Australian Flood Claims Surge to $1.2 Billion; Woolworths Cuts Outlook

Chandrasekhar Atreya
24 Jan, 2011
New York City

Stocks in Sydney gain led by banks. Retailers closed lower. The PPI growth in December quarter was weaker-than-expected at 0.1%. Insurance claims from Queensland flood touch $1.2 billion. Rio Tinto expressed optimism for its $3.9 billion offer for Riversdale Mining.

[R]6:00 PM Sydney, Australia – Stocks in Sydney gain led by banks. Retailers closed lower. The PPI growth in December quarter was weaker-than-expected at 0.1%. Insurance claims from Queensland flood touch $1.2 billion. Rio Tinto expressed optimism for its $3.9 billion offer for Riversdale Mining.[/R]

Stocks in Sydney closed higher after gains in the financial sector countered declines in retail stocks. Strong leads from overseas banks drove Australian banking stocks more than 1% higher today.

The ASX 200 Index gained 0.64% or 30.30 to close at 4,786.00 and the Australian dollar closed at 98.93 U.S. cents at Sydney today.

Woolworths, Australia’s largest supermarket chain, cut its full-year profit forecast for 2010-11 due to softer than expected consumer spending, as the Queensland flooding, higher interest rates and low price inflation were blamed by the company.

First half sales rose 3.8% to $25.3 billion excluding petrol sales.

The company had earlier guided between 8% and 11% sales increase and target is now revised lower to an increase between 5% and 6% for the year.

The producer price data for the quarter ended December was weaker than expected in the final stage of production and rose 0.1% over the prior quarter, for an annual rise of 2.7%, the Australian Bureau of Statistics announced today.

Rio Tinto said it is closer to finalizing its $3.9 billion takeover deal of Riversdale Mining since there were no rival bids and also an executive from Riversdale’s largest shareholder Tata Steel recommended the offer.

Coalworks Ltd shareholders approved the sale of 19.9% of the company’s issued capital to Boardwalk Resources Pty Ltd for a consideration of $19.28 million. Shareholders also approved an extra $10.12 million capital raising through the sale of 15.57 million shares at 65 cents per share in a private placement.

“The directors of the company believe that having Boardwalk as a substantial shareholder of the company is a great benefit and will strengthen the company’s prospects,” Coalworks said in a statement today.

Arafura Resources said today it has signed an agreement with Global Mineral Resources to sell its Mount Porter-Frances Creek gold project for a cash consideration of $1.5 million, 7.5 million fully paid shares in Global and 7.5 million options in the company exercisable at 25 cents each.

The site is located in the Northern Territory about 170 kilometers southeast of Darwin with an estimated reserve of 34,200 ounces of gold. Global plans to list on the Australian Securities Exchange after the transaction is settled.

Insurers have received $1.2 billion worth of claims from Queensland flooding related issues, the Insurance Australia Council said today.

IAC said 31,300 claims had been filed with insurers, 76% of which are related to damage to property and 24% for motor vehicle damage. The council also said that estimates for the total cost of damage and lost revenue from the floods have grown to about $20 billion so far.

Australian homes are the most unaffordable among English-speaking nations, while those in the U.S are the cheapest relative to incomes of individuals, according to a survey.

The average home in Australia costs 6.1 times the gross annual household income, while homes in U.S. were more affordable at 3 times the median earnings, according to a survey by Belleville, Illinois-based consulting company Demographia, surveying the affordability of homes in the third quarter of 2010.

Stock Movers

Westpac Banking Corp gained 1.11% to A$22.80 while ANZ rose 1.41% to close at A$23.66. Commonwealth Bank appreciated 1.28% to A$52.32 and National Australia Bank was up 1.15% to close at A$24.61.

Fortescue Metals Group pared some of its losses of last week and gained 1.69% to A$6.60. BHP Billiton closed higher by 22 cents to A$44.92 and Rio Tinto gained 73 cents to close at A$85.11.

Riversdale shares were up 1.16% at A$16.50 after Rio Tinto said it acquisition offer is likely to succeed.

Woolworths Ltd fell 2.58% or 71 cents to close at A$26.76 after it lowered its first half and full year profit guidance.