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Iron Ore Ships As Steel Shapes Up – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:18 +0000

Concerns about speculative buying continues to temper optimism regarding strengthening base metal prices as the market seeks to differentiate real metal demand from stockpiling and other conjectural buying. According to a recent report, one sector boasting solid demand is steel.Metal demand from China during the first half of the year bolstered steel demand, likely accounting for 60% to 85% of sales, estimates Tony Rizzuto, an analyst and managing director at Dahlman Rose & Co. He is one of the authors of the firm’s recent “Iron Ore, Steel and Dry Bulk Review” that highlights the Chinese government’s efforts to deflate speculative bubbles while maintaining steady growth by encouraging banks to lower lending. According to the review, steel and iron ore will continue to trend higher, supported by strong consumption. Automobile and construction industries account for the bulk of Chinese steel consumption. Auto sales have been rising in China as its economy grows even as the world remains in recession and in the U.S., thanks to the government’s Cash for Clunkers program. For a read on construction demand, report authors Rizzuto and Omar Nokta, an analyst and head of research at Dahlman Rose, looked to cement production. Cement is a good indication of rebar consumption and unlike most base metals, it isn’t easy to stockpile massive amounts of cement. Therefore, increased cement production indicates a pickup in construction activity and bolstered steel demand. Chinese steel trends suggest stronger iron ore consumption both from China and other global markets that have seen blast furnace restarts such as South Korea, Japan and Europe. Since these markets also depend on the seaborne market for iron ore, bulk dry freight demand is also strengthening. Rizzuto and Nokta estimate that China will import 518.4 metric tons of iron ore from the seaborne market, up from their prior projection for imports of 448.3 million tons. Companies poised to benefit from these trends, according to the report, include ArcelorMittal
, BHP Billiton
and Steel Dynamics
in metals and mining; and Diana Shipping
, Genco Shipping & Trading Limited
and Navios Maritime Holdings
in the dry bulk sector.

Soda Sales Float – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 22:46:22 +0000

The sluggish economy saw cash-strapped consumers downing more soda than pricey teas and other bottled beverages. The trend floated sales of Dr Pepper Snapple Group
‘s Dr. Pepper, Crush and Hawaiian Punch drinks higher but Snapple sales have sunk. During 2009′s first quarter, improved carbonated beverage and value juice trends were offset by ongoing weakness in beverages at the premium end of the company’s portfolio-a trend that likely continued into the second quarter as consumers continued to resist splurging on nonessentials. Snapple volumes were down 22% during the first quarter but trade-down trends supported sales of soda and fruit drinks like Crush and Hawaiian Punch. When the company reports second-quarter earnings on Thursday, analysts polled by Thomson Reuters anticipate earnings of 49 cents a share on sales of 1.5 billion. “We think Dr Pepper Snapple Group
may see gross margin expansion in the quarter from easing commodity costs and mix benefit from noncarbonated drinks to carbonated soft drinks,” said JPMorgan analyst John Faucher. “We note that the company grew gross margins 150 basis points in the first quarter with the help of Crush sales, which may help the second quarter as well.”In July, UBS analyst Kaumil Gajrawala said that despite improved carbonated soft drink trends, Crush distribution gains and lower commodity costs, the firm would remain on the sidelines since Snapple is expected to see continued weakness and the company will have increased pension expenses in 2009. Last quarter, the company said it planned on contributing 43 million to pension plans and also said marketing expenses would be higher in the second quarter to support new products. Last year, marketing spend was higher during the third quarter.
The company recently launched a new energy drink called Venom and signed a multi-year agreement with Jack in the Box
to make Dr. Pepper and Diet Dr. Pepper drinks available at all Jack in the Box restaurant locations. Dr Pepper Snapple Group shares closed Wednesday’s trading session down by 11 cents, or 0.5%, at 23.52. The stock is up nearly 45% year-to-date.

