Phase one of the boom may be done. Stand by for phase two

AAARRRGGGHHH. It’s the end of the boom!!!! A stunned nation reeled in horror on Wednesday to ”revelations” that BHP Billiton had canned two of its major expansion projects worth more than $50 billion.
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Various newspapers laughably screamed EXCLUSIVE, claiming they’d been predicting the decision for months, conveniently overlooking the fact that BHP chairman Jac Nasser flagged it back in May at a lunch in front of hundreds of Sydney bizoids.

Even the politicians jumped on board. The Honourable Member for Warringah salivated at the announcement. No, he hadn’t read BHP’s statement. But finally he was vindicated. The carbon tax, he said, had killed Olympic Dam, conveniently overlooking that a carbon tax would make uranium more competitive as a power source. Oh yes. And BHP boss Marius Kloppers explicitly ruled out such an argument. Still, who cares? It makes for terrific headlines.

If you want to identify the real sages in this episode you need look no further than BHP investors. They correctly picked the trend more than a year ago, long before even those running our biggest listed company.

BHP shares, and those of its major rival, Rio Tinto, have been on the slide since April last year. And as each eruption in the eurozone’s meltdown gathered intensity, the bulk commodities suppliers took ever greater hits to their market value as investors dumped the shares.

By October, senior BHP executives were flummoxed. The company, even then, was priced for global recession. But it was selling every scrap of red dirt it could dig out of the Pilbara and load onto a China-bound ship. Commodity prices were at near record highs and capacity was strained to breaking point. It didn’t make sense.

But it made perfect sense for investors. For years, they had been complaining that BHP and Rio Tinto had their sights focused too far into the future. The mega-billion-dollar takeovers and the huge expansion plans would deliver returns to future generations. ”But what about us?” they screamed. We want it now.

That investor revolt, which has been bubbling beneath the surface for more than two years, finally has filtered through to the board and management of our resource giants and is the primary force driving this week’s decision. That and the sudden drop in mineral prices.

Postponing the Olympic Dam expansion and the Port Hedland port facilities will be forever etched in history as a turning point. In a sense, it is. But is it the end of the resources boom? Not on your life. It merely is the end of the first phase of the boom, the investment phase that has caused so much pain to the non-mining sector of the economy as the rampaging Australian dollar has battered manufacturing and service industries.

The second phase is destined to last for decades. That extra mining capacity will result in vastly greater volumes of mineral and energy exports. And even though prices are well down on last year’s peak, historically they are still in the stratosphere.

For months, analysts and economists have been fretting that iron ore prices have dropped below $US120 a tonne. That is likely to cause problems for the higher-cost and more marginal operators, some of whom will be forced to shut down.

But cast your minds back a decade. That very same tonne of red dirt would have fetched just $US12. That’s right, one-10th of the price. And remember that BHP and Rio Tinto were making handsome returns back then on those same West Australian mines they’ve been busy expanding in recent years.

That agitation from shareholders to stop the expansions ultimately will put a floor under commodity prices by reducing estimates of future supplies of key raw materials.

And in the next few months, expect more of these kinds of announcements. Marginal coalmine developments and expansions also will be put on ice. For the global economy is in the midst of a slowdown, a contraction that is likely to last quite a few years as the debt crisis in Europe and America is slowly unwound.

What began as a problem in outlying states such as Greece has moved to the centre of the eurozone. Spain and Italy have been under attack by bond markets. And more worryingly, Germany – the engine room of the European economy – seems to be descending dangerously towards recession.

China has felt the chill winds of the European slowdown. This week there were further warnings that the Chinese slowdown is worsening. The once voracious appetite for Chinese exports has abated. And with Chinese authorities apparently reluctant to embark on a huge stimulus program, the short-term outlook for the miracle economy is less than robust.

America, meanwhile, is breathlessly awaiting a new round of stimulus spending, another round of money printing that ultimately will create greater debt and depress the value of the US dollar.

Farcical it might seem, but Wall Street traders secretly sweat that each new set of numbers on the US economy paints a picture of a nation and an economy in trouble.

Why? A stalling economy improves the chances that the US central bank will flood the economy with stimulus money. And given most of that stimulus is delivered through US bond markets, guess who makes a killing?

