Showing posts with label Australia. Show all posts
Showing posts with label Australia. Show all posts

Friday, April 12, 2013

B&E This Fortnight

INTERNATIONAL

BUSINESS, ECONOMY & FINANCE
$10Bn bid for Foster’s

Despite slow growth and maturing markets in beer producing countries, Australia’s largest brewer - Foster’s Group - has been offered $10 billion by the world’s second-largest brewer - SABMiller - for a takeover of the Australian favourite. SABMiller offered $4.90 per share to Foster’s for the buyout, which was 8.2% higher than the latter’s closing stock price on Monday. The deal would have been the biggest in the brewing industry since InBev bought Anheuser-Busch for $52 billion in 2008, but it was rejected by Foster’s on the grounds of being too low. Showing a strong investor confidence in the decision of Foster’s, the share prices shot up to a 9-month high of 14% on the news. Foster’s has been the subject of takeover ever since it announced its plans to spin off its struggling wine operations - Treasury Wine Estates that got listed in Australia, just last month. SABMiller that makes Peroni, Grolsch and Miller Lite, has been a favourite among the potential bidders. Despite a downturn in the beer market, Foster’s is supposed to be a good option to acquire due to its dominant position in Australia and high margins of about 37% that is almost double of its global peers. It is expected that SABMiller will increase the offer price in the second round of negotiations and the offer price can see a hike of 10-12% to A$5.40-A$5.50 per share.

Cheap us stocks
The shares of companies that make up the S&P 500 index - one of the most used benchmarks for the U.S. stock market - will earn 18% more this year on the back of cheap valuations of shares, the cheapest level in 26 years. Since April, share prices have been on a decline, pushing the price of the S&P 500 to 14.5 times the past year’s earnings, compared with the average of 20.5 since June 1991. As a result the index is valued at 8.7 times cash flow, cheaper than it has been 81% of the time since 1998. But if S&P 500 companies are expected to earn more in 2011 than in 2010, why, then, have prices been falling? That’s because investors are apprehensive of future gains on account of concerns such as the Greek crisis coupled with China’s rising interest rates & the Federal Reserve’s $600 billion stimulus programme.

Greek Crisis Eases
Despite a severe debt crisis hovering over Greece since April 2010, the double blow that it was scheduled to face due to the re-scheduling of the Greek government bonds as insisted by the German government is now slowly easing off. In fact, the German government has also indicated a voluntary rollover of Greek government debt. The debt rating (by Standard & Poor Ratings) for the Greek government bonds has been falling constantly and currently has a “CCC” grade, the lowest rating for bonds in the entire world. But with some luck, Greece may be able to stablise its situation in the short term.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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Wednesday, February 6, 2013

Is it too little... and too late?

Reforms in coal sector, on which India’s power generation is heavily dependent, have seen a faint light on the distant horizon courtesy reform proposals in this budget. B&E’s anchal gupta argues that the steps may be too small considering the delay and a lot more needs to be done, quickly.

“Not a penny off the pay, not a second on the day.” This blunt reply by the Miners’ Federation of Great Britain (MFGB), the national union of mine workers to coal mine owners was a spark that ignited the chain reaction culminating in the famous 1926 General Strike in the United Kingdom. Mine owners, under the veil of a soaring pound, hurting exports and low productivity of mines decided on wage cuts to normalise profits. Despite massive subsidies to the coal mine owners, the wage cuts were implemented. The strike began on May 3 and lasted for 10 days. In the aftermath, coal mining was forever transformed in UK with the extra labour being sucked out and productivity rocketing from below 100 tonne per miner per annum to over 300 tonne by the World War II.

Swivel back to the present and India’s coal mining output still hovers at less than 200 tonne for some of its mines while the average productivity is less than one tenth of mining giants in US and Australia. And despite a new glimmer of hope in the form of proposals to reform the sector in this years’ budget, the pertinent question remains: Is it too little… too late? But for all the hype surrounding renewable energy and efficient usage, India stands tall among the planet’s most un-efficient energy user (read massive wasters). And, till date, more than 53% of our electricity is generated in power plants fueled by the black treasure hidden deep below our rocky terrains. Estimates suggest that by 2012, India will stare at more than 100 million metric tonnes (MMT) of coal shortage and around 250 MMT by 2025. Ironically, we have the world’s largest coal miner Coal India Ltd. (CIL), a Navratna PSU. The repercussions are perilous.

According to Girish Solanki, Energy analyst, Religare, “The coal mined in India has not been enough to meet the demand. The shortage has resulted in loss of electricity generation in power plants. The power companies in India imported coal in FY2009 to keep the plants running. Coal India, for the first time in history, resorted to import of coal in FY2009. Further the calorific value of coal mined in India is at 4,000-5,000 kcal/kg. substantially lower than the coal mined in countries like Indonesia which have calorific value in excess of 6,500 kcal/kg.” The impending entry of mining giant, Trimex to strike long term coal supply contracts with Indian power producers is just the beginning of the dark tunnel. Courtesy archaic laws and divided authority over every link of the value chain, much of the coal remains buried and much of India remains dark.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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