Rio Tinto Earnings Lifts Australian Stocks

123jump.com Staff
14 Feb, 2008
New York City

Australian stocks edged higher after earnings report from Rio Tinto and a rally in Asian markets. Rio Tinto jumped 4.5% after reporting 11% rise in operating earnings and 2% decline in net earings on 32% rise in sales in 2007 from 2006. The better than expected earnings were largesly acheived on higher prodcution of iron ore, copper, and other metals. The company spent $5 billion in capital expenditures.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index rose 2.6% after Rio Tinto reported sharply higher earnings.[/R]

Market Sentiment

ASX 200 index gained 2.6% or 142.7 to close at 5,684.80 as financial markets in Asia rallied.

The Preliminary market turnover was 1.55 billion shares worth $7.49 billion, with 666 stocks moving up, 534 moving down and 343 unchanged. The most actively traded stock was Telstra with 84.43 million shares worth $398.74 million.

Market Driver

Rio Tinto shares closed up 4.5% after the company reported net income in 2007 of $7.3 billion on sales increase of 32% to $33.5 billion. Rio Tinto net income declined 2% from a year ago, but operating income increased to $13.9 billion, 11% rise from a year ago.

Chairman Paul skinner said, “With supply side constraints across the mining industry unlikely to ease in the near future, commodity prices are expected to stay high by historic standards in 2008 and well beyond.

The strong increases seen in global minerals demand are driven by demographic and economic fundamentals in fast-growing countries like China and India, whose large populations continue to urbanise. These long term trends are driven by domestic developments, and are therefore largely insulated from any potential near term weakness in western economies.”

The company increased the dividend by 31% and plans to increase it further by 20% in 2008 and 2009.

Gainers and losers

Of the ASX 200 index stocks, AED Oil led the gainers with a rise of 40.8% followed by increases in Paladin Energy of 13.2%, in Timbercorp Limited of 11.7%, in Arrow Energy Limited of 9.8%, and in Straits Resources Limited of 9.7%.

Of the ASX 200 index stocks, Boom Logistics led the decliners with a fall of 11% followed by losses in Centro Retail Group of 9.7%, in Challenger Finance of 8%, in Leighton Holdings of 5.56% and in Macarthur Coal of 5.1%.

MFS open up to City Pacific

Australian fund manager, MFS Ltd today opened its books to a rival, Brisbane-based City Pacific that put in a more than $1 billion bid in January.

City pacific is worth $472 million at today's close while MFS's market value dropped to $479 million on Jan. 18 before it suspended trading in its shares. City Pacific shares rose 0.3%.

Santos halts production at two fields

Australian oil and gas producer, Santos Ltd today announced that it had halted production at its Legendre and Stag oil fields off Western Australia on Monday due to a cyclone which may curtail daily 15,000 barrels of oil production. The news of the production curtailment was first reported by AAP in Australia and Bloomberg. Santos said its other operations in the Timor Sea, including the Bayu Undan, Challis and Elag oil and gas fields were unaffected.

Prior to the work stoppage Mutineer-Exeter oil field was producing at reduced rates of between 4,000 and 5,000 barrels per day.

Santos' stock gained 0.9%.

Zinifex barred from processing acceptances

The Takeovers Panel today ordered Zinifex Ltd to stop processing acceptances for its $745 million bid for Allegiance Mining following allegations that shareholders were misled.

Allegiance told Takeovers Panel that three of its shareholders, including the company's second largest - Lion Selection Group Ltd - were misled when accepting a takeover offer from Zinifex.

According to the interim order published on the website of the Takeover Panel and signed by Alan Shaw, Counsel, with authority of John Fast, President of the Sitting Panel, “Zinifex not take any further steps to process the acceptances of Lion Selection Group Limited, Andrew Lambert and Caroline Lee and the Andrew Lambert and Caroline Lee Superannuation Fund received by Computershare Investor Services Limited on 8 February 2008, or dispose of or otherwise deal with any of the shares the subject of the Acceptances.”

The order to not process stays till the earlier of the proceedings determination or two months after the date of this order from the Takeover Panel.

Zinifex stock rose 5.7%.

Straits Resource mulls assets sales

Australian copper and gold mining company, Straits Resources Ltd hinted today that it might sell some metal assets as it plans a fivefold increase in output of the fuel in Indonesia as reported by AAP and Bloomberg.

Chief Executive Officer Milan Jerkovic told reporters by phone that an asset sale was under review and that decide which gold or copper assets may fit in the portfolio.

Straits Resources owns two copper mines, Tritton and Whim Creek, as well as the Hillgrove and Mount Muro gold mines. The plans come after Straits completed the $350 million purchase of a second Indonesian coal mine in December and bought a coal project in Madagascar last month.

Straits Resources' stock rose 9.7% after reporting a threefold increase in its estimate of coal resources at its Sebuku mine in Indonesia.

Lion Nathan expects increased income

Australia's second-largest brewer, Lion Nathan Ltd forecasted that its annual net income would be between $265 million and $275 million for the 12-months ending September 30. In November the company had predicted earnings between $270 million and $280 million, which excluding the recent acquisition of J. Boag.

Leighton records 32% rise in profits

Australia's largest engineering and construction company, Leighton Holdings Ltd today announced a 32% rise in its first-half profit on the back of contracts it won to develop mines, roads and airport terminals.

Net income climbed to $250.3 million, or 90 cents a share, in the six months ended December 31, from $190 million, or 68.3 cents, on total sales of $6.5 billion.

The company's shares fell 5.5%.

Commonwealth Bank of Australia defends rate rise

The Commonwealth Bank of Australia today said its decision to raise mortgage rates by more than last week's central bank rise was justified and added that it may revise the rates again.

The company's shares recovered in trading today gaining 1.8% after falling to a 52-week low yesterday.

Allco defers release of first half results

Allco Finance Group Ltd today announced to delay its first half results to Monday next week.

The company said its shares would remain in voluntary suspension. API, a private investor and Allco's largest shareholder was forced by two of its margin lenders to dump 46% of its holding in the group. Separately an investment company made an offer to purchase Allco at a price of $2.70 per share.

The margin calls were triggered by a run on Allco's shares, on the growing investor concern about the level of debt used in its investment strategy.