Australian business profits rose for the first time in five quarters as earnings at wholesalers, hotels and restaurants gained.
Gross operating profits advanced 2.2 percent in the three months through December from the previous quarter, when they declined a revised 1.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 15 economists surveyed by Bloomberg News was for a 3 percent gain.
Today’s report adds to evidence of an economic rebound that may prompt the central bank to raise the benchmark interest rate tomorrow for the fourth time in five meetings. Australia’s economy probably grew the most in 1 1/2 years in the fourth quarter, a separate analysts’ survey ahead of a report on March 3 shows, boosted by A$22 billion ($20 billion) in spending by Prime Minister Kevin Rudd on roads, ports and schools.
Income from companies “looks OK, and they should improve further” in 2010, said Stephen Roberts, a senior economist at Normura Australia Ltd. in Sydney. “They’ve cut back a bit on costs and by this time next year we should have a big positive annual gain” in earnings.
Profits declined 11.2 percent in the fourth quarter from a year earlier, today’s report showed.
The Australian dollar fell to 89.84 U.S. cents at 12:03 p.m. in Sydney from 89.89 cents just before the report was released. The two-year government bond yield dropped 1 basis point to 4.58 percent. A basis point is 0.01 percentage point.
Supermarkets
Woolworths Ltd., Australia’s biggest retailer, said last week that first-half net income rose 11 percent to A$1.1 billion on increasing profitability at its supermarkets.
Goodman Fielder Ltd., the nation’s largest baker, said on Feb. 25 that first-half profit increased 25 percent after it cut manufacturing expenses and added new bread brands.
While some economists say concerns about sovereign debt in Europe and financial-markets turmoil may prompt central bank Governor Glenn Stevens to wait another month to increase borrowing costs tomorrow, 14 of 19 analysts surveyed by Bloomberg predict he will boost the benchmark rate by a quarter percentage point to 4 percent.
Boosting the benchmark rate tomorrow would make Stevens the first central banker from a Group of 20 economy to raise borrowing costs this year quick payday loans. He was also the first in the world to increase rates three times last quarter, when he raised the key rate in three quarter-point steps to 3.75 percent from a half- century low of 3 percent.
Business Investment
Profits at construction companies declined 2.7 percent in the fourth quarter and manufactures advanced 8.1 percent, today’s report said. Wholesale traders jumped 29 percent and hotels and restaurants gained 28.5 percent.
A report published last week showed business investment jumped in the fourth quarter at almost three times the pace predicted by analysts as companies raised their forecasts for investment plans to the highest level in five years.
BHP Billiton Ltd., the world’s largest mining company, said last month it will increase capital spending on iron-ore mines and oil fields by 63 percent next year to $20.8 billion from $12.8 billion this year.
Rising Chinese demand for Australian iron ore and coal is stoking a record boom in mining investment that may last more than a decade, central bank Deputy Governor Ric Battellino said on Feb. 23. Investment in new mines, ports and infrastructure may reach 6 percent of gross domestic product, more than double the amount spent during the last resources boom in the late 1970s, he said.
Faster Growth
GDP probably rose 0.9 percent in the fourth quarter from the previous three months, when it gained 0.2 percent, according to the median estimate of 18 economists surveyed by Bloomberg News. The economy probably expanded 2.4 percent from a year earlier, they said. The figures will be released at 11:30 a.m. on March 3.
Inventories held by companies gained 0.2 percent in the fourth quarter from the previous three months, today’s report showed. Economists forecast a 0.5 percent increase.
Retail sales rose 0.5 percent in January after falling in December for the first time in five months and building approvals gained for a third straight month, according to Bloomberg surveys of analysts ahead of reports to be released tomorrow.
Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign-exchange gains or losses.
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Dell shares fell more than 5% in after-hours trading, after the computer maker reported a 5% drop in fourth-quarter earnings Thursday.
The Texas-based company beat Wall Street’s expectations, however, on solid sales across all its segments as businesses started spending on IT again.
Net income dropped to $334 million, or 17 cents per share, compared with $351 million, or 18 cents per share a year ago.