BHPs Upturn Plans – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 21:46:28 +0000

Cost consciousness is paying off at BHP Billiton. While the mining industry is still licking the wounds from an up to 90% tumble in some metal prices and faltering growth in commodity-gobbling China, the Anglo-Aussie company is keeping its eyes peeled for acquisition opportunities.
While investment in forthcoming projects would be its priority, “we do look at M&A opportunities,” Chief Executive Marius Kloppers told Forbes. Petroleum – a rapidly expanding and cheap to produce business for BHP – would be one of the areas that they’d consider, he added.
Profits at the Anglo-Australian firm fell during the year ending in June by 61%, but the fall was smaller than had been expected and there were a number of other positive signs. Topping the list for analysts was operating cash flow, the amount of cash generated from a company’s operations, and a closely watched measure of profitability. While the drop in commodity prices eroded cash flows at many mining companies-Switzerland’s Xstrata, for example, saw its first-half-year figure slide 73%-at BHP Billiton
, operating cash flow rose by 5.6% to 18.9 billion, suggesting that the firm’s cost-cutting strategy was having the desired effect. The company’s pretax, pre-interest profit margin came in at 40.6%, a decline from the year before but still well above the rest of the industry. “The numbers were very positive in our view,” says Gabor Vogel, an analyst at DZ Bank in Frankfurt who rates the stock as the “top pick” within the mining sector. “With these figures and having paid out a dividend [17% above last year], they are showing they have a certain financial strength,” he added. Shares of BHP Billiton rose 1.9% in London on Wednesday. One reason for investors’ lack of alacrity is that the firm is remaining cautious in its outlook. Kloppers told Forbes that the market won’t see clear sustained growth until the first quarter of next year. BHP has attributed part of the surge in demand for commodities earlier in the year to Chinese firms that were restocking supplies, but he has also warned that this is at its tail end. However, that economic weakness may end up being a blessing for BHP. The firm has been positioning itself at the bottom end of the cost curve, focusing on low-cost commodities and projects where there is more slack when selling prices tumble. For example, five of the seven projects completed in the past six months were petroleum projects, which cost it around 6 a barrel to produce. The firm has several billions’ worth of further petroleum projects in the pipeline too, along with aluminum, iron ore and coal. According to Charles Kernot, an analyst at Evolution Securities, the large number of low-cost projects such as iron ore and petroleum that came live during the period contributed to the cash flow rise. BHP’s cost control should also benefit from its plans announced in June to pool its iron ore operations in Australia with Rio Tinto
. That plan took shape after Rio Tinto, under pressure in Australia, ditched a proposed investment from Chinese aluminum producer, Chinalco. Since then, Rio’s relations with China have deteriorated rapidly: late on Tuesday, Chinese authorities finally arrested four employees for trade-secret infringement and bribery. BHP has been lying low in the dispute: During a conference call, Kloppers told investors the firm was monitoring the situation but operating as usual in China.

Oils Bleak Outlook – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 15:46:41 +0000

Are the oil bulls vindicated? The Paris-based International Energy Agency was the latest barrel counter to raise global demand forecasts for 2009 and 2010 on Wednesday, to 83.9 million barrels a day this year and 85.3 million barrels a day next year. Although these followed more bearish predictions for 2009 from the United States’ Energy Information Administration and the Organization of Petroleum-Exporting Countries, all three institutions see demand in 2010 increasing by 500,000 to 900,000 barrels per day.A real rebound in demand might be further off than expected, however. The IEA cited improved demand from China-and other countries outside of the Organization for Economic Cooperation and Development-as the main reason for hiking its forecasts, with Chinese demand expected to grow by 2.8% this year and 4% this year. But even though China’s economy is growing at a relatively healthy rate, especially when compared with the shrinking economies of the West, there are doubts over whether a true “decoupling” can succeed for the export-driven country.”I wonder, with developed economies not consuming, where all those goods that those developing economies make are going to be sold to,” said Simon Wardell, an analyst with IHS Global Insight. He said that the IEA’s expectations for 2010 looked “a little high,” and expected forecasts to be cut down the line.Oil prices firmed up slightly during afternoon trading in Europe, with Brent crude up 81 cents, to 72.85 per barrel, while West Texas Intermediate oil rose 40 cents, to 69.85 per barrel. Analysts think oil is overvalued relative to the fundamentals of the oil market, with persistently weak demand and high inventories pointing to strong potential for a price correction; at the same time, however, speculative investors are giving oil prices support by betting on economic recovery in tandem with other financial markets.”The overall picture is quite bleak,” said Eugen Weinberg, an analyst with Commerzbank. He said that even though Chinese demand could still turn out to be surprisingly positive, whether driven by short-term re-stocking or long-term factors, there was still a lot of uncertainty going into 2010. Oil inventories were still high, which would in normal times require a cut in supplies from OPEC, but Weinberg said the cartel would face a big blow to its credibility if it was forced to make such an about-face.

