Shareholders reject Pacific Brands' pay

SHAREHOLDERS have rejected the remuneration package for the board of clothing and linen producer Pacific Brands.

Results from the company's annual general meeting in Melbourne today show the motion to pass the Pacific Brands remuneration report for the 2010/11 financial was defeated by a shareholder vote.

The poll saw 316.7 million votes cast against the adoption of the report, or 52.9 per cent, and 279.6 million were in favour, or 46.7 per cent.

The remainder of votes abstained.

According to the remuneration report, chief executive Sue Morphet and the company's other senior executives received short-term cash incentives despite performance targets not being met.

Ms Morphet was paid a $910,000 cash bonus, while the chief financial officer received $505,845 and other executives received between $127,000 and $450,00.

Short-term incentives were paid despite the company missing its target of earnings before interest, tax, amortisation and significant items (EBITA) exceeding 90 per cent of its budgeted group EBITA.

Pacific Brands posted a $132 million loss in 2010/11, and an EBITA loss of $58.8 million.

Ms Morphet's total remuneration in 2010/11 was $2.3 million.

Before the shareholder vote on the remuneration report at today's meeting, chairman James MacKenzie responded to pre-submitted concerns about the short term incentives from some shareholders.

The 90 per cent EBITA target, or gate, as Mr MacKenzie described it, was only narrowly missed in the 2010/11 financial year, he said.

The board decided to "open the gate" because of the impact of Kmart's decision to stop stocking Pacific Brands products, plus increased costs, such as cotton prices, he said.

Another factor was the progress of the company's significant restructure announced in 2009, which involved the closure of some Australian manufacturing plants and selling of some brands, Mr MacKenzie said.

"What we should have also emphasised was that the delivery of the transformation program - one year ahead of schedule and despite many thinking it couldn't be done - was a critical consideration in the board's decision to open the gate for the payment of STIs (short term incentives)," Mr MacKenzie said.

"The scale and scope of the transformation should not be underestimated."

The incentives paid were about 60 per cent of the maximum available to the executives, he said.

"It is clear that some stakeholders see the gate as something that, once set, should not be subject to any discretion," Mr MacKenzie said.

"And we hear that concern."

Source http://www.news.com.au/business/shareholders-reject-pacific-brands-pay/story-e6frfm1i-1226176222294

Foster's does not rule out takeover talks with

Foster's new Chief Executive John Pollaers, facing a barrage of questions from analysts and shareholders at a business lunch, defended the board's decision to reject the deal and focus on restoring Foster's share in a declining Australian beer market.

"The value put on the table was so far away from reality that it wasn't worth engaging (with SABMiller)," Pollaers said.

But he added: "We are not saying that we would never engage. Our interest is the shareholders' interest."

Foster's, one of the last big prizes in a consolidating global beer market, has high margins and a 50 percent market share in Australia, where it brews the Victoria Bitter, Crown and Pure Blonde brands.

But it has been losing share as consumers switch from traditional brands to premium and craft beers, and on Friday Foster's launched a new logo, rebranding its main beer business with a minor change in name.

Pollaers said the brewer had the support of shareholders for its strategy of focusing on growing the business and not being distracted by the offer on the table.

But not all agreed.

"I would have thought if anyone approaches, you talk to them because you never know what can come of it," said Craig Young, portfolio manager at Tyndall Investment Management, which owns Foster's shares.

Reporting its first-quarter earnings last week, SABMiller, the maker of Miller Lite, Grolsch and Peroni, kept the market guessing if it will sweeten its bid.

Foster's rejected SABMiller's A$9.5 billion ($10.4 billion) offer last month and refused to enter discussions.

With no other bidders emerging since then, analysts have said SABMiller may be reluctant to bid against itself and could use Foster's upcoming annual results on August 23 to put pressure on the Foster's board to negotiate.

SABMiller said in June it had shown no intention of going hostile, and it expected to engage the Foster's board in further talks.

It offered A$4.90 per share for Foster's, and after trading to a 10-month high of A$5.23, the shares have cooled in the absence of a rival bid to a slim premium over the offer price.

The shares dipped to A$4.98 on Thursday, recovering a bit on Friday to close at A$5.05, up 1.4 percent in a broader market .AXJO down 0.9 percent.

STABILISED MARKET SHARE

Australia's beer market has declined in recent years, as consumers turn to wine and premixed drinks. But Foster's also has a large stable of traditional beers that are losing share to craft brands, and to main rival Kirin's (2503.T) Lion Nathan.

Pollaers said on Friday Foster's has stabilized its market share for the first time in 10 years and expects the beer sector to return to modest growth.