Results included a one-time charge of 11 cents per share for special items, mainly related to the company’s $3.9 billion acquisition of Perot Systems in November. Without the charge, Dell (DELL, Fortune 500) said it earned 28 cents per share. Analysts polled by Thomson Financial, who typically exclude one-time items from their estimates, were looking for 27 cents.
Sales rose 11% to $14.9 billion from $13.4 billion last year, beating analysts’ forecast of $13.85 billion.
In a conference call with analysts following the results, chief financial officer Brian Gladden and Dell chairman and CEO Michael Dell said they expect to see an uptick in commercial sales in the next year and continuing into fiscal 2011 as businesses upgrade to Windows 7.
Gladden said the company is focused on cutting overhead and manufacturing costs and in simplifying its supply chain. Last year, Dell announced plans to trim expenses by $4 billion annually by the end of fiscal 2011. Gladden noted that in the last two years, Dell had consolidated its manufacturing facilities to six from 11.
"Ongoing competitor pressure and economic realities never stop, and we can’t either," he said in the call. "We’re moving into the next phase of our transformation."
While Dell’s financials beat analyst expectations, the news comes with a mixed bag of concerns such as high consumer sales with lower margins, and tight commodity prices, said Shannon Cross, an analyst with Cross Research. On the upside, the company is investing in key growth areas, she said.
"The biggest concern is a lack of leverage in the model," she said. "People had hoped to see more of that revenue upside fall through to the bottom line."
Segment by segment
Analysts say trends point to a hardware-driven uptick in IT spending during the recent holiday months. Notebook and desktop computer sales together account for more than half of Dell’s revenue.
Dell reported a 16% year-over-year jump in laptop sales and a 3% drop in revenue from desktops.
Overall, consumer sales were up 11%. That’s better than expected, Gladden said in the conference call. That said, operating margins in the consumer segment were below a target 1% to 2%, due to holiday discounts, he noted.
Software sales from Dell’s third largest division were flat. Meanwhile server sales rose 26%, while sales in Dell’s tech services division were up 51%, year-over-year.
The company’s acquisition of Perot Systems in November marked a strategic shift toward ramping up its technology services market share and taking on Hewlett-Packard (HPQ, Fortune 500) and IBM (IBM, Fortune 500).
Revenue from Dell’s public business unit jumped 16% to $3.8 billion, with sales from services more than doubling, due in large part from the Perot addition.
Dell’s number one rival HP reported results Wednesday that blew past Wall Street’s expectations. The company said earnings jumped 25% on 8% rise in sales.
"HP had a lot more room to cut costs that Dell did, and HP has seen far more of the revenue upside fall through to their bottom line. HP is more focused on the consumer, so they’ve benefited from consumer strength more than Dell has," Cross pointed out.
For the full year, Dell reported a 42% drop in earnings and a 13% drop in sales over the year before.
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Google Inc. has again tinkered with its new Buzz social networking service in the face of continued privacy concerns.
The company (NASDAQ:GOOG) said on a blog Saturday that it will stop automaticly subscribing users to follow the postings of their close Gmail contacts. Now it will only suggest users follow people from their Gmail contacts and leave it up them to do so.
Privacy advocates criticized Google for this automatic following feature, saying it spread the names and contact information of people around without their permission.
This is the second time in Buzz's first week that Google has had to adjust the service in the face of negative postings on Twitter, blogs and on the Buzz service itself business card. On Thursday, the company made it easier for users to keep photos and other information from public view.
"We quickly realized that we didn't get everything quite right," product manager Todd Jackson wrote on Saturday's blog posting. "We're very sorry for the concern we've caused and have been working hard ever since to improve things based on your feedback. We'll continue to do so."
Bob Williams, publisher of the Suburban Journals of Greater St. Louis, is leaving his position to become publisher of The Southern Illinoisan in Carbondale.
Both companies are subsidiaries of Davenport, Iowa-based Lee Enterprises Inc., which also owns the St. Louis Post-Dispatch.
Williams has been publisher of the Suburban Journals since 2007. Before that, he was Lee’s corporate director of sales and development and advertising manager for the Missoulian in Missoula, Mont. He spent a decade with Gannett Co. Inc. before joining Lee in 1998. Williams, who is married with four grown children, graduated from Brigham Young University with a degree in advertising paydayloans.