BHPReady For The Upturn – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 14:46:41 +0000

The past twelve months were never going to be pleasant for miners, with spot prices for metals falling by up to 90%, and commodity-gobbler China witnessing faltering economic growth this year, but all in all, BHP Billiton seems to have coped as well as it could have under the circumstances.Profits at the Anglo Australian firm fell during the year ending in June by 61%, but the fall was smaller than had been expected and there were a number of other positive signs. Topping the list for analysts was operating cash flow, the amount of cash generated from a companies’ operations, and a closely-watched measure of profitability. While the drop in commodity prices eroded cash flows at many mining companies – Switzerland’s Xstrata, for example, saw its first half-year figure slide 73% – at BHP Billiton, operating cash flow rose by 5.6% to 18.9 billion, suggesting that the firm’s cost cutting strategy was having the desired effect. The company’s pre-tax, pre-interest profit margin came in at 40.6%, a decline from the year before but still well above the rest of the industry. . “The numbers were very positive in our view,” says Gabor Vogel, an analyst at DZ Bank in Frankfurt who rates the stock as the “top pick” within the mining sector. “With these figures and having paid out a dividend [17% above last year] they are showing they have a certain financial strength,” he added. Shares of BHP Billiton
were up 0.5%, to 15.34 pounds , in London midday trading. One reason for investors’ lack of alacrity is that the firm is remaining cautious in its outlook. Marius Kloppers, chief executive of BHP, has attributed part of the surge in demand for commodities earlier in the year to Chinese firms that were re-stocking supplies, but he has also warned that that this is at its tail end. While North America and Europe may compensate somewhat, any assumption of a quick return to historical trend growth in the wider economy “may be premature,” the firm warned on Wednesday.However, that economic weakness may end up being a blessing for BHP. The firm has been positioning itself at the bottom end of the cost curve, focusing on low-cost commodities and projects where there is more slack when selling prices tumble. For example, the firm has spent 3 billion of a total capital expenditure of 4 billion on developing petroleum projects, which cost it around 6 a barrel to produce. The firm has several billions’ worth of further petroleum projects in the pipeline too, along with aluminum, iron ore and coal.
BHP’s cost control should also benefit from its plans announced in June to pool its iron ore operations in Australia with Rio Tinto. That plan took shape after Rio Tinto, under pressure in Australia, ditched a proposed investment from Chinese aluminum producer, Chinalco. Since then, Rio’s relations with China have deteriorated rapidly: late on Tuesday, Chinese authorities finally arrested four employees for trade secret infringement and bribery. BHP has been lying low in the dispute: during a conference call Kloppers told investors the firm was monitoring the situation but operating as usual in China.

