Australian Stocks Down 3.5%

123jump.com Staff
17 Dec, 2007
New York City

Stocks in Australia fell sharply on the weakness in financial and mining sectors. Centro plunged 76% after it lowered its earnings and profit distribution guidance. The company balmed on the higher financing cost and current credit market malaise. BHP fell 4% after it said that it has halted its stock buy-back plan to meet regulatory requirements set by te UK takeover panel. Property stocks fell sharply in the session with 26% pluunge in Goodman Group and 18% loss in Valad Property.

[R]3:00AM New York, 7:00PM Sydney- ASX 200 index declined 3.5% on regional weakness in financial stocks and BHP halted its stock buy-back to meet regulatory requirements.[/R]

ASX 200 index sharply declined 3.5% or 228.2 to close at 6,263.50. BHP and Rio Tinto both shed 2.8%.

The Preliminary market turnover was 2.05 billion shares worth $7.19 billion with 219 stocks rising, 1,209 falling and 285 unchanged. Centro led the most active stocks list with trading of 120.3 million shares worth $211.69 million changing hands.

Australia''s second-biggest shopping-mall owner, Centro Properties Group today announced that it had revised downwards its operating profit per share from 47 cents to 40.6 cents.

In a statement released today the company blamed the downgrade on increased costs associated with the extension of the debt facilities, and expected costs of the refinancing, and the current credit market malaise.

It added that the U.S. subprime mortgage rout would restrict it from executing some of its growth plans in the United States, which had been expected to generate higher earnings. Centro however said the despite the lowered estimate of the earnings, it still represents 2.1% rise from the previous year when the distribution was 39.8 cents per share.

Centro, which called for a trading halt on Thursday, 13th December 2007, said it has completed certain refinancing arrangements. Centro said it is still negotiating the refinancing of $1.3 billion in its maturing facilities, and had obtained an interim extension until 15th February 2008 of all debt maturing prior to that date. In addition, the U.S. joint venture facilities have also been similarly extended. Centro plunged 76%.

The company said the restructuring and refinancing is forecast to incur a one off cost of $40 million and have been excluded from the fiscal 2008 forecast of operating distributable profit.

In addition, Centro said its $26.6 billion managed property portfolio is performing well as most of its properties are groceries and non-discretionary retail locations.

Zinifex today launched an all-cash offer of 90 cents for each Allegiance share and pledged to increase the bid to $1.00 per share if the company acquires more than 30% of its target, or gains board approval. The deal is valued at $697.44 million at the 90 cents per share offer and it rises to $744.93 million at $1.00 per share.

Allegiance rebuffed the takeover offer saying that it was unsolicited, opportunistic and designed to take advantage of the company prior to first production from its flagship Avebury project in Tasmania - scheduled for early 2008.

The company said its board was unanimous in its view that Allegiance shareholders should take no action or make any decision in relation to their shareholding until the offer was reviewed. Zinifex chief executive Andrew Michelmore said the takeover would help Allegiance gain an ''attractive entry'' into the nickel industry.

""Avebury is just the start of our strategy to vigorously grow in Zinifex''s chosen base metals of copper, nickel and zinc,'''' Mr Michelmore said in a statement.

The Avebury nickel project, located near the Zinifex''s Rosebury zinc mine, is expected to produce about 8,500 tons of nickel in concentrate annually. Zinifex amassed a war chest of more than $2 billion to fund potential acquisitions, after the sale of its smelting assets this year. Allegiance rose 38% while Zinifex shares fell 7%.

BHP Billiton share nose-dived today following a decision by the mining giant to suspend the $11.63 billion (US$10 billion) buyback of its London-listed stock.

The company said in a statement that it had continued to buy-back its London-listed shares since the market became aware of a $160 billion proposal for rival Rio Tinto through a third party under an ""irrevocable mandate"", the plan has been in place since February of this year.

Insider trading regulations stipulate a company cannot buy-back its own stock if it is privy to market sensitive information and BHP Billiton said the buyback had been suspended until ""further notice"".

BHP Billiton shares dropped 4% and Rio Tinto shares lost 3.9%.

Meanwhile, the UK Takeovers Panel will hand down its decision on Rio Tinto''s request to set a deadline for a formal takeover bid from BHP Billiton. The so-called ''put-up or shut-up'' clause under Britain''s takeover laws would set BHP Billiton a six to eight week period in which to launch a formal bid or withdraw from the takeover process.

If BHP Billiton fails to lodge a bid within the scheduled timeframe or withdraws, the company has to wait for six months before it can make any takeover attempt.

Rio Tinto rebuffed a merger proposal of three BHP Billiton shares for every Rio Tinto share, which is valued at about $147.7 billion (US$127 billion).

A merger would create the largest mining company in the world with interests in coal, iron ore, copper, aluminum and coal.

The Australian dollar was significantly lower at the close today after the U.S. dollar strengthened. The Australian dollar was trading at US$0.8609/13, down sharply from Friday''s close of US$0.8778/83.

Of the ASX 200 index shares, Resmed In led the gainers with a rise of 5.6% followed by increases in Sonic Healthcare of 1.6%, in AGL Energy Limited of 1.5%, in Singap Telecom of 1.3%, and in Coates hire Limited of 0.6%.

Of the ASX 200 index stocks, AED Oil led the decliners with a loss of 11% followed by losses in Queensland Gas of 8%, in Lihir Gold of 6.7%, in Caltex of 6%, and in Paperlinx Ltd and Valad Property of 5%.

In the banking sector Commonwealth Bank of Australia shed 1.2%, National Australia Bank fell 2.5%, Australia and New Zealand bank lost 2.4%, and Westpac dropped 2.4%.

In the energy sector, Oil Search was lower at 5.6%, Woodside Petroleum dropped 1.4% and Santos shed 4.4%. In the gold sector Newcrest Mining was down 4.8% and Lihir shed 7.2%.

The retailers across the sector traded lower, Harvey Norman shed 1.6%, Woolworths was down 0.9%, David Jones was lower at 1.7%, and Wesfarmers fell by 3.6%.

In the properties sector several stocks fell sharply after Centro lowered its profit outlook.

Goodman Group plunged 26%, Valad Property Group fell 18%, Westfield slipped 5.8% and James Hardie Industries dropped 2.3%.

Leighton Holdings Ltd., Australia''s biggest builder, fell 3.8% after borrowing $434 million to help pay for a stake in Dubai-based Al-Habtoor Engineering. The Sydney based company agreed to pay $870 million for 45% of Al- Habtoor in September.

Qantas Airways Ltd slipped 4.1% after its workers hinted on possibility of a strike next month over working conditions they claim are unsafe. A total of 500 staff may stop work if Qantas doesn''t address the complaints, Transport Workers Union spokesman Tony Sheldon was reported to have said.