Liams Last Post : Japan meltdown post Tsunami sweeps all before it ! Irish Companies continues to score highly with results.

Good Afternoon ,

 

Last Friday Morning when I came into work , I have to say I stood gobsmacked as the TV screens which were already on showing the Tsunami sweep all before it. Who was to know that that the fall out of this would be as catastrophic as it would appear to be.

 

In my naivety I had wondered when the last great Tsunami hit in 2007 how so many people got killed, I never saw as much destruction as now. So it would seem this is yet another massive Black Swan event which has taken place. There seems to be nothing but black swans around these days. 

 

ICG had results this morning as well as Aryzta , Both did ok no surprises , both have challenges in terms of rising costs.

 

Aryzta said  operating margin is likely to improve from in H2 (12.1% H1), driven by increased volumes in Europe in the run up to the summer months. They expect that double digit price increases will be necessary to offset raw material inflation. These price increases will be negotiated and phased in over the next few months and are not expected to be realised fully until FY12. Increases in the order of 5% will be seen in H2 11.

In comparison to the extreme input cost volatility experienced in 07/08, IAWS saw no notable impact on volumes. Price increases of c. 10% were absorbed fully by customers and consumers. They expect similar situation for 2011.  Volumes were relatively flat for H1 and management anticipate growth in H2 reflecting continued improvements in economic and customer/consumer sentiment.  Aryzta noted that they experienced a double digit fall in Ireland in H1 with somewhat less recorded in the UK.  They confirmed that they have no plans to reduce their stake in Origin and remain very satisfied with their progress.  Management stated that they believe that their current momentum should leave them well positioned to achieve their longer term targets set out in 2008 - EPS 400c by 2013 and ROI 15%+ by 2015

 

 

ICG is fascinating business, a almost debt free , highly cash generative , lowly valued , asset backed business which has performed more than creditably through the worst of the downturn. The split of their business is 66% car and passenger now vs 60% in 2009. Freight has been declining as %.  30% down from 35% in 2009.

Volumes +11% in market flat overall due to a competitor capacity removal. This is a freight volume play not rate and company is looking for fuel surcharge. Fuel 21% of costs up from 16% in 2009.  DFDSs had added capacity but recently announced pulling 3 ships off routes but Seatruck adding a ship and PO  upgraded their ship which gives only a net 1.5 ship benefit to route.  Fuel costs will increase by eur 14m if prices stays at these levels. ICG don't hedge. Reason for not hedging is they would have to disclose it. Would impact market pricing , could get it wrong.  Dividend maintained is a signal that the company is managing expectations and pricing for customers. Interesting to note that Pension deficit reduced by higher bond yields.  Re-structuring all done , Reduced costs by 31% with outsourcing over the ast four years.  CEO mad a few quips about preferring to be in a position to not have to answer analysts questions… fuel for the MBO fans and definitely one for the takeopve candidate watch list if you have not got it on your radar already…

 

Markets absorbed the constant stream of news about Japan today and with costs of insurance estimated in the eur34bn range this hit the insurers. Switzerland announced a suspension of its Nuclear power plant programme and Germany also put plans to extend the life of German Nuclear reactors on hold.

 

The news that Saudi Arabia had sent troops into Bahrain to quell protests added an unwelcome dimension to the afternoon.

 

Not much good news except in irish company reporting season continuing with no negative surprises in any of the non financials who reported thus far.

 

Have a good evening

 

Liam

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

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