Greg Veon, Lee’s vice president for publishing, said Williams was selected after a nationwide search for a new publisher.
Williams will be replaced by Tom Wiley, a Lee executive now in charge of the Suburban Journals and Daily Journal in Park Hills.
The current publisher of the Illinoisan, Dennis DeRossett, is leaving the paper to become executive director of the Illinois Press Association.
DETROIT — As Toyota dealers across the country work to repair the defective gas pedals in millions of vehicles, they also are trying to repair the automaker’s reputation by extending hours, making house calls and offering other services.
Toyota Motor Corp. recalled eight vehicles Jan. 21 and stopped selling those vehicles five days later because their accelerator pedals could stick in a depressed position. Toyota is sending dealers a piece of steel about the size of a postage stamp that can be inserted into the accelerator mechanism and eliminate the friction that causes the problem.
Kent Newbold, president of Newbold Toyota in O’Fallon, Ill., said Wednesday that he was even offering customers free tickets to a movie at the nearby O’Fallon 15 Cine while repairs are made to their recalled vehicles.
Nobody had taken him up on that offer, but he said it would remain until all of the recalled vehicles were fixed. "They’re our customers and we’re going to take care of them. … I was even tempted to sneak out and see ‘Alvin and the Chipmunks 2′ myself," Newbold said.
Jim White Toyota, a dealership in Toledo, Ohio, received about 350 steel pieces, or shims, and began repairs Wednesday morning. By mid-afternoon, about 25 cars were fixed, said Terry Treter, service manager.
Repairs were going smoothly and a little faster than the half-hour Toyota estimated, he said. Technicians do a test drive as part of the repair.
Dealers said they would extend service hours as needed to make repairs at the convenience of their customers. "The main thing the dealers want to do is to get the cars repaired and back on the road," said John S. Poppell, president of Twin City Toyota in Herculaneum.
Tom Seeger, owner of Seeger Toyota in Creve Coeur, added, "We’re going to get this done as seamlessly and comfortably for our customers as possible."
Dealers said customers had been calm despite a warning early Wednesday from U.S. Transportation Secretary Ray LaHood, who said owners of recalled Toyotas should stop driving them. LaHood later said he misspoke and told owners to get their cars repaired.
"There was an (increase in) concerned calls five minutes after Ray LaHood made his first comment, but people calmed down after he later explained himself," Seeger said.
Toyota is giving U.S. dealers payments of up to $75,000 to help them offer extra measures such as house calls. The automaker also suggested other steps, such as additional hires to help with recall repairs, dedicated recall service lanes and complimentary oil changes.
Toyota is sending checks this week based on the number of cars each dealer sold in 2009. Dealers who sold fewer than 500 cars will get $7,500. Dealers who sold more than 4,000 will get $75,000.
Robert Kelly of the Post-Dispatch contributed to this report.
BAGHDAD–Iraq gave final approval Sunday to a deal by a Shell-led consortium to develop one of its largest oilfields, marking a crucial step toward the nation’s postwar rebuilding by boosting the production of its most lucrative resource.
Royal Dutch Shell PLC and its partner, Malaysia’s state-run Petronas, won the right to develop the 12.5 billion barrel Majnoon field last month during Iraq’s second postwar bidding round. As part of the deal, Shell and Petronas will pay the Iraqi government a $150 million (U.S.) signing bonus.
At a Baghdad signing ceremony, Oil Minister Hussain al-Shahristani hailed the deal as a "major step that will transform the region from an area of misery and deprivation into a prosperous one."
Shell chief executive Peter Voser refused to say how much money will be spent on the project.
The oil deal for Majnoon, located in Basra province near the Iranian border, was one of seven the Iraqi government awarded last month.
The 20-year contract calls for the companies to be paid $1.39 per barrel produced above current output levels. The firms have said they hope to raise production from the current 45,900 barrels per day to 1.8 million barrels per day by 2020.
The Majnoon field was discovered in 1976 and was partially developed until the Iran-Iraq war halted work. Oil production resumed in 2002.
