne to compete in the competitive sector of the global tourism market.

He added that the major capital expenditure would be a significant benefit to Australian tourism, capturing a greater share of emerging markets, such as China.

Crown Melbourne’s CEO, David Courtney, said the new development would result in a number of new private gaming salons, an upgrade and expansion of a VIP room, improvements to spa facilities, a refurbishment of villas and new non-gaming facilities for members.

Crown said the project would be completed in the first half of 2012.

“The expansion has been facilitated by the amendments to Crown Melbourne’s licence which were part of an agreement which was ratified by the Victorian parliament late in 2009,” the company said.

“That agreement saw an increase in the number of tables permitted under Crown Melbourne’s licence and an increase on tax in gaming machines.”

As at 1036 AEDt, Crown shares were down 15c to $8.24.

Washington H. Soul Pattinson and Company Limited (SOL) said its post-tax profit fell 86.9% to $123.4 million for the six months to 31 January 2010. The result came on the back of fluctuations in the earnings of its 60% controlled coal miner New Hope Corporation, which reported earlier in the week.

The previous six months result was buoyed by the injection of $822.5 million, following New Hope’s sale of the New Saraji coal project to a BHP Billiton JV.

Not including one-off items, Soul Pattinson still reported a 17.4% decline in post-tax profit to $97.1 million, citing a reduced contribution from New Hope, which suffered from a strong Aussie dollar and lower coal prices.

In essence Soul Pattinson is a holding company for a range of business, not just in mining.

Soul Pattinson holds a 78% stake in Pitt Capital Partners, a 24.6% stake in Australian Pharmaceutical Industries Limited and a 44.6% stake in Brickworks Limited, amongst others.

Most of these companies said the outlook for the second half of the year was more positive than the first, pointing to a stronger result for Soul Pattinson.

The market value of Soul Pattinson’s listed investment portfolio was $3.9 billion at January 31, up from $2.8 billion a year earlier.

The conglomerate declared an interim dividend of 14c, up from 13c at the corresponding point last year.

At the open Thursday, Soul Pattinson shares were down 2c to $13.60.

Washington H. Soul Pattinson and Company Limited (SOL) said its post-tax profit fell 86.9% to $123.4 million for the six months to 31 January 2010. The result came on the back of fluctuations in the earnings of its 60% controlled coal miner New Hope Corporation, which reported earlier in the week.

The previous six months result was buoyed by the injection of $822.5 million, following New Hope’s sale of the New Saraji coal project to a BHP Billiton JV.

Not including one-off items, Soul Pattinson still reported a 17.4% decline in post-tax profit to $97.1 million, citing a reduced contribution from New Hope, which suffered from a strong Aussie dollar and lower coal prices.

In essence Soul Pattinson is a holding company for a range of business, not just in mining.

Soul Pattinson holds a 78% stake in Pitt Capital Partners, a 24.6% stake in Australian Pharmaceutical Industries Limited and a 44.6% stake in Brickworks Limited, amongst others.

Most of these companies said the outlook for the second half of the year was more positive than the first, pointing to a stronger result for Soul Pattinson.

The market value of Soul Pattinson’s listed investment portfolio was $3.9 billion at January 31, up from $2.8 billion a year earlier.

The conglomerate declared an interim dividend of 14c, up from 13c at the corresponding point last year.

At the open Thursday, Soul Pattinson shares were down 2c to $13.60.

Credit Suisse lowered its recommendation on ORI (NEUTRAL, price target $29.35) despite remaining positively disposed towards the company. The Swiss broker said the downgrade reflected a number of negative one-off items and recent share price strength.

Credit Suisse pointed to the environmental provision for the Botany remediation, which is to take place over the next year, the Hexachlorobenzene provision and the Pharmaceuticals tax case.

Despite these “below the line” issues, as well as the recent run in Orica’s share price, the broker believes earnings growth is set to continue as Australian and Indonesian mining volumes remain robust.

The key uncertainty for the group is around the speed and extent of recovery in the US.  

Credit Suisse lowered its recommendation on ORI (NEUTRAL, price target $29.35) despite remaining positively disposed towards the company. The Swiss broker said the downgrade reflected a number of negative one-off items and recent share price strength.

Credit Suisse pointed to the environmental provision for the Botany remediation, which is to take place over the next year, the Hexachlorobenzene provision and the Pharmaceuticals tax case.

Despite these “below the line” issues, as well as the recent run in Orica’s share price, the broker believes earnings growth is set to continue as Australian and Indonesian mining volumes remain robust.

The key uncertainty for the group is around the speed and extent of recovery in the US.  

Brickworks Limited (BKW) reported a 65.5% drop in profit for the six months to 31 January 2010. The company posted a profit of $88.2 million for the period, compared to $255.3 million a year earlier.

Brickworks expects its full-year result to be solid due to lower interest expense as a result of the conservative level of gearing and the improving performance of the Building Products division.

“This is due to the initial signs of recovery that are already evident in the housing market and the expansion of the Building Products division into new growth areas,” the company said.

“The Investments division is also forecast to maintain performance.”

Brickworks reported a normalised profit of $57 million, 12.1% higher than the previous corresponding period.

Chairman, Robert Millner, said this result highlighted increased earnings derived from the Building Products and Property divisions and lower interest payments.

The company said the Building Products division recorded an earnings before interest and tax result of $21.8 million for the half year, up 32.9% from the $16.4 million reported in the previous corresponding period.

Brickworks attributed the increase to higher volumes and higher average selling prices.

The Land and Development division produced an EBIT of $12.3 million for the half year, an increase of 1.7% from the previous corresponding period.

Brickworks’ said its investment in Washington Soul Pattinson & Company (WHSP) contributed $39.9 million for the half year, down 16.5% from $47.8 million in the previous corresponding period.

The company said the market value of its 48.25% share holding in WHSP was about $1.4 billion, up 24.1% from $1.125 billion at 31 July 2009.

Managing director, Lindsay Partridge, said the company undertook significant steps to improve the business and strengthen its financial position.

“A total of $421.9 million was raised through a successful Share Purchase Plan, the sale and leaseback of the Wollert plant and the sale of surplus properties and non-core assets,” Mr Partridge said. 

“Consequently, net debt to capital employed was reduced to 10.8%.”

Brickworks declared an increased interim dividend of 13c per share for the half-year, up from 12.5 cents per share for the previous corresponding period.  

At the close of trade yesterday, Brickworks shares were trading at $12.60.