• Sellers remained in control of the Australian share market over the course of Wednesday afternoon. The period after lunch was marked by a plunge of selling which saw the ASX 200 establish the low of the day with a 53 point deficit. A recovery of sorts followed, although the last 24 hours of trade for global markets have made it plain that market participants are taking a conservative approach to risk ahead of the conclusion of the US Federal Reserve’s FOMC meeting. Commsec expects the commit tee to reiterate that US economic activity is gaining momentum but we doubt they will change their forward guidance until the 30 April meeting. Such a result should be generally positive for stocks and could potentially see some profit taking in the Greenback which has been in a solid uptrend in recent times.
  • The Healthcare sector was the best improved group owing to a sustained recovery for Sirtex Medical (SRX) whose shares halved yesterday following the release of clinical trial which fell short of expectations. While the trial failed to meet its main objective as a treatment for metastatic colorectal cancer, there was sufficient evidence that the treatment could control cancer in the liver. This was the guiding factor in the bounce on Wednesday which saw the shares close at $20.95 a gain of 19.5% or $3.42.
  • Fortescue Metals Group (FMG) announced that it will defer its US$2.5bn note offering, launched just yesterday. The miner cited unfavourable debt capital market conditions as the reason for the decision. The iron ore producer had planned to use the proceeds from the senior secured notes to repay its unsecured notes maturing in 2017, 2018 and part of 2019. FMG said “Whilst we have no debt maturing until April 2017, the objective of the refinancing was to extend Fortescue’s maturity profile and minimise interest costs.” The note offering had been part of a refinancing package unveiled earlier this month when Fortescue said it would issue new debt and offer to buy back its existing securities as part of a plan to extend the maturity of its debt and reduce its borrowing costs. However the company said about 60% of its debt remained available for early repayment or refinancing prior to maturity. The miner also stressed that cash on hand and positive operating cash flow would provide a strong basis for voluntary early repayment of debt. In its latest earnings results, Fortescue reported net debt of US$7.5bn and gearing, or the ratio of its debt to its share price, of 54%. Fortescue’s first half net profit fell 81% as sharply lower iron ore prices overtook a 53% increase in shipments. FMG shares ended the session at $1.86 down 5.3% or 10.5 cents.
  • Building materials company Boral (BLD) announced it will buy back $236m of its own shares over the course of the next 12 months. BLD will be reducing the amount of its shares on issue by up to 5%. The net effect of this is that after the buyback, the company’s profit will be spread across fewer shares, which is where the shareholder return element comes in. The BLD buyback will be conducted on the market, which means the company will purchase its own shares during the ordinary course of trading. BLD said the buyback follows the “successful completion of a number of transactions over the past 12 months which have reduced the Group’s net debt”, resulting in a cash position sufficient to support the buyback. Boral announced a return to profit in its interim results last month, although this was driven by cost cuts rather than growth in revenue. House boom, cost cuts, lift Boral profits Boral’s shares have risen since late 2014 in expectations of stronger housing and construction growth in the US and Australia. Shares in Boral closed 1.6% higher at $6.12.
  • Explosives maker Orica (ORI) fell after announcing that chief executive Ian Smith will step down after three years with the company. The company has launched a search for a new CEO and Mr Smith would step down once a replacement was found. Mr Smith, who previously headed gold miner Newcrest, oversaw a major overhaul of the company's structure, including the sale of its chemicals business for $750 million and transition into a pure-play mining services group. ORI shares were at $18.20 a loss of 101 cents or 5.2%.
Tom Piotrowski - Market Analyst (Author)
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