For Iraq, the oil deals mark a crucial step forward in the country’s so-far faltering bid to raise oil output. Although it sits atop the world’s third-largest proven reserves of conventional crude oil, Iraq produces a comparatively modest 2.5 million barrels per day, of which about 1.9 million barrels a day are exported.
Of the seven deals awarded in December, Iraq’s Cabinet has approved four, including Majnoon, and has asked for changes to proposals for the remaining three – awarded to consortiums led by Russia’s private oil giant Lukoil, China’s CNPC and Russia’s Gazprom – before signing off on them as expected by the end of January.
Four top bank chief executives told a panel probing the financial crisis Wednesday that they made mistakes but didn’t realize how bad they were at the time.
In a heated exchange in Washington with the head of the Financial Crisis Inquiry Commission, Lloyd Blankfein, Goldman Sachs’ CEO, agreed the banks had assumed too much exposure to risk at the height of the crisis, and he wished he could go back and change things.
"Anyone who says I wouldn’t change a thing, I think, is crazy," Blankfein said. "Knowing now what happened, whatever we did, whatever what the standards of the time were — It didn’t work out well."
"Of course, I’d go back and wish we had done whatever it took not to find ourselves in the position we found ourselves in," he added.
The remarks came during a hearing of the Financial Crisis Inquiry Commission, a 10-member panel appointed last summer by Congress. Testifying were chiefs of some of the best-known and largest banks: Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).
The panel’s chairman, Philip Angelides, said he wanted to hear about the banks’ role in creating the crisis and benefiting from the Troubled Asset Relief Program, which was set up to provide them with liquidity.
During the hearing, Angelides cast doubt on Blankfein’s defense of Goldman Sachs’ actions in the mortgage markets — such as buying parts of risky mortgages and then placing bets against such morgages — as part of their job as a "market maker."
"It sounds to me a little like selling a car with faulty brakes and then buying an insurance policy on the buyers of those cars," Angelides said. "It doesn’t seem to me that that’s a practice that inspires confidence."
Blankfein responded that Goldman was just selling what investors wanted.
"These are the professional investors who want this exposure," he said. "Even today, people are coming for exposure to these very products. .. That’s what a market is."
The chief executives — Blankfein, John Mack of Morgan Stanley, Jamie Dimon of JPMorgan Chase, and Brian Moynihan of Bank of America — testified under oath, standing up for a swearing-in during the public session.
The hearing lasted more than three hours and most of the testimony revolved around bad lending in the housing market.
Dimon said that one of the the banks’ "big misses" was failing to "stress test" the housing market.
"We didn’t stress test housing prices going down by 40%," Dimon said.
It has been suggested that this lack of accountability could be remedied if all of the firms and individuals involved in the creation of financial instruments had to "eat their own cooking." That would, for example, require that the bulk of their fees not be taken in cash, but in the securities they created, which they would be required to hold unhedged until maturity.
One commissioner asked Morgan Stanley’s Mack if investment banks could have remediated the volume of illiquid toxic securities by eating "their own cooking," and taking fees for financial transactions via toxic securities, instead of cash. Mack said his firm did hold some of those securities.
"We did eat our own cooking and we choked on it," Mack said. " We kept positions and it did not work out."
‘Sound’ regulatory changes
Blankfein, Dimon and Mack all talked about the need for "sound" regulatory changes to help ward off future crises bad credit unsecured personal loans.
"I want to be clear that I do not blame the regulators … however, it is important to examine how the system could have functioned better," Dimon said. "The current regulatory system is poorly organized with overlapping responsibilities, and many regulators did not have the statuatory resolution authority needed to address the failure of large, global financial companies."
In written testimony, the bank chiefs laid out their banks’ mistakes that led to the crisis, detailing the housing bubble, with "new and poorly underwritten mortgage products," "excessive speculation," and mortgage securitization that allowed people to duck responsibility for poorly underwritten loans.
However, they added they didn’t expect the financial crisis and especially its magnitude.
"After the fact, it is easy to be convinced that the signs were visible and compelling," Blankfein said. "In hindsight, events not only look predictable, but look like they were obvious or known. But none of us know what is going to happen."
