Fortescue Profit Surges; Australian Universities

Darlington Musarurwa
10 Aug, 2009
New York City

Australian home loans increased 0.3% to A$23.1 billion. Fortescue Metals reported net annual profit on a rise in iron ore production. Bank stocks fell ahead of earnings from Commonwealth Bank. Julia Gillard, the Australian Education Minister fails to act on universities that lack credentials.

[R]3:00AM New York, 7:00PM Sydney – Australian home loans increased 0.3% to A$23.1 billion. Fortescue Metals reported net annual profit on a rise in iron ore production. Bank stocks fell ahead of earnings from Commonwealth Bank. Australia fails to act on universities that lack credentials.[/R]

Australian stocks struggled to hold on to earlier gains as investors showed a lack of interest. The benchmark index has surged more than 15% in the last two months and increasingly analysts are sounding cautious outlook for stocks on valuations.

Investor sentiment was also lifted after Fortescue Metals recorded a full-year profit as the iron ore mining production surged.

Gold prices fell 0.4% to $959.5 per ounce and crude oil prices dropped 1.4% to $70.9 per barrel.

In Sydney trading ASX 200 rose 0.1% or 4.7 to 4,304.10.

Of the ASX 200 stocks, 112 increased, 76 fell, and 12 were unchanged. Goodman Group led advancers in the index shares with a rise of 15.7% followed by Carnarvon Petrol gaining 7.4%.
India’s Minister of External Affairs S M Krishna urged Australia to tighten regulations that covers questionable educational institutions. Indian students in Australia have been lured to several Australian universities with the misleading claims and questionable credentials.

Australian Education Minister Julia Gillard has yet to take any concrete steps to control or close down single university that lacks international credentials.

Australia’s Home Loans Rise 0.3% in June

Australian Statistics Bureau reported today that seasonally adjusted home loan commitments, excluding alterations and additions, advanced 0.3% to A$23.1 billion from a month earlier.

Owner occupied housing commitments soared 1% to A$17.2 billion. However, investment housing commitments dropped 1.8% to A$5.9 billion.

The statistics bureau also noted that owner occupied housing commitments advanced 1.1% to 65,151, while construction of new homes increased 2.4% to 6,400.

In the review period, the purchase of new homes slid 0.2% to 2,635, but the purchase of existing homes increased 1% to 55,116.

Fortescue Metals Profit on Rising Production

Fortescue Metals Group, an iron ore producer said full-year sales were $1.8 billion or $139.3 million a year ago. Net profit in the year was $508.04 million or 17.70 cents per diluted share compared to net loss of $772 million or 47.63 cents per share, a year ago.

Fortescue Metals Group, in the last one year traded as high as A$7.95 in September 2008 and as low as A$1.35 in November 2008. Based on the yesterday’s closing price of A$4.16 the company has market cap of A$12.85 billion.

Revenues climbed on increased production at Cloudbreak mine in Pilbara region in Western Australia.

Fortescue mined 31 million tons and shipped 27.3 million tons in the year and has previously stated its plan to reach its initial target of 45 million tons a year.

The company did not declare dividend and did not issue guidance for fiscal year earnings.

Gainers & Losers

Felix Resources was halted ahead of possible takeover offer from China based Yanzhou Coal Mining. Felix last traded at $16.90 and an offer is expected at 20% premium.

Australian politicians in the past have raised roadblocks to Chinese investment in mining sector. Foreign Investment Review Board has officially preferred minority investments in the natural resource sector.

The deal will be closely watched by investors in India, China and Japan as a test of Australia’s willingness to allow foreign investment.

Metal stocks rose as Fortescue Metals reported its first annual profit. Murchison Metals soared 6.4%. Rio Tinto decreased $2.02 to $58.55 and BHP Billiton lost 24 cents to $37.76.

Other commodity stocks slumped as gold prices dipped 0.4% to $959.50 per ounce and crude oil prices shed 1.4% to $70.90 per barrel. Aquarius Platinum fell 3.8%.

Commonwealth Bank declined 61 cents to $43.84, National Australian Bank fell 4 cents to $25.46 and Westpac decreased 17 cents to $22.66.

ASX 200 Index Movers

Crane Group Limited led the decliners in the ASX 200 index of 9.4% followed by losses in Fortescue Metals Group Ltd of 5.6%, in Independence Group NL of 4.8%, in Envestra Limited of 4.0% and in Aquarius Platinum Ltd of 3.8%.

Goodman Group led gainers in the ASX 200 index with a rise of 15.7% followed by gains in Carnarvon Petroleum Ltd of 7.4%, in ING Industrial Fund of 7.2% and Murchison Metals Ltd of 6.4%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 112.17 or 1.08% to 10,524.26, Hang Seng index in Hong Kong increased 554.15 or 2.72% to 20,929.52 and CSI 300 index in China lower 10.56 or 0.30% to 3,544.54. ASX 200 index in Australia increased 4.70 or 0.11% to 4,304.10. The FTSE Bursa KL Composite index in Malaysia closed higher 3.12 or 0.26% to 1,188.00.

The Kospi Index in South Korea increased 0.11 or 0.01% to close at 1,576.11. SET index in Thailand closed lower 0.45 or 0.07% to 643.75 and JSE Index in Indonesia increased 40.43 or 1.72% to 2,389.56. The Sensex index in India decreased 150.47 or 0.99% to 15,009.77.