The company reporting season begins, a local takeover concludes and Freightways extends its emergency air freight services to Australia
Local market gets set for start of reporting season
Investors will be nervously anticipating the start of reporting season this week with Contact Energy set to release its full year result today. Fletcher Building and Auckland International Airport will report their results next week, with Spark and Air New Zealand later in the month. All up, 29 companies will report either full year or half year results in August.
The NZX50 lost ground last week easing 0.7 percent to close at 11,646 while Australia’s ASX200 gained 1.3 percent to close at 6004 as the Aussie market continues to hug the 6,000 level which it hasn’t deviated far from for the past two months. In the US, the S&P500 had another positive week gaining a further 2.5% to close at 3351, just 36 points away from eclipsing its pre-Covid high of 3386 on February 9.
Gold continued to push higher gaining a further 2.9 percent for the week to close at US$2028. However, the precious metal lost ground on Friday falling 1.5 percent, its biggest one day fall in almost two months, as the US dollar strengthened and investors decided to lock in profits from gains of more than 13 percent in recent weeks.
Centuria secures 90 percent acceptances for Augusta Capital
Centuria NZ Holdings confirmed on Friday that it had received sufficient acceptances of its takeover offer for Augusta Capital to meet the required 90 percent threshold to compulsorily acquire the remaining shares.
The company said today is the final day for Augusta shareholders who have not already accepted the offer to do so to receive the consideration more quickly than under the compulsory acquisition process.
Independent Chairman Paul Duffy said “the takeover process brings together two complementary real estate platforms with greater asset and sector diversification. Augusta’s new ownership will create a significant opportunity for our shareholders who will become Centuria shareholders.
Freightways trans-Tasman freight contract extended
Freightways’ contract to provide trans-Tasman airfreight services has been extended for another month and, with the virus situation in Victoria continuing to escalate, is likely to be extended further.
The government’s implementation of the International Air Freight Capacity scheme, which underwrites the cost of air freight, was designed to stop a blow-out in air freight costs as a result of reduced services between NZ and Australia.
In May, Freightways was awarded a two-month contract under the scheme in partnership with Parcelair. Since then, the company has been operating daily flights to Sydney and Melbourne in addition to its overnight domestic service.
Freightways said it had been using 737 freighters with a capacity of 18 tonnes per aircraft to fly 250,000 kilograms, mostly seafood produce, across the Tasman each week.
Food prices in China set to rise as a result of severe flooding
Severe flooding in the Yangtze region of China, which has been described as some of the worst in almost two decades, looks set to severely damage the country’s annual rice harvest. China’s Ministry of Emergency Management pegs the direct economic cost of the disaster at US$21 billion in destroyed farmland, roads and other property. Some 55 million people have been affected.
The disaster is bad news for China’s already fragile economy, still recovering from the impact of the coronavirus pandemic. Beijing has so far been able to secure food supplies by importing vast amounts of produce from other countries and by releasing tens of millions of tons from strategic reserves.
But analysts warn that such measures can only be useful for so long while tense relationships between China and much of the Western world may further complicate the current situation.
Evictions in the US set to surge in coming months
A new report has forecast up to 40 million Americans could face eviction by the end of the year.
The report by the Aspen Institute warns that the US may be facing the most severe housing crisis in history if conditions do not improve in the coming months with up to 43 percent of renter households facing eviction this year.
The institute said that unless the federal government invests in eviction prevention then negative health outcomes, greater unemployment, educational decline, and long-term harm for renters, property owners and communities will be inevitable.
African Americans and Latinos make up about 80% of those facing eviction. The federal protections on evictions expired last month, while 30 states are without state-level protections against eviction. The institute said at least US$100 billion in emergency rental assistance, with the extension of enhanced unemployment benefits, would help stave off millions of evictions.
Buffet embarks on record stock buyback
In a confident sign of faith in its outlook, Warren Buffet’s Berkshire Hathaway confirmed over the weekend it had bought back a record amount of its own stock during the second quarter as the coronavirus pandemic dented operations for his diversified conglomerate.
The company said it repurchased US$5.1 billion worth of stock in May and June. Berkshire repurchased more than US$4.6 billion of its Class B stock and about US$486.6 million in Class A shares.
The share repurchase is the largest buyback ever in a single period for Buffett, nearly double the US$2.2 billion the conglomerate bought back in the final quarter of 2019. Despite the company’s record buybacks last quarter, Berkshire’s cash hoard grew to more than US$140 billion.
Buffet is heavily invested in several companies that have rallied strongly since the broader stock market bottomed in late March. Apple — Berkshire’s biggest common stock holding — has nearly doubled since its low on March 23. JPMorgan Chase is up more than 27 percent over the same period and Amazon has popped more than 66 percent.
Saudi Aramco profit falls by 50 percent
Oil giant Saudi Aramco reported a 50 percent fall in net income for the first half of its financial year, reflecting a devastating year for oil markets and the global economy more broadly due to the coronavirus pandemic.
In a statement over the weekend, the company said net income plunged to US$23.2 billion in the first six months of the year, down from $46.9 billion over the same period in 2019.
Saudi Arabia’s majority state-owned oil company, the world’s largest crude producer, also maintained its second-quarter dividend of US$18.75 billion, saying it will be paid in the third quarter.
Total free cashflow at the company came in at US$21.1 billion for the first half, down from US$38 billion the year before. The financial results for the second quarter reflect the biggest shock to global energy markets in decades.