"We believe that once Australia moves through this period of economic uncertainty, the beer category will return to the long-term trend of modest growth," he said.

The past 12 months have been the most volatile the brewer has seen, mostly due to extreme weather conditions, including an unusually cool and wet southern hemisphere summer.

Pollaers took over as chief executive in May, after being the managing director of the beer business where he was the sixth chief in seven years.

"The company line is, Pollaers has to put his head down and he's got to regenerate the beer business and he has to put at the back of his mind the fact that SAB has approached them," said an analyst who declined to be named because he was not authorized to speak to the media.

Still, Pollaers answered questions for nearly half an hour, longer than his formal speech at the business lunch, and nearly all of them on the company's rejection of SABMiller.

Foster's has forecast its beer volumes in the latest six months to June would decline 3-4 percent, a slight improvement from the December half, but severe floods across eastern Australia earlier this year could have further weakened sales.

The brewer rebranded its beer business on Friday with a minor tweak to the brand name.

The beer business will be called Carlton United Brewers, a slight change from the original Carlton & United Breweries, in what Pollaers said was a renewed focus on beer following the split from the wine unit, Treasury Wine Estates (TWE.AX).

Source http://www.reuters.com/article/2011/07/29/us-fosters-idUSTRE76S0QN20110729

Australia indicates rate rise due to curb inflation

Australia's central bank suggested it could raise interest rates again soon as it lifted inflation forecasts for the next two years.

In a quarterly monetary policy statement, the Reserve Bank of Australia on Friday said underlying inflation, which excludes volatile price items, was expected to be around three percent in 2012 -- the top of its target band.

In February, the RBA forecast underlying inflation would remain below 3.0 percent until the end of 2012.

In the latest estimate the bank said it expects prices to rise to 3.25 percent by the end of 2013 as the economy heads toward full employment, wages rise and mining investment surges.

"Further tightening of monetary policy is likely to be required at some point for inflation to remain consistent with the two to three percent medium-term target," the bank said.

It added that the board would "set policy to ensure a continuation of the low and stable inflation that has made an important contribution to Australia?s strong economic performance over the past two decades".

The bank left interest rates on hold at 4.75 percent earlier this week, having last lifted them in November 2010.

"Looking ahead, given the outlooks for both the world and domestic economies, year-end underlying inflation is expected to pick up over the course of 2011," the RBA said.

It said one of the biggest risks was that as mining investment boomed, companies would compete aggressively for labour, leading to more pressure on wages and other costs than the bank initially envisaged.

Australia, the first major western economy to raise interest rates after the global slump, has hiked its cash rate by 175 basis points since October 2009 as it rides the Asia-driven mining boom that helped it dodge recession.

Economist and chief executive of property Group Rismark, Chris Joye, said the RBA could lift rates three times this year to tackle inflation.

"If unemployment holds steady at 4.9 percent and wages growth remains healthy" the RBA is very likely to hike in June, he said.

Source http://www.google.com/hostednews/afp/article/ALeqM5iLiZnJJVnLFu5dy7ilnkIzmd5MXw?docId=CNG.d3307569a9f63532b17cec86e01675f0.831

Shell Plans to Turn Refinery Into Terminal

The Australian arm of Royal Dutch Shell PLC said Tuesday it plans to stop refining at a plant near Sydney and convert the operation into a terminal for fuel imported from around the region.

The relatively small Clyde Refinery can't compete with the "mega-refineries" going up in Asia and elsewhere, which have led to overcapacity in the industry, said Andrew Smith, vice president of Shell Australia's downstream portfolio. He denied the decision had been prompted by government policy or a proposed tax on carbon emissions.

The company will immediately begin consultations with employees, Mr. Smith said; the boards of two local business units then decide whether to convert the terminal, with a decision expected within weeks. He said that if the plans are accepted, the transition would be done by mid-2013, when the refinery had been scheduled for maintenance.

"Clyde is no longer regionally competitive," Mr. Smith said during a conference call with reporters. "The proposal would secure its long-term future."

Shell acquired the 75,000 barrel-a-day refinery in 1928. It currently supplies about 40% of Sydney's petroleum and nearly half of the requirements of New South Wales state, refining crude oil received from the Gore Bay terminal. Shell's other Australian refinery, near Melbourne, can process up to 120,000 barrels of oil a day.

The Clyde operations employ about 310 people, while a typical terminal employs between 30 and 50 people, Mr. Smith said. If the conversion goes ahead, he said, Shell would look to redeploy workers where possible.

Martin Ferguson, minister for resources and energy, said in a statement that Shell's proposal wasn't related to the government's plans to price carbon. "The decision by Shell to examine this proposal has been taken for a range of commercial reasons," he said.

