Taking the Piss

Are we really meant to believe that a freeze on the payment of bonus shares and options to NAB boss Frank Cicutto and two other senior executives will stop them profiting in some way from the $1 billion sale of shares designed to cover the $360 million losses incurred by their incompetence? And what do we make of Air NZ's plans for major expansion? This is a company that used a chunk of a $NZ885 million bailout package to pay bonuses to the executives that oversaw the collapse of Ansett in 2001, leaving hundreds of Australian workers fighting for their dues to this day.

WEEKLY REVIEW

NAB slated over share issues

National Australia Bank has suspended granting new options and shares to boss Frank Cicutto while it gets to the bottom of its $360 million foreign currency trading losses but has been forced to defend its pricing and issuing of new shares to staff.

Full story: http://www.smh.com.au/articles/2004/01/28/1075088090406.html

Forex losses put at $360m, for now

NATIONAL Australia Bank yesterday admitted to foreign exchange losses of $360 million, but there are concerns that further shifts in the currency markets could affect the final number.

Full story: http://www.theaustralian.com.au/common/story_page/0,5744,8512879%255E643,00.html

ExxonMobil ordered to pay 6.75 billion dollars in Valdez spill

NEW YORK (AFP) - ExxonMobil was ordered to pay 4.5 billion dollars in punitive damages and 2.25 billion in interest for the Alaska 1989 Exxon Valdez oil spill, a lawyer for the plaintiffs said.

Full story: http://au.news.yahoo.com//040128/19/nh9j.html

Govt to decide on Rivkin health report challenge

Convicted insider trader Renee Rivkin will find out today whether there is likely to be a legal challenge to the medical advice that is keeping him out of periodic detention.

Full story: http://au.news.yahoo.com//040128/21/nh7s.html

Court cases to test income splitting

The Tax Office is funding about 10 taxpayer test cases aimed at clarifying the nature of income from personal services and the splitting of such income with spouses and associates.

Full story: http://www.smh.com.au/articles/2004/01/28/1075088090143.html

ASIC puts hard word on licence applicants

An administrative slip by Australia's top securities regulator has provided an insight into fraught and frantic efforts to ensure that some of the nation's biggest financial names are fully authorised by the March 10 licence deadline.

Full story: http://www.theage.com.au/text/articles/2004/01/26/1075087956250.html

Call for a referee to judge the giants

SMALL business groups are calling for the appointment of a referee to ensure that big businesses play by the rules.

Full story: http://www.theaustralian.com.au/common/story_page/0,5744,8501001%255E643,00.html

Air NZ poised for global expansion

Air New Zealand announced the first expansion of its international network in eight years yesterday, the strongest indication yet the airline is contemplating life without its proposed $NZ550 million ($475 million) alliance with Qantas.

Full story: http://www.smh.com.au/text/articles/2004/01/27/1075088020570.html

INTERNATIONAL

US bust in 2005 under Bush: Soros

Billionaire financier George Soros has criticised US President George Bush's foreign policy and said the Administration's economic plan would cause a "boom in 2004 and bust in 2005".

Full story: http://www.theage.com.au/text/articles/2004/01/25/1074965433524.html

Audit reveals Parmalat's debt

PARMALAT'S debt reached $14.3 billion ($23 billion) at the end of September, almost eight times the amount reported by the dairy company's previous management before it went bankrupt.

Full story: http://www.theaustralian.com.au/common/story_page/0,5744,8511239%255E643,00.html

NEWS HIGHLIGHT

Forget the FTA, it's not dinkum

There is no agreement with the US on free trade yet and not likely to be, either, writes Malcolm Maiden of the Sydney Morning Herald.

Barring a miraculous breakthrough, talks in America between Australia's Trade Minister Mark Vaile and US Trade Representative Robert Zoellick that begin tonight local time will result in the shelving of the proposed US-Australian free trade agreement.

Or perhaps the effective shelving - both sides have invested political capital in the talks and both are in an election year, so an "agreement" may still be announced. But an actual free trade agreement between Australia and the US is as far away now as it was when the talks started.

This was meant to be a deal that gave both sides unfettered access to each other's markets. But the gains it offered Australia were never massive and they look even smaller now.

Andrew Stoeckel's Centre for International Economics, for example, used an exchange rate of US68c to the dollar last year when it calculated that a free trade agreement with the US would be worth $US2 billion a year or almost $3 billion in our money. Since then the Australian dollar has risen by 13.4 per cent against the greenback, reducing the translated value of the gain to $2.6 billion.

While Stoeckel's model assumed an across-the-board deal, what is now on offer is far more selective and of far less value.

The agricultural export "access" offered by the US bypasses the sugar industry completely and appears to offer higher export quotas for dairy and beef farmers but no reductions in penalty tariffs for over-quota shipments.

The US drug industry's opposition to what it perceives as the Australian Government's wholesale drug price manipulation through the Pharmaceutical Benefits Scheme is also absolute: greater transparency in how the PBS works will not placate it.

