Woolworths shocks market by lowering sales guidance: Economy Roundup

Woolworths has announced a 4.7% improvement in third quarter sales, but has surprised the market by lowering its full year sales forecast due to inflationary pressures. Year to date sales growth is at 5.3%, within previous guidance, but the company warned that there will be some pressures on margins.

“Given the greater than anticipated impact on sales of low food and liquor inflation and the cycling of the prior year stimulus, we revise sales growth guidance for the year which we now expect to be between 3% and 6%,” the company said.

“Consumer spending has tightened in the quarter, reflecting consumer concerns about further interest rate hikes and higher petrol prices than last year.”

The company said same-store food and liquor sales are well below growth rates recorded last year, with second-quarter sales rising 3.8% and first quarter sales up 5.8%.

Third quarter total sales excluding petrol rose by 3.8% to $11.04 billion, with the Big W chain suffering a 3.7% decline in sales.

“The sales for the final quarter of the current year are expected to be impacted significantly by cycling these conditions. In addition, current levels of food and liquor inflation are significantly lower than those historically experienced and this is expected to continue in the final quarter.”

Woolworths shares rose 0.4% to $27.02 at 12:15.

Macquarie Group has recorded a 21% increase in full-year net profit to $1.05 billion, with the company also saying it expects to see improved operating results for all businesses during the 2011 year.

The company has said market conditions are increasingly positive, but uncertainty still remains regarding forecasting.

“In addition to market conditions, the FY11 result remains subject to a range of other challenges including increased competition across all markets, the cost of maintaining a conservative approach to funding and capital, and regulation, including the potential for regulatory changes to impact flows to capital markets,” Macquarie managing director and chief executive, Nicholas Moore, said in a statement.

“Subject to economic activity continuing to increase across all major markets, we expect continued growth in revenue and earnings across most businesses over time and continued growth in our global businesses driven by expanding our strong client franchise.”

Operating income has increased by 20% to $6.6 billion, with international income accounting for 52% of that figure. Tier 1 capital ratio was 11.5%, up from 11.4% at March 31, 2009.

The Foreign Investment Review Board has approved the purchase of Arrow Energy by Royal Dutch Shell and PetroChina for $3.45 billion, with the target company confirming the approval in a statement.

“Today’s announcement brings us one step closer to realising significant value for Arrow shareholders through the monetisation of Arrow’s Queensland coal seam gas assets while retaining significant upside through exposure to Dart’s outstanding portfolio of assets in Asia and Australia,” Arrow chief executive and managing director Nick Davies said.

Shareholders in Arrow will receive one share in a newly-listed entity, Dart Energy, for each share they already hold. The approval comes after the Australian Competition and Consumer Commission said it would not oppose any deal.

Shell and PetroChina will each own 50% of the gas produced by a new plant on Curtis Island, Queensland, with the company to sell the gas to China.

The East Timor government has reaffirmed opposition to Woodside Petroleum’s plan to develop an offshore gas field with a floating liquefaction plant. The field contains 5.13 trillion cubic feet of gas, and is on the border of Australian and East Timorese waters.

Shares higher after solid Wall Street results

The Australian sharemarket has opened higher today, following strong leads on Wall Street and solid results from metals and commodity markets.

The benchmark S&P/ASX200 index was up by 31 points or 0.65% to 4816.7 at 12.15 AEST, while the Australian dollar also increased slightly to US92c.

ANZ shares have gained 0.1% to $24.22, while Commonwealth Bank shares have moved up 1.5% to $58.46. Westpac rose 1.4% to $27.38 as NAB gained 0.7% to $28.22.

Australia and New Zealand Banking Group chief executive Mike Smith has said the debt problems in Europe are at risk of infecting local markets. Speaking after the company’s financial results were announced, he said “the contagion issue is now very real”.

“I think it will probably have an affect on equity and credit markets, but credit markets I think is more relevant to the Australian situation,” he said. “I think it’s further aftershocks after the major earthquake.”

Additionally, Smith said he believes the economy is two-thirds of the way through the downturn, and that a significant recovery has already begun to emerge.

“I think the third part of the cycle is not going to be as difficult as we envisioned before, because the unemployment that was likely to have occurred with the hits to the big end of town and to the middle market really hasn’t happened, therefore the pain on the consumer side is not likely to be as significant as originally thought,” he said.

Noble Group has said it does not have any interest in talks with Macarthur Coal regarding potential merger transactions for coal assets.

“Noble wishes to categorically state it has no interest whatsoever at this juncture in having any discussions regarding this matter, directly or indirectly, with Macarthur…” it said in a statement.”This is one of those times where there may be a great deal of smoke, but there is no fire.”

IMF, EU work to bail out Greece

Overseas, the International Monetary Fund, the European Union and the European Central Bank are in Athens to negotiate a bailout for Greece regarding its debt issues. The bailout package could be as much as $US160 billion over the next three years.

“The immediate emergency measures will be a strong bridge to cross over to great changes, secure the life of every citizen and have dynamic growth in a more just society,” Greek Prime Minister George Papandreou said in a statement.

In the United States, the Wall Street Journal has reported that US federal authorities are now conducting a criminal inquiry into Goldman Sachs trading. Prosecutors are currently investigating whether the company or its employees committed securities fraud, while the company itself is already facing a civil lawsuit from the US Securities and Exchange Commission.

Stocks have continued to rise, with investors responding to proposed bailout plans for Greek debt and a number of strong financial results. The Dow Jones Industrial Average gained 122.05 points or 1.10% to 11,167.32.