Sara Lee Sees Meaty Growth – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 18:46:58 +0000

Commodity costs have been a huge boon to packaged food companies, along with favorable dining trends as consumers prepare more meals at home to conserve cash. Sales of cheap, quick and satisfying meal options are heating up in the current environment, leading Sara Lee to focus on packaged meat product lines like Hillshire Farm and Ball Park. At the end of May, packaged food and household products company Sara Lee
announced plans to invest more than 130 million in a Kansas City sliced meat manufacturing plant, which is expected to be up and running by 2011. The company sees value-added meats as a huge long-term growth driver and recently launched a Premium Deli lunch meat line and Miller Beer bratwursts. Speaking at a May conference, CJ Fraleigh, chief executive of the company’s North American retail and food service division, estimated sales of the company’s bacon and sausage line, Jimmy Dean, would hit 676 million this year and said Ball Park hot dogs continue to be swift-sellers.The market is eager to hear whether the Downers Grove, Ill.-based company has reached any conclusion regarding its international household and personal care division since it previously mentioned the possibility of selling it after receiving some interest from unnamed parties. At the time of the March announcement, Sara Lee said the unit was a 2.3 billion business, including brands like Pur, Kiwi shoe care and Sanex deodorant and skin care products. The company has also expressed interest in expanding into developing markets, particularly Russia, India and Brazil.Sara Lee releases fourth-quarter earnings on Wednesday. Analysts polled by Thomson Reuters have been expecting earnings of 24 cents a share on sales of 3.3 billion and a year-end profit of 82 cents a share on sales of 13 billion. Analysts and investors will also be looking at progress made under the company’s cost savings initiative that aims to deliver more than 250 million annually by fiscal 2011. Shares of Sara Lee were trading down by 7 cents, or 0.7%, at 10.70, on Tuesday afternoon, which saw a mixed trading session for packaged food companies. Kraft Foods
lifted its full-year forecast last week after reporting higher-than-expected profits on cost-cutting and stronger pricing on the heels of similar results from General Mills
and Kellogg
. Kraft’s stock was down by 18 cents, or 0.7%, at 28.44, General Mills shares gained 15 cents, or 0.3%, to 58.29; and Kellogg’s stock was up by 11 cents, or 0.2%, at 46.20.
The Associated Press contributed to this article.

Stake Sale Would Help Xstrata – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 13:46:25 +0000

Has Xstrata gone far enough to slash its debt burden? The copper-focused miner raised 5.9 billion from shareholders in March, most of which went towards paying down debt, but the company is still carrying a 13 billion debt pile in an uncertain trading environment. This could explain why Xstrata is currently considering asset sales to raise cash, as it also tries to woo Anglo American into a so-called “merger of equals” to save costs.Switzerland-based Xtrata
has received “expressions of interest” for a 70% stake in a Chilean mine called “El Morro,” which reports have valued at 700 million, but a spokeswoman for the company would not comment on Monday on whether they had been solicited or how they were received. She said that it would be “mistaken” to connect any deal with a desire to pay down debt, and that the company was comfortable with its current gearing levels of 28%.But Xstrata’s high debt position does remain “an issue,” according to Charles Kernot, an analyst with Evolution Securities. He cited debt concerns as a reason for his “reduce” recommendation on the stock, and said that the reported value of the stake-700 million-meant that an asset sale of that size would be a step in the right direction.Xstrata’s debt burden may also be the reason why it has not sweetened a rebuffed merger proposal with Anglo American. Xstrata proposed a 50-50 equity split in June, with expected annual synergies of 1 billion, even though Anglo American’s market capitalization is currently at 25 billion pounds , or around 1 billion pounds more than Xstrata’s.Shares of Xstrata sank 2.7%, or 22 pence , to 789.50 pence , during afternoon trading in London on Monday. Potential merger partner Anglo American
fell 1.7%, while rival BHP Billiton
lost 2.4%.Xstrata Chief Executive Mick Davis said earlier this month that the company had no significant refinancing requirements until 2011 and over 6 billion in existing credit facilities, but he still emphasized cost-cutting measures for the second half of the year. These included a “substantial” cut in capital expenditure on medium-to-long-term projects, and pushing managers to seek out “every opportunity” to drive down operating costs.