As Vaile observed on Friday before he flew out, the tough issues are always the last to be resolved in trade talks. But these talks have always been under time pressure. They were launched in May last year and both sides knew then that they had to wrap them up by the end of 2003 or become hostage to the US election process.

That deadline has been missed, the US election season has begun, and Vaile and Zoellick may spend most of their time this week working out how to bury the main deal, perhaps by serving up a face- saving side dish of politically innocuous concessions while announcing that talk on a broader agreement has been postponed until the election season is over.

A senior strategist with US value investor, Eagle Capital, nominated Rinker as her top pick for 2004.

It has taken almost a year, but the US investment community is finally working out what Rinker, the CSR spin-off, offers. Shares in the construction materials group jumped by 18c or 2.75 per cent to a new high of $6.73 on Friday, and have risen by 10.3 per cent in the past seven trading days.

US buying is behind the move and it can be traced back to the roadshow across America that Rinker chief executive David Clarke conducted in December.

The group was spun off from CSR in March last year, with an asset mix and business plan custom-made to market to the American funds. Rinker is active in Australia, where it owns Readymix, but about 80 per cent of the group's revenue and sales comes from the US.

Its American focus is in the south-east, including Florida and Georgia, and the west, including Arizona and Nevada.

Gearing was 27 per cent at the end of September last year and Clarke is chasing earnings growth through the expansion of existing assets and the acquisition of new ones.

Investors didn't immediately take to Rinker. Its shares were expected to trade at about $5.50 after the spin-off last year but came on at $4.85 and hit a low of $4.57 in May, after Clarke announced March-year earnings that in Australian dollar terms were marred by the falling value of the US dollar.

The share price slide reflected the fact that about 83 per cent of Rinker's shares were owned by Australians. US ownership was only about 5 per cent at the time of the spin-off.

Since then, however, Rinker's profile in the US has risen. The group's shares listed on the New York Stock Exchange at the end of October, and in mid-November it announced a solid September-half net profit increase of 35 per cent in $US terms, and 14 per cent in $A terms.

The result was lodged with the Securities and Exchange Commission and from there was fed out on to the US investment industry's research and information systems, notably Barra.

That in turn meant that Clarke was finally in a position to sell Rinker to the US funds. In the first half of December, he crossed the country doing just that.

The trip ended on the east coast in mid-December and Rinker's price has been trading up from just under $6 a share since then.

A concrete sign of US interest appeared on Boxing Day, when Boston-based Wellington Management disclosed that its $US250 billion ($321 billion) share portfolio included a 5.2 per cent block of Rinker stock that is now valued at about $US328 million.

The US fund manager revealed that it had started buying in August, and accelerated in December. Another thumbs-up came a week ago when the senior strategist with another US value investor, Eagle Capital, included Rinker in their top picks for 2004.

Rinker's own estimate is that US ownership of the company has risen from under 5 per cent at its inception 10 months ago to more than 13 per cent.

Clarke's job is not nearly done. He told me late last year that his target is to get US ownership of the company up to 40 per cent in two years.

But just getting Rinker on the radar screens is a big achievement and Friday's share price surge is an example of how higher visibility changes the profile of the shares.

The price rise came after a competitor of Rinker in the south-east of the US, Florida Rock, announced that strong demand had pushed earnings up 96 per cent.

That's a logical connection for investors in the US to make: if Florida Rock is doing well, Rinker probably is too. But it's a connection that even six months ago simply would not have been recognised.

SATIRE

Care of our friends at the Chaser www.chaser.com.au

NAB introduces new $180 million "Incompetence Processing Fee"

The National Australia Bank has angered the community by introducing a total of $180 million worth of new fees this week, including an Incompetence Processing Fee, an Embezzlement Approval Levy and a Miscellaneous Profiteering Charge. The charges come only days after the bank announced a $180 million loss due to the rogue trading of foreign currencies.

"These new charges have nothing to do with our recent losses," announced NAB Chief Executive Frank Cicutto. "We've simply introduced them to cover the hidden risks of banking in a globalised society - risks like hiring extravagant hucksters who break all the rules of prudent currency trading."

The raft of new measures, such as the Cicutto Survival Surcharge, will replace a number of 'outdated' fees like the Lazy Teller Duty. "We've felt that duty became largely obsolete after we retrenched all our tellers," explained Cicutto. "The changing times have similiarly seen us review our Country Bank Survival Levy."

Nevertheless, Cicutto made a point of emphasising the need for the new fees, declaring they would "provide our managers with the incentive they need to gamble recklessly with your funds in the hope of earning lucrative bonuses."

"Just take our new Buddhist Maintenance Fee. We don't find a lot of Buddhists in our day trading rooms, but when we do, they tend to cost us."

The announcement saw NAB's share price rise 12 cents by the close of trading, prompting calls for an increase of the bank's Executive Bonuses Charge.

For further information

Contact:   Chris Owen
Email:   c.owen@labor.org.au