The government plans to start pricing carbon with the aim of cutting emissions and pollution and boosting investment in renewable energy and low-carbon industries from July 2012, subject to the federal parliament's passing the legislation. Details of the plan haven't been finalized.

Source http://online.wsj.com/article/SB10001424052748704529204576257832586113442.html?mod=googlenews_wsj

Qantas slashes jobs, flights amid rising fuel costs

Australia's national carrier, says it is decreasing staffs and flights in response to high oil and jet fuel prices and the impact of significant natural disasters in Japan, New Zealand and Australia.

Qantas Chief Executive Officer, Mr Alan Joyce, said the measures included reductions in domestic and international capacity, retirement of aircraft, reduction of management positions and ongoing fuel surcharges.

"The significant and sustained increases in the price of fuel is the most serious challenge Qantas has faced since the Global Financial Crisis," Mr Joyce said.

"The price of Singapore Jet Fuel has risen from around US$88 per barrel in September 2010, to more than US$131 per barrel today. Qantas fuel costs for the second half of FY11 will be $2.0 billion.

"There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group.



"We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the Global Financial Crisis, to ensure the ongoing sustainability of our business."

The Qantas Group's result for second half of FY11 will be impacted by a number of significant events, including:
- A380 Rolls-Royce engine incident and fleet grounding - $25 million in second half of FY11 in addition to $55 million in the first half of FY11; and
- A number of significant natural disasters which are currently estimated to total approximately $140 million.
- Queensland floods - $60 million
- Cyclones (Yasi and Carlos) - $20 million
- Christchurch earthquake - $15 million
- Japan earthquake and tsunami - $45 million

Mr Joyce said it was too early to estimate the likely impact of these significant events on the Qantas Group's result for FY12.

Qantas management has reviewed operations and are implementing a number of measures which will reduce costs and increase revenue in order to protect the interests of employees and shareholders including:

- Reduction of Qantas Group domestic capacity growth in 2H11 from 14 per cent to 8 per cent and the reduction of Qantas Group international capacity growth in 2H11 from 10 per cent to 7 per cent;
- Suspension of up to four return weekly Jetstar services from Australia to Japan (from 1 April to end of August); the suspension of Qantas services between Perth and Narita (from 8 May); and downsizing of Qantas aircraft between Sydney and Narita from a Boeing 747 to an Airbus 330;
- Reduction of three daily Jetstar domestic New Zealand services to Christchurch and one Melbourne to Christchurch daily service (all from April);
- Fleet changes with the early retirement of two B767 aircraft; and
- Review of manpower costs which will include initiatives to reduce management headcount and annual and long service leave balances.

"We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave. At this stage only management positions will be made redundant," Mr Joyce said.
In addition, Qantas has already increased domestic airfares and international fuel surcharges in February and March this year in response to rising fuelprices . Jetstar also increased fares in selected domestic and international markets in February and increased ancillary revenue, including baggage charges.

In spite of the increase in fuel surcharges and fare increases, Qantas will not recover the full impact of current and forecast fuelprices.

Mr Joyce said the diversity of the Qantas Group would assist the business to manage this volatility in the market, by providing greater flexibility than many of the Group's competitors.

"Our portfolio of businesses - Qantas Airlines, Jetstar, QantasLink, Qantas Frequent Flyer and Qantas Freight- allows us to succeed no matter what challenges we face - from economic cycles to fuel price rises and natural disasters," he said.

Source http://au.ibtimes.com/articles/128443/20110330/qantas-slashes-jobs-flights-amid-rising-fuel-costs.htm

Australia’s Home-Loan Approvals, Consumer Confidence Decline

Australian home-loan approvals fell in January by the most in a year as floods inundated the nation’s east coast and consumer confidence slid on expectations a government-proposed carbon tax will lower household income.

The number of loans granted to build or buy houses and apartments dropped 4.5 percent from December, the first fall in seven months, with Queensland state approvals plunging 16.4 percent, the statistics bureau said in Sydney. The sentiment index fell 2.4 percent to 104.1 in March from a month ago, a Westpac Banking Corp. and Melbourne Institute survey showed.

Today’s housing “result was distorted by disruptions from the January floods, which devastated Queensland and impacted parts of New South Wales and Victoria,” Westpac economists led by Bill Evans said in a report after the release.

Reserve Bank of Australia Governor Glenn Stevens held the benchmark interest rate at 4.75 percent for a third meeting this month, citing weaker consumer spending and higher savings. The governor has said the bank will look through the economic impact of torrential rains in Queensland that affected about 30,000 properties, shut coal mines, cut rail lines and damaged crops.

