Australian Stocks Rise, Woolworths Sales Up

123jump.com Staff
16 Apr, 2008
New York City

Australian stocks raced ahead on rising crude oil and metals prices. ASX 200 index in Sydney added 1.3% or 70 to close at 5,470.30. Woolworths reported its third quarter sales increase of 10.2% on rising sales of wine and groceries. Rio Tinto reported global first quarter iron ore production increase of 16% however copper production declined. Zirconia maker Iluka reported completion of retail stock offering as it completes $1 billion of debt and stock placement.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index rose 1.3% as resource stocks gained after oil prices soared. Woolworths reports 10% rise in third quarter sales. Rio Tinto iron ore production rises 16%.[/R]

Market Sentiments

ASX 200 index gained 1.3% or 69.9 to close at 5,470.30.

The preliminary market turnover was 1.3 billion shares worth $5.29 billion, with 671 shares up, 476 down and 345 unchanged. The most traded stock was Telstra Corporation with 62.62 million shares worth $284.52 million.

Market Driver

Rio Tinto Group reaped the benefits of its expansion program after its global production of iron ore soared 16% on the first quarter of 2007.

According to the results released by the group today, first quarter iron ore production reached 43 million tons in the Pilbara, Western Australia, up 15% compared with the first quarter of 2007 as the iron ore operations deliver their rapid expansion program.

The group also benefited from strong contribution from Rio Tinto Alcan in the quarter, with a significant uplift in production compared to the first quarter of 2007. Bauxite increased by 106%, alumina by 236% and aluminium by 386%, following a good performance from the Canadian smelters, the company said.

On a proforma basis, it added, the respective increases for bauxite, alumina and aluminium were 20%, 10% and 2% respectively. However the group said mined copper production declined by 6% compared with the first quarter of 2007, primarily reflecting lower grades at Kennecott Utah Copper and Northparkes locations.

It also indicated that its Australian thermal and coking coal production was affected by heavy rains, notably in Queensland where the coal industry generally suffered production and logistics disruption but uranium production was 20% higher than in the previous year.

During the quarter the company reached agreement on the first two sales under its planned program to divest $10 billion of assets in 2008. The sale of the Greens Creek silver, lead and zinc mine in Alaska for $750 million was announced and the sale of the Cortez gold mine in Nevada was completed for $1.695 billion.

Commenting on the first quarter''s production results, chief executive Tom Albanese said: """"Our expansion drive continues to pay off with a record-breaking first quarter for the iron ore and aluminium product groups. Markets remain very strong and the prices of many of our products are at record highs, bearing out our view that the US slowdown will have little effect on global metal and mineral supply and demand balances.”

Meanwhile Albanese again rebuffed speculation that his company was working with other companies to institute a counter bid to BHP Billiton’s bid.

According to an ING Bank research report, Rio was mounting a defensive bid that could include the disposal of the petroleum and mining assets. Australia''s second largest oil and gas producer, Woodside Petroleum Ltd was cited as a potential partner in the counter bid.

Rio''s share closed up 1.8%.

Gainers and losers

Of the ASX 200 index stocks, Sundance Resource led the gainers with a rise of 12.8% followed by increases in Centro Retail GR of 9.2%, in Arrow Energy Ltd of 9.2%, in APN/UKA European of 7% and in Queensland Gas of 7.5%.

Of the ASX 200 index stocks, Aquarius Platinum led the decliners with a fall of 4.5% followed by losses in Challenger Finance of 3.7%, in Invocare Ltd of 3.7%, in Tatts Group Ltd of 3.7% and in Iluka Resources of 3.6%.

Woolworths third quarter sales rises

Australia''s largest retailer today announced third quarter sales rise of 10.2% from continuing operations.

The company reaffirmed its net profit forecast, given that in February it registered between 19% and 23% growth.
Woolworths’ chief executive Michael Luscombe said, """"Woolworths continues to gain value from the solid platform created by continuing to focus on lower costs, lower prices and on-going management emphasis on range, quality, value and convenience for the customer.""""