PGs Shaving Operations – US-FOREX.US

Forex-Publisher — Tue, 04 Aug 2009 19:46:16 +0000

During a time in which consumers haven’t been buying as much-and seeking out cheaper store brands when they do-even companies selling consumer staples, like Procter & Gamble, are streamlining.Having a portfolio of popular brands is a mixed blessing in the current economic environment, since consumers often associate well-known labels with higher prices. Although some expect Procter & Gamble
, the company behind Tide, Charmin and Pantene products, to put underperforming brands or its pharmaceutical business on the chopping block as part of its fat-trimming efforts, the company recently acquired two upscale men’s grooming lines: The Art of Shaving and Zirh. “While these premium-priced products will likely be margin accretive for the company, is the timing really ideal to take a bigger position in premium personal care, given that PG’s mass-market portfolio is already priced at over a 20% premium on a weighted-average basis?” asked Citi analyst Wendy Nicholson. She estimates a sales drop of 9.3% for the fourth quarter, extending from the previous quarter’s 8.9% dip, with grooming, beauty and health care segments looking the weakest. Foreign exchange rates and increased promotional spending are also projected to drag on the quarter’s revenue.Analysts polled by Thomson Reuters have been anticipating fourth-quarter earnings of 79 cents a share on sales of 19.3 billion when the Cincinnati-based company releases its report on Wednesday.Investors will be eager to hear from P&G’s new chief executive, Bob McDonald, who took over from A.G. Lafley on July 1, on his plans for the company and his expectations for the coming year. Shares across the consumer staples segment traded in the red on Tuesday afternoon. Arm & Hammer products company Church & Dwight
raised its year-end outlook to between 3.35 and 3.40 a share, from between 3.30 and 3.35, previously, while Clorox
took a cautious tone regarding sales in the current quarter as it upheld year-end guidance, tainting better than expected fourth-quarter earnings. Church & Dwight’s stock shed 97 cents, or 1.6%, to 58.05 while Clorox shares slipped 29 cents, or 0.5%, to 58.71 and P&G’s stock was down by 16 cents, or 0.3%, at 55.45. Johnson & Johnson
lost 26 cents, or 0.4%, to 60.84 and Colgate-Palmolive
was down by 2 cents to 72.11. The Consumer Staples SPDR
exchange-traded fund was down by a penny, or 0.4%, at 24.54 during Tuesday’s afternoon trading session.The Associated Press contributed to this article.

