Nufarm Raises $200 M, NAB Hikes Rates

123jump.com Staff
06 Mar, 2008
New York City

National Australia Bank led other banks in hiking its interest rates after it raised its variable home loan rate by 0.29% to 9.27%. St George is likely to follow the NAB lead with a rate hike. The Reserve Bank of Australia raised its lending rate to a 12-year high of 7.25%. Fertilizer maker, Nufarm Ltd today raised $200 million to pay for its recent acquisitions. The company placed 13.25 million shares at $15.10 per share.

[R]3:00AM New York, 7:00PM Sydney- NAB raised rates on variable rate mortgage loans by 0.29% after the RBI raised rates by 0.25%. Other banks are likely to follow with similar rate increases.[/R]

Market Sentiment

ASX 200 index rose 1.1% or 58.9 to close at 5,435.50.

The preliminary market turnover was 1.63 billion worth $6.61 billion, with 628 stocks moving up, 597 moving down and 331 unchanged. The most traded stock was ABC Learning with a trading of 108.3 million shares worth $228.2 million.

Market Driver

National Australia Bank led other banks in hiking its interest rates after it raised its variable home loan rate by 0.29% to 9.27%.

NAB''s rate rise, which are effective from tomorrow, are higher than that by the Reserve Bank of Australia, which raised official interest rates by 0.25% to 7.25%.

NAB executive director and CEO, Ahmed Fahour told reporters that they had a responsibility to balance the needs of their shareholders as well as our customers.

He said escalating wholesale funding costs had been impacting NAB since August 2007 and this had been compounded by the rise in both short and long term wholesale funding to their highest levels in a decade in February.

Fahour said the increase in the RBA''s cash rate by 0.25% was not reflective of the true cost of funding a mortgage loan.

He said that even with the additional 0.04% change on variable rate products, NAB was continuing to absorb a significant portion of the increased wholesale funding costs but he failed to quantify the amount.

Looking ahead, Fahour said the bank was continuing to watch the market closely and would adjust its rates further if the increased wholesale funding costs do not subside. It share rose 1.3%.

Meanwhile, Australia''s fifth largest bank, St George, sent a strong signal it also may raise its lending rates, including home loans, by as much as 40 basis points. Its shares rose 2.1% after the bank today reaffirmed its guidance for earnings per share to grow by 10% this year.

Gainers and losers

Of the ASX 200 index stocks, APN/UKA European led the gainers with a rise of 23.4% followed by increases in Allco Finance Group of 21.1%, in Boart Longyear of 14.4%, in Crane Group Limited of 8.5%, and in Oil Search Limited of 8.2%.

Of the ASX 200 index stocks, ABC Learning led the decliners with a fall of 18.2% followed by losses in FKP Property Group of 5.5%, in Timbercorp Ltd of 5%, in Babcock & Brown of 4.9% and in Mount Gibson Iron of 4.4%.

Nufarm raises $200 million for acquisitions

Australia''s biggest supplier of farm chemicals, Nufarm Ltd today raise $200 million through an institutional share placement meant to raise funds for its acquisition of AH Marks Holdings Ltd and proposed acquisition of Etigra LLC.

The offering of 13.25 million shares was oversubscribed and was placed at $15.10 per share.

He said global growth drivers in agriculture remained very strong, and the longer-term outlook for Nufarm was extremely positive. Rathbone, chief executive sold four million Nufarm shares representing 13.5% of his total shareholding Nufarm.

Nufarm announced on Wednesday that it had acquired British phenoxy herbicides supplier AH Marks Holdings and had agreed to acquire Etigra LLC in the US, which supplies crop protection products to the turf and specialty markets. The company said the acquisitions, at a price of $236 million including debt, would boost annual earnings and help Nufarm meet unprecedented demand for agricultural chemicals.

Nufarm shares fell 4.4%.

SPO pulls plug on backing of Consolidated Media''s takeover

Consolidated Media Holding today announced SPO Partners & Co. withdrew its buyout offer by James Packer and Lachlan Murdoch on difficult financial conditions.

As part of the deal, Packer was set to increase his current 38% stake in Consolidated to 50% while Illyria would own the other 50%. Consolidated Media requested a trading halt today pending an announcement on the takeover proposal.

