AGL Energy faces pressure to renegotiate its largest single electricity contract with the Tomago Aluminium plant in NSW which is struggling to turn a profit at current spot aluminium prices, Credit Suisse says. Tomago, the biggest user of energy in Australia, has seen its power costs increase by $290m since November 2017, partly due to a clause which means the manufacturer foots the bill for increased coal costs. Profitability at the Hunter Valley unit has halved in the last few years despite aluminum prices increasing 20 per cent since 2017, the broker estimates. “Such a decline in profitability warrants a response, and with efficiency opportunities limited, this leaves external assistance from AGL and the government,” Credit Suisse told clients. Tomago is owned by Rio Tinto, CSR and Hydro Aluminium.
ALS Ltd (ALQ):
A little-known $3.8 billion testing and commercial services company called ALS released full year results this morning exceeding guidance, with a post-tax profit of $181 million, up 27.3 per cent on the previous year. Revenue increased 15 per cent to $1.7 billion and the statutory net profit is $154 million. It has increased dividends by 28 per cent to 11.5 cents per share franked at 35 per cent, payable on 1 July. ALS has spent $131.4 million of a $225 million share buy back program. It is looking for opportunities in the environmental, pharmaceutical, and food sectors, and says it is "on target to implement its strategic objectives and consolidate its presence as a leading provider of services to the global testing, inspection and certification sector." It will provide half-year guidance at the July annual general meeting.
Arena REIT (ARF):
The listed Arena REIT Group is growing its empire of childcare centres and disability accommodation centres, striking deals to buy $62 million worth of the properties. The deals, which will lift the trust’s portfolio to $805m, will see Arena acquire and develop the social infrastructure properties. The new assets include three specialist disability accommodation properties for $24m, three Early Learning Centre properties for $13m, and five ELC developments worth about $25 million. Arena’s managing director Rob de Vos said the improvement in the operating environment for its early learning tenants was “providing new opportunities for disciplined investment” and it is in due diligence on another $30m worth of assets. Mr de Vos said the equity raising provided the capacity for additional investment in “appropriate social infrastructure properties, consistent with our investment strategy”. Arena is undertaking a fully underwritten $50m institutional placement at an issue price of $2.67 per share via Morgan Stanley to fund the acquisitions and refresh its balance sheet.
Australia and New Zealand Banking Group (ANZ):
ANZ Bank's long-serving general counsel, Bob Santamaria, is retiring and will be replaced by Ken Adams, a long-term adviser to ANZ from Freehills. Mr Adams, who will report to chief executive Shayne Elliott, has been a senior partner at Freehills since 1998. Mr Santamaria said in an article on the bank's BlueNotes website that he had planned to retire in September last year at the age of 65, but these plans were delayed. "And then along came the Royal Commission, and I said to Shayne that it wouldn't be fair for there to be a change of the person in my role in the middle of a Royal Commission. So, I checked in with my wife and we agreed to push my retirement back a year," Mr Santamaria said.
BHP Group Ltd (BHP):
In new numbers released on Tuesday, BHP is forecasts that electric vehicles will make up at least seven per cent of the world's light vehicle fleet by 2035, up from five per cent in its previous forecast. And in 2050 it predicts that more than one in four light vehicles on the world's roads will be EVs, or 27 per cent, up from its earlier forecast of 21 per cent. The miner is watching the development of the EV market extremely closely, and has a keen interest in the buying habits of motorists given its activities around the world.
Computershare Limited (CPU):
Computershare this morning warned investors the migration of UK business Asset Resolution has been delayed by 12 months and will have a "significant" impact in 2019-20. Delays will cost about $35 million this current financial year and next. In the past year there have been "large scale and high profile IT failures in the UK banking sector, including clients who purchased UK Asset Recovery assets", which is making people reluctant to use the platform.
James Hardie Industries plc (JHX):
Construction materials company James Hardie has cut its final dividend despite lifting full-year profit 57 per cent to $US228.8 million. Revenue for the 12 months to March 31 rose 22 per cent to $US2.51 billion despite the softening housing market in Australia, with the company’s acquisition of Fermacell in Europe and higher net sales in its North America Fiber Cement segment lifting income. However, James Hardie said it would pay a final unfranked dividend of US26 cents, down from US30 cents a year ago.
