Japan Airlines plunges 8.73% on China worries

26 Sep 2012 – AAP –

Japan Airlines plunges 8.73% on China worries


Shares in Japan Airlines (JAL) have plunged to close down nearly nine per cent, less than a week after relisting, amid concern over a festering territorial spat between Tokyo and Beijing.

The carrier ended Tuesday at ¥3,395, down 8.73 per cent from the previous day but off an intraday low of ¥3,375 hit in late afternoon trade.

The closing price was 10.42 per cent lower than the offer price of ¥3,790 when JAL returned to the Tokyo Stock Exchange on Wednesday last week, less than three years after becoming one of Japan’s biggest ever corporate failures.

Retail investors dumped their holdings amid pessimism over Sino-Japanese relations strained over a disputed island chain in the East China Sea and the possible fallout on firms heavily exposed to the region, Dow Jones Newswires reported.

JAL said last week it would cut the number of flights to China next month to reflect a fall in demand from tourists in both countries.

Shares in rival carrier All Nippon Airways (ANA) closed down 1.13 per cent at ¥174 on Tuesday.

Nissan chief pitches electric taxis to HK

14 Sep 2012 – AAP –


Nissan President Carlos Ghosn has met with Hong Kong’s leader to pitch a proposal for the Japanese car maker to supply electric taxis to the southern Chinese city.

Ghosn’s visit with Leung Chun-ying is part of an effort to sell Nissan’s electric taxi technology to cities around the world looking to upgrade their taxi fleets to more environmentally friendly models.

Earlier this year, New York City chose Nissan’s van-like NV200 to replace older models starting October 2013, with an electric version on the cards for 2017.

Ghosn said he “proposed to offer a solution for Hong Kong, particularly into taxis or fleets” and Leung seemed “very interested”. He gave few other details.

Hong Kong’s 18,000 Toyota taxis are powered by liquefied petroleum gas. They were launched in 2001 and many are due to be replaced in the next two to three years.

Environmental and transportation officials are examining the feasibility of replacing the taxis with electric vehicles in a bid to reduce the city’s frequently heavy air pollution. The government has provided subsidies for pilot projects of electric taxi models by other carmakers including China’s BYD Co.

Nissan Motor Co. is also planning electric taxi tests in the Chinese cities of Wuhan and Guangzhou.

Winning the Hong Kong taxi contract could boost Nissan’s electric ambitions in China, which has set a goal of creating a world-beating electric car industry.

The Chinese government has set bold targets for the development of the industry, including sales of five million electric vehicles by 2020, though it has scaled back its ambitions after facing technological hurdles and lack of buyer interest.

While Hong Kong is an ideal place for electric taxis because its compact geography means drivers wouldn’t have to worry about getting too far from charging stations, the carmaker needs to figure out how to develop charging infrastructure, said Executive Vice President Andy Palmer.

The city has only six fast charging stations, so Nissan is thinking about donating more and setting up a test fleet, Palmer said.

Japan’s Nomura unveils massive cost costs

7 Sep 2012 – AAP –

Nomura Holdings says it would slash $US1 billion ($A984.8 million) in costs to repair its balance sheet as Japan’s biggest brokerage signalled the end of its ambitious plan to become a global powerhouse.

The Tokyo-based securities giant, which is trying to move past an embarrassing insider trading scandal, said on Thursday it would usher in the sweeping cuts across its global operations by March 2014.

About two-thirds of the reductions would come from regions including the US and Europe, it said, adding that Nomura would focus on the Asian market as it looked to triple its pre-tax profit over the next four years.

The move marked the final nail in the coffin of Nomura’s ill-fated plan to become a global investment banking giant after buying some operations of defunct Wall Street titan Lehman Brothers during the 2008 financial crisis.

The resignation last month of chief executive Kenichi Watanabe, a key driver behind the firm’s expansion, due to an insider trading scandal had also been widely viewed as a fatal blow to Nomura’s heavyweight ambitions.

On Thursday, Nomura said it would “position Asia including Japan as home market” and “shift to a global business model centred on Asia”.

“The global economy is facing various serious challenges and is in the midst of a big paradigm shift,” new chief executive Koji Nagai said on Thursday.

“The challenges which our corporate and individual clients face are getting more serious and the need for high-valued financial services is rapidly increasing.

“What Nomura must do is acutely sense the changes in our clients’ needs … and flexibly adapt.”

Focusing on Asia was the right strategy because of the “abundant funds” available for investment in a region with mature and emerging markets that were driving the global economy, the firm said.

Nomura revealed few specifics of its cost cuts, saying only that about 45 per cent of the reductions would be from “personnel expenses”.

The firm’s shares closed 2.3 per cent higher at ¥266 ($3.40) in Tokyo.

Nomura last year unveiled separate cost savings of about $1.2 billion and chopped hundreds of jobs after posting a net loss of ¥46.1 billion ($588 million) in the July-September quarter of 2011, reversing a net profit of ¥1.1 billion in the same period a year earlier.

The loss was Nomura’s first in 10 quarters and underscored how market turbulence and the eurozone crisis had dented its brokerage and investment banking business.