Woolworths'' food and liquor division anchored the result, with sales rising 9.3% to $7.6 billion in the quarter on the price increases at Woolworths supermarkets and liquor outlets by 4.5% in the quarter, as compared to 2% experienced in the first half. The retailer opened six supermarkets and six new Dan Murphys liquor stores during the quarter.

Supermarkets located in New Zealand achieved sales of $1.1 billion 4.2% increase on the previous corresponding quarter while petrol sales, including Woolworths/Caltex Alliance sites, rose 19.7% to $1.4 billion, reflecting higher petrol prices.

Iluka completes retail component

The world''s biggest zircon producer, Iluka Resources Limited today announced that it has successfully completed the retail component of its 4 for 7 pro-rata accelerated renounceable entitlement offer to shareholders and raise $95 million.

The company said it had raised over $1 billion through institutional offers and debt facilities, which gives it financial capacity to proceed with the development of the Jacinth-Ambrosia mineral sands project in the Eucla Basin, South Australia.

It raised approximately $258 million through financial institutions last month and $353 million in new equity funds which, combined with the $500 million in debt facilities Iluka entered into on 12 March 2008.

The retail offer closed on Wednesday, 9 April 2008, with subscriptions for approximately 22.2 million new shares. The company said the remaining approximately 15.1 million new shares available in the retail offer were sold to institutional investors at $4 per share, above the retail offer price of $2.55 a share.

On 20 March 2008 the company announced Board approval for initial expenditure of up to $8 million to order and procure certain long lead capital equipment integral to the proposed development of the project and its first production schedule of mid 2010. The total capital expenditure for the Jacinth- Ambrosia project is estimated at $450 million.

Its share fell 6%.

QBE likely to lift offer for IAG, analysts

Insurance Australia Group Ltd''s share rose 4.5% after analysts predicted that QBE Insurance Group Ltd could offer as much as $5.00 in the takeover bid.

QBE''s rejected proposal, which closes on Monday, comprises 0.142 QBE shares and 70 cents cash for each IAG share. Based on QBE''s closing price on Tuesday, it equates to $3.95 per IAG share. QBE share added 1.3%, giving its offer a value of $3.99 per IAG share.

IPN share buoyed by Sonic''s proposal

Medical center management services provider, Independent Practitioner Network Ltd''s share was up 24% after Sonic Healthcare Ltd indicated that it wanted to buy the company.

Sonic, which already owns 71.5% of IPN, made a non-binding proposal that it wants to increase its holding to 100% for 25 cents per share.

Sonic advised its shareholders to take no action and not to sell their shares. The company has since appointed Blake Dawson as its legal adviser and intends to appoint separate advisers and an independent expert in due course.

Zinifex completes acquisition of Allegiance Mining

Zinifex has officially completed the acquisition of Allegiance Mining, which is now under new management. Zinifex took over Allegiance and the Avebury nickel mine on Tasmania''s west coast a month ago, after a three-month struggle.

Zinifex holds more than 80% of Allegiance shares, and needs 90% by the middle of next month to take full control.

Oxiana records increased copper output

The world''s second-largest zinc producer, Oxiana Ltd today indicated that it had increased copper output in Australia and Laos as metal prices surge to record highs.

According to the company''s statement to the stock exchange copper production at Sepon, Laos'' biggest mine, rose 24% to 17,132 metric tons in the three months ended March 31 while gold output from the mine fell 28%.

Its copper output from the Golden Grove mine in Western Australia rose 9% from a year earlier to a record 7,958 tons and the mine''s gold output totaled 6,700 ounces.

The company added that Sepon copper production for the year is forecast to be in line with previous guidance of 60,000 to 65,000 tons.

Chief executive Owen Hegarty said its cost was within budget though start-up has been delayed by two months to the end of November. He added that the company was targeting total copper output between 110,000 and 120,000 tons next year and gold output between 75,000 and 80,000 ounces.

Oxiana''s share was up 4.7%.