In the past several weeks, the commission has talked to Treasury Secretary Tim Geithner and Federal Reserve Board Chairman Ben Bernanke, but that testimony isn’t being made public yet.
Lawmakers say the commission was modeled after the Pecora Commission, a panel that was convened after the 1929 Wall Street crash and other events leading to the Great Depression.
The Pecora panel’s findings led to an overhaul of federal banking laws, including the creation of the Glass-Steagall Act of 1933. Glass-Steagall divided investment banking from government-insured commercial banking; ending that separation in the 1990s was seen by some critics as contributing to the current crisis.
Slow start
The Financial Crisis Inquiry Commission has taken a while to get up on its feet.
The panel was appointed last July and held its first meeting in September. It has only started getting staffed up over the past few months.
It has new offices in downtown Washington, a few blocks northwest of the White House. Funded to the tune of $8 million, it aims to employ between 40 and 50 investigators and other staffers.
The crisis panel’s one big goal is to complete a final report, sort of like the final 9/11 Commission report that found federal agencies missed signs of the impending terrorist attacks in 2001. The financial crisis report is due Dec. 15.
Critics have noted the panel’s impact may be blunted by timing, as the House has already passed a bill to overhaul regulations and the Senate is deep in negotiations on similar proposals.
But panel members have consistently pledged their work will serve as more than window dressing for politicians worried about the appearance that they allowed the financial crisis to happen.
The panel, which has subpoena power, plans to issue interim reports as it collects data, Angelides has said.
The panel’s second-in-command is Bill Thomas, a retired California Republican congressman described as strong-willed during his tenure running the powerful Ways and Means Committee.
Other key panel members include: Keith Hennessey, an economic adviser under President George W. Bush; former Sen. Bob Graham, a Florida Democrat; and Brooksley Born, a past chairwoman of the Commodities Futures Trading Commission, who called for stronger regulation of complex financial products such as derivatives in the 1990s.
Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. economy will probably expand at “a reasonable pace” this year on growth in spending by households and businesses.
“Housing should continue to recover from a very depressed state, consumers should gradually expand spending, business investment should make something of a comeback,” Lacker said today in remarks to the Maryland Bankers Association in Linthicum, Maryland. Even with a resumption in growth, “the level of economic activity will disappoint many people for quite some time,” he added.
Fed Chairman Ben S. Bernanke and his fellow policy makers have left the benchmark lending rate in a range of zero to 0.25 percent since December 2008 to revive lending and end the worst recession since the Great Depression.
Policy makers will need to “choose carefully when and how rapidly” to remove monetary stimulus, Lacker said without indicating his own views on the timing.
The risk of a “pronounced” reduction in inflation has diminished, Lacker said.
“During the recovery period ahead we may face an increasing risk of inflation edging upward, which has sometimes occurred during past recoveries,” he said. “While that risk appears to be minimal at this point, we will have to be careful as the recovery unfolds to keep inflation and inflation expectations from drifting around.”
Not Strong Enough
Growth hasn’t been strong enough to reduce the unemployment rate. The U.S. lost 85,000 jobs in December after revisions showed payrolls increased the prior month for the first time in almost two years, a report today from the Labor Department showed. The jobless rate held at 10 percent.
The U.S. Congress has mandated that the Fed pursue low inflation and full employment. The 7.2 million drop in payrolls over the past two years has been the biggest decline as a percentage of total jobs since the end of World War II.
“The labor market could conceivably recover more slowly than many expect, which would restrain consumer spending and dampen growth,” Lacker said. “But household incomes and household confidence could conceivably rebound more vigorously than many expect, in which case consumer spending could expand more briskly.”
Services Expanded
Service industries expanded in December, with the Institute of Supply Management’s index of non-manufacturing businesses rising to 50.1 percent from 48.7 percent in November. Manufacturing last month expanded at the fastest pace in more than three years, the ISM said in a separate report.
The economy probably expanded at a 4 percent annual rate in the fourth quarter, according to a Bloomberg News survey.