Nomura eyes massive cost cuts to repair balance sheet

Sept 2012 – AAP

Nomura Holdings says it will cut $US1 billion ($A975.28 million) in costs as part of a bid to repair its balance sheet as Japan’s biggest brokerage recovers from an embarrassing insider trading scandal.

The firm plans to usher in the cuts by March 2014, chopping expenses from its wholesale division, which includes investment banking, equities and fixed-income businesses.

In July, Nomura said its fiscal first quarter profit to June shrank almost 90 per cent owing to weakness in its retail and wholesale trading business.

Like many investment banks, Nomura has struggled with yo-yoing stock and bond prices, poor merger prospects and tightening regulation in the wake of the global financial crisis.

The firm held a meeting with about 450 managers in Tokyo on Friday to outline the plan, which is to be presented to shareholders this week.

Nomura shares traded 4.26 per cent higher at 269 yen on Monday afternoon.

The company confirmed that job cuts were part of the planned reductions, but declined to elaborate.

Japanese media have reported that the bulk of the cuts would come from slashing jobs in the money-losing European business acquired from Lehman Brothers in 2008.

Nomura began an aggressive expansion drive when it picked up the Lehman businesses – and thousands of employees – following the Wall Street giant’s collapse.

However, the bulked-up Nomura lost some key executives as a corporate culture clash hit.

The resignation last month of chief executive Kenichi Watanabe, a key driver behind the firm’s expansion, was widely viewed as the end of Nomura’s ambitions to be a global heavyweight.

Mr Watanabe quit in the wake of a damning internal report that said Nomura sales staff improperly tipped off clients about share sales while information often flowed freely between sales and Nomura’s investment banking and research side, which is usually barred.

Insider trading, although illegal in Japan, is widespread and carries only token fines.

However, Japanese authorities are carrying out a wide-ranging probe into the practice amid renewed pressure to crack down on lax regulations and legal loopholes, which have dented Japan’s corporate governance image.

Mr Watanabe’s resignation came several weeks after the former chief of Barclays Bank, Bob Diamond, and its chairman stepped down in the wake of a scandal over the manipulation of key inter-bank lending rates that has rocked the City of London, one of the world’s top financial hubs.

BlueScope ventures out into the light

13 Aug 2012 – Stephen Bartholomeusz – Business Spectator

That near-50 per cent spike in the BlueScope Steel share price probably has as much to do with relief as it was to the specifics of the announcement that the group will joint venture its ASEAN and North American coated products businesses with Nippon Steel.

BlueScope imploded as the global financial crisis developed, with over-capacity in its industry, low prices, higher raw material costs, the soaring Australian dollar, a weak domestic economy and dangerously high debt levels undermining it and leaving it drowning in a sea of red ink.

Even after last year’s desperate $600 million equity raising there were continuing doubts about its survival as it tried to effect an urgent and radical restructuring of its business that included the shutting down of its export businesses.

Those doubts would, had the joint venture not been announced, been amplified by the announcement of more write-downs today which will lead to the group reporting a $1 billion loss for the 2011-12 financial year, even though there are some clear signs of improvement at an operating level.

The $310 million of new write-downs within the Australian business relate, BlueScope’s directors said, to a slower than expected recovery in domestic demand and the use of higher discount rates against future expected cash flows because of the increased volatility in markets.

The joint venture announcement caused BlueScope’s shares to soar by nearly 50 per cent, adding $450 million or so the group’s market capitalisation ahead of the announcement of $871 million.

BlueScope and Nippon Steel, which is merging with Sumitomo Metals to create the world’s second-largest steelmaker, will create a new entity, equally owned, with an enterprise value of $1.36 billion. Critically, in return for Nippon Steel’s acquisition of its share of the joint venture, BlueScope will receive net proceeds of $US540 million.

BlueScope has done a remarkable job of reducing its debt, which looked likely to hit $1.6 billion last year had it not been for the capital raising. Net debt is now down to $384 million thanks to an intense focus on reducing working capital, although the company said that adjusted for the favourable timing of year-end cash flows, a net debt balance of about $580 million would be a more appropriate figure.

In any event, the cash from the creation of the joint venture will effectively wipe out BlueScope’s remaining net debt and with the group saying it expected it expects its domestic coated and industrial products business to deliver positive earnings before interest, tax, depreciation and amortisation in 2012-13 it may finally be close to real financial stability.

While the broader implications of the proceeds from the joint venture for BlueScope’s future are perhaps the most significant aspect of the announcement, it also says several positive things about the business BlueScope has built in the region and in the US and its future.

The price tag obviously validates the worth of the business but introducing Nippon Steel as a partner should transform it. Nippon Steel has customer relationships within the region that BlueScope couldn’t replicate on its own. It also has its own technologies and products.

It is instructive that the joint venture believes it can add incremental EBITDA of as much as $US75 million by 2017 to the growth profile of the existing business, which generates about $A115 million of EBITDA.

BlueScope’s Paul O’Malley and his team have been through four years of continuous and difficult and delicate reorganisation as they undertook one of the bigger industrial restructurings ever contemplated in this market, one complicated by the group’s fragile financial foundations.

Once the deal with Nippon Steel has been completed, after four years of teetering on a tightrope, BlueScope ought finally to have been stabilised.