Australian Stock Market Report – Afternoon 2/26/2013

Afternoon Market Report
(17:30 AEDT)

For weeks now a common market discussion has turned around the rise of the markets and the speed with which the ASX200 ascended to the 6000 mark. Over the course of this time there have been few outcomes to interfere with the rosier perspective adopted by the market. The last week has seen this paradigm revert to themes that were common place at the end of last year. European political risk and the state of US finances have returned to cast a pall over market sentiment.

As a result there were few indices throughout the region that were left untouched by sellers after Wall St suffered its worst loss this year. The spectre of the Italian elections leaving a hung parliament in their wake left investors underwhelmed. Additionally, automatic cuts to the US budget threaten to put the handbrake on US growth, once again. The sequester or spending cuts totalling $85bln over 2013 or $1.2 trillion over the next 10 years could come into force on the 1st of March if the matter isn't resolved by US politicians. It's been a case of back to the bad old days of last year. The question on the minds of market participants is whether these matters will unseat the confidence that has taken root in the market over the course of last 2 months.

The ASX200 closed the session at 5003.6 down by 52 points or 1.03%. The All Ordinaries Index settled at 5021 a loss of 51 points or 1%. As has been the case in recent days interest in the market remained high. There were 1.9 billion transactions on the day valuing turnover at $5.1bln. 356 stocks ended higher, 621 ended lower and 372 were unchanged.

Rio Tinto finished at $65.57 a loss of 58 cents or 0.87%, BHP Billiton closed at $36.35 a loss of 55 cents or 1.49%, Fortescue Metals Group closed at $4.61down 14 cents or 2.95%. Alumina closed at $1.18, a loss of 3 cents or 2.47% , Iluka ended at $10.06 down 3 cents or 0.29%, OZ Minerals closed at $6.59 down 19 cents or 2.8%.

Write-downs have seen Atlas Iron Ore announce a first half loss of $256 million compared with a $6.1 million profit for the same period a year earlier. Underlying profit of $1 million was down from $62.2 million in the previous corresponding period, as revenue was impacted by weaker iron ore prices. The company said the recent recovery in iron ore prices was generating improved margins. The underlying result was ahead of the markets expectations. The shares ended the session at $1.54 down 5 cents or 3.4%

In the energy sector, the country's largest oil refiner, Caltex Australia (CTX), returned to a modest profit of $57M in 2012, largely boosted by lower costs associated with the closure of its Kurnell refinery in Sydney. This result was in-line with the company's guidance provided in Dec of between $45M & $65M. Profit was driven by 6% growth in earnings within its Marketing & Distribution unit, improved refinery reliability, a better tax outcome & increased production. CTX provides over 1/3 of Australia´s transport fuels & operates two refineries. The better setup at its Lytton refinery in Brisbane contributed most to earnings; however $430M in costs linked to the Kurnell conversion held the result back. Looking ahead, Caltex expects to close Kurnell by late 2014 & forecasts continued growth in its Marketing & Distribution unit despite intense competition. A 23cps dividend was declared & will be paid out to eligible shareholders on 4 April. Investors reacted well to the result; however CTX is still down around 3.2% since the start of 2013. CTX shares ended at $18.18, down 49 cents or 2.6%.

Elsewhere amongst the consumer discretionary stocks, global travel agent Flight Centre Limited (FLT) has posted a 13% rise in 1H profit to $91.8M, above market expectations. Revenue rose by almost 7% to $1B, buoyed by record earnings at FLT´s operations in Australia, China, Britain and Singapore. Total transaction value was up 7% globally and rose by 9% in Australia. The result is very solid, particularly given what FLT has called ´´challenging global trading conditions´´. FLT plans to focus on improving store efficiency and is also continuing with its ´´blended travel offering´´ which will see online sales complimented with a traditional travel agent from one of its retail stores. FLT also remains on track to lift its FY earnings, expecting FY13 NPAT between $305-$315M. FLT believes Australia, the UK and the US will remain its key growth markets but is also on the look-out for acquisitions. Shareholders will receive a fully franked interim dividend of 46c per share, to be paid on 19th April 2013. FLT shares fell during Tuesday´s trade on a downward day for the market and despite the solid result. The shares ended down 79 cents or 2.45% at $31.50.

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