The short- to medium-term outlook for the global economy is anything but rosy. But there are some heartening developments. That Europe so far has muddled through – despite the incompetence of its lawmakers, bureaucrats and bankers – is enough to give hope.

A radical restructure of the European Union is inevitable. But whatever form that should take – nations such as Greece departing and other nations pulling closer together – the shock value from such changes has greatly diminished. So, too, have the chances of a huge meltdown of global finance.

Greece already has defaulted once. It was an orderly affair. But its debt position remains unsustainable regardless of what policy action is instituted. A further default or perhaps a eurozone exit could be accommodated.

Until recently, the response from eurozone leaders to contain the crisis has been characterised as ”too little, too late”. But the mood is shifting.

For the most part, Australia has been sheltered from the icy winds blowing through the global economy. Now that China is feeling the chill, we, too, will be affected.

But the Asian region remains an area with enormous growth potential. And Australia is well situated to benefit in the medium to longer term. There is no doubt that things are likely to get worse before they get better. But the fruits of the resources boom have yet to flow fully through the economy.

Don’t let anyone tell you otherwise.

This story Administrator ready to work first appeared on Nanjing Night Net.

Mining fears of Chinese invasion

TONY Abbott was at his pugilistic best as he worked through a tight schedule of meetings on his visit to Beijing last month.
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Shaking hands with Chinese dignitaries with the iron-grip confidence of a man who believes he should be the next prime minister, his eyes bulged and veins popped with the adrenalin of meeting senior officials who will set the course of arguably Australia’s most important trade and diplomatic relationship.

His Chinese counterparts were well briefed on our opinion polls; a more senior than usual line-up of party officials and ministers were summoned to have an audience with the opposition leader. When it came to his keynote speech at the Grand Hyatt in Beijing, Abbott had already raised eyebrows by noting that for all of China’s recent economic strides, its people ”still can’t choose their government”.

But then he moved to the crux of his speech – the emotive issue of sovereign investment. While he welcomed foreign investment in principle, he said, Chinese investment ”is complicated by the prevalence of state-owned enterprises”.

”It would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business,” Abbott said. ”That’s because we don’t support the nationalisation of business by the Australian government, let alone by a foreign one.”

On his return, Abbott launched a policy discussion paper espousing tighter scrutiny on foreign investment in Australian farmland and agribusinesses – including a national register of foreign-owned land and lower trigger levels requiring Foreign Investment Review Board approval. The review board’s chairman, Brian Wilson, has also weighed in, saying Australian businesses, however they are owned, should be run on a purely commercial basis and ”not as an extension of the policy, political or economic agenda of a foreign government”.

Foreign Minister Bob Carr called Tony Abbott’s remarks in Beijing ”dangerously dumb”, and the official Chinese news agency Xinhua characterised Australia’s foreign investment debate as our ”economic xenophobia” on display.

To say no to Chinese SOEs is to say no, effectively, to China. Of the 116 deals involving China in the past six years, 92 of them were made by 45 state-owned enterprises.

Based on transaction value, 95 per cent of Chinese investment into Australia in the same period came through SOEs, according to a recent joint study by consulting firm KPMG and the University of Sydney.

Chinese SOEs have invested nearly $50 billion in Australia in the past five years, with almost all of it in the sensitive sectors of mining and energy. The acceleration has been marked – total Chinese investment in 2007 was just $1.5 billion. And with our traditional sources of foreign investment, the US and Europe, struggling to pull themselves out of their economic funk, signs are China will continue to provide a larger share of our capital needs.

The investment is also highly concentrated. Just 11 SOEs account for 80 per cent of all Chinese investment stock in Australia.

But what are Chinese SOEs and what is behind their push into Australia? Are SOEs driven purely by commercial interests, or are they merely an extension of the Chinese Communist Party? Should they be viewed as an emerging threat to our security, industry and even sovereignty?

”There’s a fear of SOEs and when I say fear, I mean a fear of their real motive and their modus operandi,” says Jason Chang, the chief executive of EMR Capital, a China-focused private equity investment manager. ”It’s very logical, because when you think about SOEs they’re controlled by one shareholder and that’s the Communist Party.

”It’s different ideology, different language, different culture, so when you think about that, it’s not that easy for a Western nation to understand it quickly.”

