Allied Brands shares down 24% after another profit downgrade: Economy Roundup

Franchise operator Allied Brands has lowered its profit guidance for the second time in six weeks due to writedowns in the Cookie Man and Villa & Hut businesses.

The company’s shares have dropped nearly 24% to 3.5c this morning after the news was announced on the Australian Securities Exchange.

While the writedowns were previously expected to be between $13-15 million, they are now expected to be $30-32 million. The company said they reflect changes made during an operational and strategic review.

“The company also wishes to advise that due to the failure to settle contracts for the sale of the Bay Swiss franchised stores coupled with significantly increased trading losses in these stores and increases in bad debt provisions means the underlying profit for the full year will be roughly breakeven.”

The company also said it will cut $3 million in overheads, and reduce operating costs by about $4.5 million per year.

Meanwhile, the Australian Competition and Consumer Commission has said it won’t intervene in the sale of Mobil’s retail assets to 7-Eleven and Peregrine, saying the deal won’t substantially reduce competition.

However, the corporate watchdog also said it has received undertakings from 7-Eleven that it will on-sell three of its service stations, while Peregrine, which is set to operate the Mobil stations in South Australia, will divest one.

“The ACCC considers that the proposed acquisitions by 7-Eleven and Peregrine, when viewed with the proposed divestitures, will not substantially lessen competition in the relevant markets,” chairman Graeme Samuel said in a statement.

The original deal was announced in late May, with 7-Eleven saying it would produce sales in excess of $2.8 billion. At the time, 7-Eleven said it would hope to make most of these stores “progressively franchised”.

It comes after a previous $302 million bid for the same retail outlets from Caltex was blocked by the ACCC.

The deal will provide 7-Eleven with over 650 stores nationwide, with the deal producing over 160 million transactions each year in total.

Shares rise after solid lead on Wall Street

The Australian sharemarket has opened higher today, following solid leads on Wall Street where stocks rose after a number of better-than-expected financial reports.

The benchmark S&P/ASX200 index was up 75 points or 1.72% to 4449.8 at 12.10 AEST, while the Australian dollar also rose nearly two cents higher to US89c.

ANZ shares gained 1.6% to $22.46, as Commonwealth Bank shares rose 2.5% to $51.17. NAB gained 2.4% to $16.66 as Westpac rose 2.3% to $22.65.

In the mining sector, oil giant Woodside Petroleum recorded a fall in production during the June quarter caused by maintenance shutdowns and asset sales.

The company’s second quarter production volume dropped 10% to 17.5 million barrels, compared to 19.4 in the second quarter of 2009.

In a statement, the company said the drop was “driven largely by scheduled maintenance shutdowns on North West Shelf Trains three and five, the sale of our Otway assets in the previous quarter as well as natural decline in oil production from Enfield and Neptune”.

It also said the company was continuing to work on schedule for its Pluto gas export project, and is on guidance with the figures announced last month.

“The exploration drilling campaign to support Pluto expansion continues to ramp up with the arrival of the second drilling rig in the Carnarvon basin,” the company said.

Also, billionaire mining mogul Andrew Forrest has now questioned former BHP chairman Don Argus’s role in the transition to the new mining tax.

“I was told ‘well, he’s independent, he’s no longer in the mining industry serving on the board of BHP’,” Forrest told a media conference yesterday.

“I answered ‘well, that’s fine. Would you kindly appoint John Howard – he’s not in parliament either, he’s as independent as Don Argus is from BHP – appoint John Howard to be your campaign director and then you’ll know exactly how we feel’.

Overseas, the China Daily has reported China will launch domestic carbon trading within the next five years.

The news agency has said officials have reached a consensus on the need for carbon trading in order to improve energy efficiency over the next decade. The publication stated Tang Renhu, from the China Datang Corp, believed there to be major differences over how pilot projects should begin.

US commission to investigate Goldman Sachs

The US Securities and Exchange Commission will expand its investigation against Goldman Sachs, and will investigate the timing of its proposed $US550 million settlement.

Reuters has reported SEC Inspector General David Kotz said in a letter that he will investigate “the circumstances surrounding the timing of the SEC’s settlement reached with Goldman on July 16,”

Meanwhile on Wall Street, stocks rose after a number of better-than-expected financial results, including software giant Microsoft’s announcement of a 48% profit increase. The Dow Jones Industrial Average gained 201 points or 1.99% to 10,322.30.