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