Lynas Corporation Ltd (LYC):
Rare earths producer Lynas Corp says it plans to spend $500 million by 2025 to boost production and set up an initial processing facility in WA. The plan also includes investing in its processing facility in Malaysia, where Lynas is facing problems in getting license renewals for its plant due to concerns over waste storage. The world’s only major producer of rare earths outside China has been considering initial ore processing near its Australian mine. Malaysia’s prime minister said in April that companies would need to clean raw materials in order to operate. Broker CLSA has pegged the cost of building a cracking and leaching plant at about $100 million over three years. Lynas said on Tuesday it expected demand for rare earths, used in everything from consumer electronics to military equipment, is expected to outstrip new supply. The company, which is also trying to fend off a takeover offer from Wesfarmers, plans to increase volume to 10,500 tonnes per annum of neodymium-praseodymium products to boost revenue. On Monday, Lynas also said it would develop of a separation facility in the United States with Texas-based Blue Line Corp. Last month, it reported record quarterly NdPr Production of 1,591 tonnes.
Myer Holdings Ltd (MYR):
Department store Myer has strengthened its retail experience in its boardroom with the appointment of retail veteran Jacquie Naylor as a non executive director effective from Monday. Myer has long been criticized by its biggest shareholder, rebel investor Solomon Lew and his Premier Investments, who has attacked Myer for not having directors with strong retail credentials. Last year Mr Lew Mr Lew described the Myer boardroom as a “clueless board” that he compared to a horse trainer who “wouldn’t know one end of a horse from the other”. Myer Chairman Garry Hounsell said this morning Ms Naylor is one of the most respected retailers in Australia.
National Australia Bank Ltd (NAB):
NAB says its customers can now access Apple Pay, with the service going live today. By doing so, it joins ANZ and Commonwealth Bank in offering the service. The bank said: “Apple Pay provides customers with an easy, secure and private way to pay via their iPhone, Apple Watch, iPad or Mac and is available for NAB personal and business customers with an eligible NAB Visa debit or credit card.”
Nine Entertainment Co Holdings Ltd (NEC):
Nine Entertainment has sold its events business to The Ironman Group for $31 million, three weeks after offloading 160-plus regional mastheads for $125 million. Around half of the staff within the events and entertainment division, formerly Fairfax Events and Entertainment, will move to the new owner’s Oceania division, which will consist of popular annual City2Surf running race in Sydney as well as Melbourne Corporate Triathlon and Spring Cycle. Nine said its business and food operations, which include the Night Noodle Markets, Good Food Month, The Australian Financial Review Business Summit and Women of Influence Awards, will move into its publishing division “to better align with their respective editorial brands.”
Seven West Media Ltd (SWM):
Seven West Media issued an earnings warning this morning saying underlying group earings for the full financial year are now likely to be between $210 million and $220 million, compared to $235.6 million in 2017-18. Analysts were expecting to see earnings of about $230 million. However, it has managed to reduce nearly $40 million in costs, as advised at the half-year results. And its share of the metropolitan free to air advertising market has grown to 41.3 per cent "however, this revised guidance reflects the soft conditions and short market experienced across the advertising sector, and the economic uncertainty surrounding the Federal Election".
Technology One Limited (TNE):
Enterprise software group Technology One has been given a reminder of the big problem with a sky-high valuation – even good news can disappoint. The stock fell 9.1 per cent in late-morning trade on on Tuesday to $8.23, well below the record high of $9.30 it hit on Friday. And all because its full-year guidance suggests it will "only" show growth of about 45 per cent. The release of Technology One's full-year profit growth, and its earnings numbers for the six months ended March 31, show it's a tech company in transition. Unlike the white-hot Australian tech stocks that form the WAAXA cohort – that's Wisetech, Afterpay, Altium, Xero and Appen – Technology One is a business with two decades of profitable history, built on providing enterprise software mainly to local government and higher education customers.
（Source: AIMS）
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