Can Grocers Serve Up Profits – US-FOREX.US

Forex-Publisher — Mon, 03 Aug 2009 21:46:09 +0000

Commodity costs are much cheaper than a year ago, so you’d think the food sector would have an easier time pleasing the Street with higher profits. But it’s not that simple: Consumers remain a challenge as companies vie for a bigger portion of their limited spending.
Whole Foods Market
has seen its number of shoppers dwindle amid the global economic slowdown. Although the company increased its store-label offerings and emphasized its price comparability to regular grocery stores, not as many consumers are currently able to pay extra for naturally-grown produce and minimally-processed food.Analysts are optimistic, however, about the Austin, Texas-based supermarket’s third-quarter earnings report, due out Tuesday. “The company is doing a good job of reducing expenses and bringing them more in line with current sales trends. It has also become more disciplined about the cost of building new stores and their size/location to ensure that returns are adequate,” said Barclays Capital analyst Meredith Adler. Whole Foods’ shares have more than doubled since January, but Adler remains cautious on the stock, as market expectations are high. Adler also said store expansion would have to be extremely limited to uphold the company’s aim to fund capital expenditures with internally generated cash and to generate free cash flow this year and beyond. Analysts polled by Thomson Reuters are expecting the company to report third-quarter earnings of 19 cents a share and sales of 1.9 billion. Popular brand companies like Kraft Foods
, which also reports on Tuesday, face similar difficulties in the current environment since shoppers often seek out store labels when searching for bargains. In response, Kraft said it would use cost savings to strengthen its key brand products. The Northfield, Ill.-based company is behind major labels like Oreo, Ritz and Jell-O.
According to Barclays analyst Andrew Lazar, promotional spending appeared to have paid off with improved volume and market share compared with the previous two quarters. “We estimate that, if current heightened promotional levels persist, Kraft would only offset about half of the potential margin favorability it faces from lapping higher year-over-year costs,” Lazer said. Companies with a strong presence in the dairy case-like Kraft and Dean Foods
-are expected to have an especially robust second quarter, according to UBS analyst David Palmer, who said dairy prices have been near historic levels. He warned that margin gains will likely peak in the second quarter and could substantially increase in the early part of next year. Palmer raised second-quarter estimates for both companies on Monday in anticipation of “significant gross margin gains.”Kraft is reporting second-quarter earnings on Tuesday, and analysts polled by Thomson Reuters are expecting profit of 54 cents on sales of 10.4 billion. Investors will be looking to see whether the company upholds year-end earnings guidance for 1.88 a share.Dean Foods, which reports second-quarter earnings on Wednesday, is anticipated to post a profit of 42 cents a share on sales of 2.8 billion. Lower diesel prices are expected to be another boon for the company, which uses the fuel for its refrigerated distribution system, Palmer said.Oilseed and grain processor Archer Daniels Midland
also reports fourth-quarter results on Tuesday. The company has suffered weak demand for its products in its previous quarter and although other oilseed processing and agribusiness companies like Bunge
and Corn Products International
recently reported estimate-beating profits, oilseed product volumes remain low. Analysts anticipate fourth-quarter earnings of 45 cents a share and sales of 15.2 billion.

Anglo Makes Its Case – US-FOREX.US

Forex-Publisher — Fri, 31 Jul 2009 10:46:04 +0000

Cynthia Carroll has much to prove. The chief executive of Anglo American has rebuffed a no-premium, merger of equals proposal from rival Xstrata and is fighting back against shareholder criticism that she’s not doing enough to cut costs after a string of acquisitions during the commodities boom. Anglo now seems to be making a strong case on cost cutting, but even that might not be enough to counter sliding demand.
Anglo American
revealed Friday that half a year in, it had saved 450 million in costs as part of a two-year, 2 billion cost-saving plan. The company had also trimmed its workforce by 15,405, as part of a goal to cut 19,000 jobs by the end of 2009.But the company had missed expectations on underlying net profit, bringing in 1.1 billion against the 1.8 billion that had been expected by analysts, according to TradeTheNews.com. Net profits had fallen by 58%, as the price of metals like iron ore, platinum and copper more than halved from a year go. Anglo’s shares slipped 1.2% to or 23.5 pence , to 18.82 pounds on Friday morning in London.Another worrying factor for Anglo: the miner said its net debt had risen by 292 million from the end of 2008 to 11.3 billion, and that it could rise further towards the end of the year as it spent about 4.5 billion on projects in Latin America. Still, it could be worse. Rival miner Rio Tinto
is in the middle of slowly shifting a 38 billion debt pile, built up after its acquisition of Canada’s Alcan. Carroll said that Anglo expected demand to “remain soft in the near term.” China was still growing strongly and was “key to demand, particularly for iron ore, copper and platinum.”
She added that while there had been some recovery in metal prices, the economic outlook still looked uncertain in the short term, while longer term, fundamentals were “highly attractive.”Anglo American rebuffed a “merger of equals” bid from Xstrata
in June. Since the companies have yet to get to the stage of even talking about a deal premium-which analysts say could go up to 30% for about 22 pounds a share for Anglo American-it could be many more months, if not more than a year before the two ootentially seal a deal. Shareholders of Anglo American have also rejected the current merger offer on hopes for better terms. But it looks unlikely that Xstrata, which is also expected to post sharply lower profits next week, will sweeten its offer when it reports, and will more likely talk up the strategic merits of the deal.