The rhetoric of the debate has invariably been black or white. There has been political point-scoring from those keen to feed off fears of ”selling the farm” and negative perceptions surrounding China-backed investment. And yet the defence has largely come from business leaders whose corporate profits depend on, or at least are boosted by, healthy levels of investment from China.

One frequent cheerleader for Chinese investment is ANZ chief executive Mike Smith, who is pursuing an aggressive Asian expansion strategy for his bank, and the internationalisation of the Chinese currency, the yuan.

”What is a state-owned institution? The obvious target here is China,” he says. ”I think you have to look at China and say, of its state-owned institutions, what are truly controlled for the interests of the state or, actually, what are run as businesses that happen to be owned by the state.”

Regardless of the size of the transaction, any investment from a state-owned enterprise automatically triggers a Foreign Investment Review Board review. Where a proposal involves a foreign government or a related entity, the review board must consider whether the investment is commercial in nature or if the investor could be pursuing broader political or strategic objectives that may be contrary to Australia’s national interest.

So with the FIRB rules already providing a safeguard against foreign investment which may be against our national interest, why has there been so much debate?

”There’s this underlying assumption when you read the public commentary that there is a conflict of interest between the national interest and that of the SOE,” Chang says. ”I put to you that they can be highly complementary because we have resources and intellectual property which is what China needs to sustain their growth. And they have … financial capital to assist us in developing what we need.

”Australia was built on foreign capital; now foreign capital is just coming from a different time zone than in the past … [but] the concept is exactly the same.”

Tim Murray, an investment analyst who has been based in Beijing for the past 18 years, said conservative politicians were engaging in cheap political point-scoring.

”At the core of it is actually a racist debate and I think the Liberal Party under John Howard and now Tony Abbott, they’re still following the same sort of course,” he says.

”It’s nothing to do with whether they’re state-owned or not, I think it’s a furphy.”

FOR David Lamont, revealing his occupation often proves a show-stopper at barbecues and other social gatherings.

”I work for a company that’s listed in Hong Kong and 72 per cent-owned by a SOE in China, and people go: ‘Why are you doing that?’

The chief financial officer at Minmetals Resources, which is controlled by China Minmetals Corporation, says the common perception was that he was at the beck and call of his Chinese minders. ”That [is] so far from the truth,” Lamont, a former BHP Billiton and PaperlinX executive, says. ”It’s not as though on day one when Minmetals acquired OZ Minerals there was a [Boeing] 747 that arrived from Beijing and unloaded a whole bunch of people who took over the office.”

He says his experience of China Minmetals’ management style was ”no different to any Western company I’ve worked for”. ”Are they tough in certain instances? Yes. Are they sensible and rational? Yes.”

Minmetals Resources launched a takeover for OZ Minerals in 2009, but was blocked by the Australian government due to concerns over the proximity of the Prominent Hill mine to a military site. But a deal excluding Prominent Hill was approved, and Minmetals retained the management of OZ Minerals, including Lamont and chief executive Andrew Michelmore.

Despite a common perception that Chinese investors are put off by an unwieldy FIRB process, or suspect it as an excuse to single out Chinese investment for exclusion, Lamont says China Minmetals ”is no way perturbed” about needing to go through FIRB for every transaction.

”They don’t sit there and take it as an affront,” he says, pointing to subsequent acquisitions in Havilah Resources and Anvil Mining, and a failed play at Equinox, as evidence that China Minmetals were not rendered gun-shy by perceived regulatory hurdles.

Lamont is keen to emphasise that the Australian operations are run autonomously and that the Chinese parent company has not interfered with where the resources its mines produced would go. But ultimately approval for large projects and acquisitions, as with any state-owned enterprise, needs to be cleared with China’s all-powerful National Development and Reform Commission. ”It’s quite clear that the strategy at its broadest is that China growing the way it is … clearly needs to be able to get exposure into the underlying base metals that we produce,” Lamont says.

SOEs are the leading force in China’s offshore investment push. State-owned enterprises are an important instrument of government policy. The government uses SOEs to facilitate structural change in the Chinese economy, to acquire technology from foreign firms, and to secure raw material sources from beyond China’s borders. As of 2010, SOEs held 2.66 trillion yuan ($402.5 billion) in assets outside mainland China, a 50 per cent increase on the previous year.