Federal Open Market Committee members maintained an outlook for “moderate growth and subdued inflation” in 2010, minutes of their Dec easy online payday loans. 15-16 meeting showed. “A moderate pace of expansion would imply slow improvement in the labor market next year, with unemployment declining only gradually,” the minutes said.
The U.S. central bank’s efforts to restore liquidity and credit have resulted in the expansion of its balance sheet to $2.24 trillion in total assets, up from $858 billion at the start of 2007. As a result of the Fed’s direct purchases of $1.7 trillion in mortgage-backed, federal agency, and Treasury bonds, banks now hold more than $1 trillion in reserves in excess of what they are required to hold against deposits.
No ‘Huge’ Increase
Lacker said he doesn’t expect the conclusion of Fed purchases of mortgage-backed securities scheduled for the end of March to lead to a “huge” increase in mortgage rates.
Central bankers are now discussing how they will eventually exit their low-rate policy and drain excess cash in the banking system to head off inflation. The timing of such moves depends on economic performance, the minutes showed.
“A few members” suggested “it might become desirable” to expand the scale of asset purchases and continue them beyond the first quarter if the outlook for growth weakened or mortgage markets deteriorated, the minutes said. One member thought the purchases could be scaled back, and said it “might become appropriate” to begin selling assets if the recovery “gains strength over time,” the minutes said.
Banks haven’t started to circulate their reserves into expanding credit. Loans and leases of commercial banks in the U.S. declined to $6.8 trillion in November from $7.2 trillion a year earlier, according to Fed data.
Criticism of Policy
Proposed congressional audits of monetary policy would lead to criticism of decisions to increase the benchmark interest rate, Lacker said to reporters. The House voted last month to approve a proposal by Representative Ron Paul, a Republican from Texas, to end a ban on audits of monetary policy over Bernanke’s warnings the measure threatens to compromise Fed independence.
“The kind of audits of recent monetary policy decisions that the Paul amendment would allow are almost certainly going to result in criticism of interest rate increases,” Lacker said. “They are going to be biased in one way.”
The central bank hasn’t “settled on an approach” on how its various tools will be used with the federal funds rate, he said. “One option you might want to consider is that our policy rate is the interest rate on excess reserves and we let the fed funds rate trade with some spread to that.”
Virginia Power is committing $4 billion over the next three years to improve and expand its electric service.
Dominion Virginia Power CEO Paul Koonce, in a letter to be included with bills sent to Virginia customers in January, outlines plans for improving service reliability and adding more renewable sources of energy.
Koonce was named chief executive in June.
"Keeping your lights on safely, efficiently and at a reasonable cost are my highest priorities,"Koonce said in the letter.
To keep up with growing demand, the company will add new, gas-fired generating units and a hybrid coal station. It is also making environmental improvements to older stations to reduce emissions.
Dominion says it is committed to meeting Virginia's goal of achieving 15 percent of its electricity sales from renewable sources by 20205, and to reducing the growth in customer demand for electricity by 10 percent over the next 12 years high quality business cards.
"Meeting these goals will be a challenge," Koonce says. "Despite the recession, customers are using more power, lending credence to the forecast that demand will rebound as the economy recovers."
Dominion Virginia Power plans to offer new energy efficiency programs this year for both residential and business customers, and digital meters are now being installed in some of its service areas.
Last summer, Dominion (NYSE: D) applied for $200 million in federal stimulus money to speed up the installation of 2.4 million smart meters.
Thirteen of Arizona’s 21 billion-dollar public companies saw their stock prices move up during the fourth quarter.
Seven of the companies posted double-digit gains, with Clear Channel Outdoor leading the pack at 58 percent, according to the Phoenix Business Journal’s analysis of prices from Sept. 30 through 30 through Dec. 18.
Penny stock Mesa Air Group mirrored that performance with a 58 percent decline to lead the group of eight companies with a drop in price per share over the quarter.
Over the same period the Dow Jones Industrial Average gained 6.4 percent and the Nasdaq Composite moved up 4.2 percent.
The Arizona group did better when price changed is measured over all of 2009, but all but four of the stocks still lag from the end of 2007. Click here for the 2009 wrapup and here for a two-year look at local stocks.
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