The Australian dollar fell after the data, trading at $1.0081 at 12:51 p.m. in Sydney from $1.0099 in New York yesterday, and was set for its fifth daily decline.

The total value of loans declined 5.3 percent to A$20.3 billion ($20.5 billion) in January, today’s report showed.

Value of Lending

The value of lending to owner-occupiers dropped 4.6 percent, the report showed. The value of loans to investors who plan to rent or resell homes declined 6.8 percent.

First-time home buyers accounted for 15.2 percent of dwellings that were financed in January, down from 15.8 percent in December and lower than 21 percent a year earlier, the report showed today.

Australian consumer confidence fell to a nine-month low in March, the survey of 1,200 consumers taken Feb. 28-March 6 and released in Sydney today showed, with the largest drop of 6.8 percent coming in a gauge reflecting family finances over the next 12 months.

“We expect that the key negative for households, which is highlighted by the prominence of budget/taxation in their assessments, relates to the government’s commitment to introducing a price on carbon by July next year,” Evans said in a statement.

Prime Minister Julia Gillard said Feb. 24 the government intends to set a price on carbon emissions from July next year before moving to an emissions trading plan. Her support fell to a record low in a Newspoll published in the Australian newspaper yesterday as voters rejected the plans.

Source http://www.businessweek.com/news/2011-03-08/australia-s-home-loan-approvals-consumer-confidence-decline.html

Coles slashes price of milk, sells more

WESFARMERS Ltd says milk sales at its Coles supermarkets have risen by about 15 to 20 per cent since it began a price war on the consumer staple to achieve customer loyalty.

Coles last month slashed the price of its home brand milk to $2 per two-litre bottle.

It was immediately matched by rival Woolworths, drawing the ire of Australian dairy farmers who are already battling with the impact of floods following long years of drought.

Wesfarmers chief executive Richard Goyder today said the move was designed to bolster "price trust" in Coles shoppers and "was never about doing anything of any harm to primary producers".

"This hasn't been in place for long, but the reaction we're getting from our customers is incredibly positive and our milk sales are up very strongly since this was put in place," Mr Goyder told media after the company delivered a 33 per cent increase in first half profit.

"There has been some shift to the Coles brand milk, as you would expect, but overall milk sales are strongly up.

"Our milk sales were up by 15 to 20 per cent since we put this in place.

"The aim is get price trust and I can tell you, customers love it."

Mr Goyder said Coles' price cuts across various products had attracted more shoppers, who were buying more items.

"If you put that (milk price cut) in the context of 5,000 items that we've reduced, then what we're seeing is a lot more customers walking into our stores and we are now starting to see them increase their basket size with us," he said.

"That's all about giving our customers, many of whom are working families, a better deal at the supermarket.

"Milk is all about providing a core staple to our customers at great value.

"We would hope to increase the market for milk as a consequence as this."

Mr Goyder said there had been a move by consumers towards the Coles brand of milk, which accounted for about four per cent of all milk produced in Australia.

"There's been some shift, but in the scheme of things it hasn't been massive."

Mr Goyder said food inflation in Australia had reduced from about four per cent to two per cent in recent years.

"That's saving Australians significant amounts of money, as in a billion dollars a year or thereabouts."

Source http://www.news.com.au/business/breaking-news/coles-slashes-price-of-milk-sells-more/story-e6frfkur-1226007750622

Rio Tinto posts $14.2b profit, announces buyback

Global miner Rio Tinto has more than tripled last year's earnings, posting an annual profit of $14.2 billion, and announced a share buyback plan worth almost $5 billion.

The company benefited from soaring commodity prices such as copper, which jumped 47 per cent in the period, and iron ore which is negotiated on a quarterly basis.

These increases were driven by rising demand for its exports from emerging markets such as China.

Chief executive Tom Albanese says while he expects Rio Tinto to continue to benefit from these conditions, he did so with a degree of caution.

"GDP growth in emerging markets and supply constraints mean the general pricing outlook for commodities remains positive, albeit with elevated risk," he said.

"In particular the timing and speed at which the post-global financial crisis stimulus packages were removed have the potential to generate volatility and substantial swings in commodity prices."

Shareholders are set to benefit from the plan to return $5 billion through a share buyback to be completed by the end of 2012, as well as a 20 per cent increase in the final dividend.

The on-market transaction to take place on the London Stock Exchange (LSE).

Rio Tinto says that shareholders will benefit from the fact that there will be less shares in circulation.