China’s total outbound direct investment flow reached $US68.8 billion, or 5.2 per cent, of the world’s total in the same year. Seventy per cent of this outbound investment was made by SOEs, according to official statistics.

But despite promising that the government would not influence the commercial decisions of SOEs when it joined the World Trade Organisation in 2001, China does not appear to be keeping this commitment, according to a report prepared last October for the American government’s US-China Economic and Security Review Commission, which found SOEs were likely to retain a critical role in China’s economic make-up. ”If anything, China is doubling down and giving SOEs a more prominent role in achieving the state’s most important economic goals,” the report, by Capital Trade Inc, says.

The report finds the question as to whether state-owned enterprises are acting on their own or merely as a proxy for the Chinese government is moot: most state-owned enterprises, by definition, are either wholly or majority-owned by the state and therefore their actions must be a de facto proxy for their shareholder’s interest.

The influence the Communist Party and the State-owned Assets Supervision Commission exert over the executives of state-owned enterprises mean they face two possibly conflicting sets of incentives. ”You don’t always understand why they’re doing [things], sometimes its not 100 per cent a financial part of the project, but it could be that the government wants him to do it, so he’ll be rewarded for doing it,” Chang says. ”So there’s this strategic element that is not purely financial. But do we have something to fear? I don’t think so, we just need to understand why they’re doing certain things.”

On the one hand, the entities they control are supposed to be profitable, and they are rewarded accordingly based on financial performance. On the other hand, it is also in their best interests to follow the Chinese government’s central policy guidelines, given their career paths are determined by the party’s Central Organisation Department.

”The tricky thing with understanding state-owned enterprise is the role of the top person, who is a Communist Party appointee,” says Geoff Raby, the former Australian ambassador to China.

One of the biggest controversies in Raby’s time at the helm was when Chinalco was trying to increase its stake in Rio Tinto in early 2009. The Australian government’s decision to block the move and the subsequent Chinese backlash is widely considered the low point in recent Australia-China relations.

”I was saying to Canberra: ‘Sure, this is what a state-owned enterprise is, the party secretary runs the show’,” says Raby, who now runs a private consulting firm and is a non-executive director at Fortescue Metals. ”I know party secretary, chairman Xiao Yaqing, very well, he talks to me and he’s very focused on the business dimensions of Rio.

”So there was a very strong and convincing story and I think I convinced Canberra that this was a class-A firm that behaved and operated like a private sector firm – which I believe it still does.”

In the middle of negotiations, the Communist Party’s Central Organisation Department – a powerful and secretive government organ which decides who does what within the party machine – asked chairman Xiao to resign from Chinalco and appointed him deputy secretary-general of the party’s State Council: its equivalent of the government’s parliamentary cabinet.

”People in Canberra were like: ‘What? He goes from running the world’s second-biggest aluminium corporation to being the deputy secretary-general of the State Council?”’ Raby recalls. ”It’s a case of the left hand and the right hand not knowing what it was doing.

”But it certainly set me back in my attempts to persuade people that this was basically a commercial enterprise.”

Raby says the reform of China’s SOE sector is ”the single most important economic challenge” that China’s new leadership faces because of the inefficiencies the state-owned model brings to its economy.

Former Treasury secretary Ken Henry, now the Prime Minister’s special adviser charged with leading the preparation of the Asian Century white paper, says Australians had a similarly adverse reaction when the Japanese ramped up their investment in Australia in the 1980s. But, he says, it goes back even earlier than that.

”Very few people in Australia seem to know that the Foreign Investment Review Board was set up because of concerns in the community about American investment in Australia,” Henry says.

”That was really the first wave of foreign investment to challenge Australian policymakers … and the history is that we will find a way of bringing ourselves to a position of comfort with a significant level of Chinese investment in Australia.”

Much of the negative sentiment around SOE investment stems from its close ties with the ruling Communist Party government and its authoritarian rule, and its chequered record with human rights, social equity and sovereign disputes in the South China Sea.

But Chang says China’s track record with foreign investment has proven it did not want to assert its authority.

”If government’s involved, [people think] they must have a different motive behind it, but bear in mind what they’re trying to do is preserve China’s growth and prosperity, they’re not there to figure out how to conquer Australia,” Chang says.