Allco loses outstanding shares

Struggling Australian asset manager, Allco Financial Group has lost 14% of its outstanding shares after it failed to reach a deal with its margin lenders. National Australia Bank Ltd and HBOS Plc seized the shares as collateral for unpaid loans.

In a letter to the finance group from Allco Principals Investment PTY Limited, API indicated that it has failed to reach an agreement on the terms of an ongoing standstill arrangement with its remaining margin lenders, the Bank of Scotland International Limited and National Australian Bank.

API also pointed out that the standstill arrangement that was previously in force had ceased. As a result API said NAB had appointed agents to take possession of 23.7 million AFG shares owned by API.

In addition NAB appointed agents to take possession of a additional 10.8 million AFG shares pledged to the lenders by entities associated with Allco executives and 2.4 million shares in Allco HIT pledged to it by an entity connected to certain Allco executives and another 1.6 million share in HIT pledged to it by Allco Principals Property Pty Limited.

API also advised that the Bank of Scotland had indicated that it would appoint a receiver to all the assets and undertaking of API (including 600,000 shares in Allco HIT) and to 18.3 million shares in AFG and 2.4 million shares in Allco HIT pledged to it by entities associated with certain Allco executives.

In its statement to the exchange NAB said it had been compelled to exercise its right under its security in light of the deterioration in the value of the Allco Finance Group Securities and its refusal to provide additional security as stated in the agreement.

NAB, which provided a margin loan of approximately $110 million to API that was secured by shares in AFG, said it would pursue all avenues of recovery against API and related parties to mitigate its loss.

National Australia Bank Ltd had on Thursday warned that it would book a provision on its $110 million loan to Allco Principals Investments, reversing from its reassurance in January that it did not expect any material loss on the loan.

Meanwhile AFG has requested a trading halt in its stock. Allco, which is struggling to pay off its debt, suffered a 90% slump in its stock early this year as a result of margin calls and concerns about the company''s debt.

Allco Chairman David Cole together with Gordon Fell and David Turnbull were forced to resign from their position on the board on March 3 after calls from investors for a more independent board.

Allco is selling some businesses as part of negotiations with banks on $250 million of loans due May 1 and another $900 million of debt.

Incitec forecast growth in earnings

Australia''s largest fertilizer maker, Incitec Pivot Limited said today that it anticipated 2008 earnings before interest and tax would be in the range of $700 million to $730 million, an increase of up to 135% on 2007.

The company said the improved outlook was largely attributable to an increase in earnings from manufacturing flowing from higher international di-ammonium phosphate (DAP) prices, partly offset by adverse currency movements, higher sulphur costs and lower production volumes at its plant at Phosphate Hill in North West Queensland.

In addition Pivot said the earnings guidance was based upon expectations that global influences would drive an increase in average DAP prices to a range of between $760 and $790 per ton in 2008. This follows strong international demand, supply disruptions in China and record high input costs of phosphate rock, ammonia and sulphur.

Phosphate Hill production, the company said, has been adversely impacted by railway line outages due to floods, the current interruption to feedstock supply at the Mt Isa sulphuric acid plant and scheduled maintenance shutdowns.

It was now expected that IPL''s ammonium phosphate production in 2008 would be approximately 900,000 tons, compared to 2007 production of 978,000 tons.

To mitigate future interruptions to ammonium phosphate production, Pivot said it was investigating a range of capital investment plans to address transport and storage of sulphur and sulphuric acid, as well as production streamlining at the Mt Isa sulphuric acid plant at a cost of $25 million in the next two years. Its share rose 0.5%.

ABC share falls on concerns over sale of assets

Childcare company, ABC Learning''s share slid 18.3% today to its lowest in 6 years on concern about the impact of its impending disposal of its US assets on its earnings.

Investors were worried that the sale of a 60% stake in its U.S. childcare centers to Morgan Stanley for $750 million would curb earnings growth.

ABC''s stock fell 43% when it last traded on Feb. 26 as a slump in earnings raised concerns it would struggle to repay debt. The company resumed trading today after it sold majority stake in its U.S. business. The deal means ABC Learning would surrender financial control of more than 40% of about 2,300 of its global childcare centers.

ABC Learning operates 1,000 centers across the U.S., more than 1,200 in Australia and New Zealand and 112 nurseries in the U.K., having spent about $1.06 billion expanding in those four countries since its first U.S. purchase in November 2005.