Chairman Jan du Plessis says that commitment will still allow Rio Tinto to take advantage of any future growth opportunities that may arise.

The profit figure has come in broadly in line with market expectations, but analysts say there were a few surprises.

"The dividend increase is ahead of expectations, and while people were thinking that a buyback is possible, they thought it wouldn't be announced for another six months," UBS resources analyst Glynn Lawcock said.

"So Rio has come and surprised people on the upside with the dividend and the buyback. The buyback is clearly positive and it's what shareholders were asking for."

On its growth outlook, Rio Tinto says it will continue to make investments to drive organic growth and acquire small to medium assets.

"The commitment to small and mid-size acquisitions is good," Pengana Capital portfolio manager Ric Ronge said.

"That will throw the heat on BHP because BHP's strategy has been about buying large market-leading assets so they run into anti-trust issues. Small and mid-size acquisitions will not run into the same issues."

Rio Tinto is currently vying for smaller coal miner Riversdale.

It says it has extended its $3.9 billion takeover offer for the miner to March 4 after signs that Riversdale's second-biggest shareholder was holding up a deal.

Source http://www.abc.net.au/news/stories/2011/02/10/3135652.htm

Yahoo!7 buys online deal site Spreets

Online media company Yahoo!7 has bought online group buying site Spreets.

Yahoo!7 says it acquired both the Australian and New Zealand operations of Spreets (spreets.com.au and spreets.co.nz), which deliver cost-effective marketing to small businesses through online coupon deals.

The financial terms of the deal were not disclosed.

Since Spreets was launched in February 2010, it has gained 500,000 members and had more than 274,000 vouchers purchased.

Yahoo!7 chief executive Rohan Lund said Spreets was a leader in what's becoming a highly competitive and fast-growing market for group buying.

Other sites include Jump On It, Scoopon and Cudo, which is owned by PBL Media and marketed through the Nine Network.

Spreets CEO Dean McEvoy said websites such as Spreets were meeting a growing demand from customers for online coupon deals.

"Australians and Kiwis love an amazing deal and Spreets has seen significant growth delivering over $40 million in savings to consumers over the past year," Mr McEvoy said.

Yahoo!7 is a joint partnership between the Australian media company Seven Network Ltd and US-based technology company Yahoo! Inc.

Source http://www.smh.com.au/small-business/yahoo7-buys-online-deal-site-spreets-20110120-19x90.html

Dollar's rise, rate hikes take toll on manufacturing sector

THE soaring value of the dollar and the Reserve Bank's rate rises are forcing manufacturers to slash production and employment.

Greece is the only country in either the industrialised or the emerging world where manufacturing is performing worse, according to the December performance of manufacturing index, which is a survey conducted globally.

JPMorgan senior economist Helen Kevans said that in the rest of the world, the manufacturing industry was gaining momentum with economic recovery.

"In contrast, the Australian manufacturing sector is still contracting, with the currency being the main issue," Ms Kevans said.

"The Australian dollar was an average of 5 per cent higher in the December quarter."

The survey, conducted locally by PricewaterhouseCoopers and the Australian Industry Group, shows most manufacturers have now been contracting for the past four months, with December's result the worst in a year and in line with scores recorded during the financial crisis.

The index measure dropped to 46.3 points, below the 50-point mark that separates expansion from contraction. Idle capacity in manufacturing has now risen to 27.7 per cent.

Ms Kevans said manufacturing was being squeezed by the mining boom, which was attracting the investment capital and the skilled labour.

The boom continues to gather strength with commodity prices climbing to a new peak, according to the Reserve Bank. Its commodity price index advanced 3.2 per cent in December because of price rises in iron ore, coal, and also wheat.

Commonwealth Bank chief currency strategist Richard Grace said the dollar could be expected to remain strong until economic recovery in the US forced interest rates there higher. He said that could take another three to six months.

"Australian interest rates are high and, more to the point, European and US interest rates are at extreme lows that are not sustainable," Mr Grace said.

The head of PwC's global manufacturing division, Graeme Billings, said conditions were difficult even in industries that were not subject to import competition, such as construction materials. "Building materials are a good barometer of confidence within the economy," Mr Billings said. "Through the second half of 2010, activity flattened."

He said the wind-down of the government's school-building program contributed to weaker conditions.

Australian Industry Group director Innes Willox said the Reserve Bank's rate rises last year had made the competitive position of Australian manufacturers more difficult.

"Concerns about where interest rates will go from here has raised questions about investment in manufacturing," he said.

Source http://www.theaustralian.com.au/business/markets/dollars-rise-rate-hikes-take-toll-on-manufacturing-sector/story-e6frg926-1225981976575