But the Capital Trade report says the system in place means that despite the autonomy afforded to SOE executives in most circumstances, it must consider the strategic objectives of the Chinese government. Put differently, it says, as long as SOE executives are beholden to the Communist Party, they will have an incentive to choose state goals over financial goals when the two conflict.

But with much of the developed world in the economic doldrums, signs that Chinese economic growth is slowing, and evidence firming that our historic mining boom is running out of puff, perhaps beggars can’t be choosers.

”In the past, whatever we dug up and put on a boat somebody would pay a higher price for that, and if we dug more they’d still buy it. It’s going backwards now,” Murray says, adding that the power dynamics in the region are shifting. ”Prices are going to fall back and when that situation happens, people will be glad to have any investment they can get and that’s when things will naturally change.

”Maybe then, certain enterprises aren’t so bad any more.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Airports stake for Future Fund

THE Future Fund has swooped on a listed fund manager with plans to take off with a direct stake in several Australian airports. The government-owned investment fund surprised the market yesterday with news it was in talks for all the assets in Australian Infrastructure Fund. The fund, which trades as AIX, owns a minority stake in Perth Airport, Melbourne Airport, three regional Queensland airports, Northern Territory Airports, Hochtief Airport Capital and the M4 motorway in Sydney. Hochtief has a stake in airports in Sydney, Athens, Dusseldorf and Hamburg.
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AIX units jumped to a five-year high of $3.26 before settling to close up 17.4 per cent at $3.11.

The Future Fund has signed a memorandum of understanding to buy all the assets for $2 billion, a premium on the $1.8 billion valuation that AIX puts on its own assets.

AIX chairman Paul Espie said the board had agreed to proceed with the offer.

”Ultimately, AIX would finish up as a cash box and the intention is to distribute that cash to our unit holders on the most efficient basis – tax and other issues considered – and thereafter collapse and wind up the corporate structure of AIX. This will take some months,” he said.

Mr Espie said that AIX might still consider a higher offer, but under the memorandum of understanding it would have to pay certain costs and possibly a break fee.

Unit holders will have pre-emptive rights to increase their stake, leaving the possibility that the Future Fund will get less than 100 per cent.

The Future Fund already owns 16.8 per cent of Australian Pacific Airports Corporation, which runs Melbourne and Launceston airports. The AIX takeover will increase its stake to 43 per cent.

This story Administrator ready to work first appeared on Nanjing Night Net.

A lifeblood lesson for Australian industry

The right medicine: Brian McNamee’s vision drove CSL’s vision worldwide.AT 33, Brian McNamee was chosen to run the Commonwealth Serum Laboratories: a small government enterprise manufacturing plasma, antibiotics, flu vaccines and other medicaments for Australia and its neighbours.
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This week CSL announced its first $US1 billion global profit for 2011-12. It is now Australia’s most successful manufacturing business, and by a long way.

While CSL, too, is being belted by the high dollar – the annual earnings report a ”foreign currency headwind of $A108 million” – its global structure, with manufacturing plants in four countries, its high productivity and premium products have allowed it to withstand those headwinds, and remain highly profitable. (Its $US1 billion profit was achieved on just $US4.6 billion of sales.)

It has been an amazing journey that few would have expected when, in late 1989, then industry minister John Button headhunted the young McNamee to become director of CSL, with the ultimate aim of privatising it to be a flagship for the fledgling Australian pharmaceutical industry.

It is an unusual story, of a most unusual company, in which the cultures of the scientific researcher and the corporate carnivore have merged to create an enterprise that in some ways defies modern fashions, and in other ways anticipated them.

It is now very much a global company, on the verge of becoming one of the world’s top 20 pharmaceutical companies, and with 90 per cent of its revenues coming from outside Australia. Yet it is based in an unpretentious old building on the wrong side of Royal Park, where CSL has been since 1918. Its head office has only about 20 staff.

Its big markets are the US and Europe, with a fast-growing Asian trade. But it is led by an Australian-dominated board, chaired by molecular biologist Professor John Shine, carries out half of its vast research and development activity in Melbourne – with 400 to 500 researchers – and credits Australian research for much of its global revenue.

It is not just McNamee who has been with the company for decades. Most of his senior executive team have been there for decades, in CSL itself, or in the companies it has acquired. McNamee’s main interest is in strategy, and he is happy to delegate and trust his deputies. He habitually uses ”we”, not ”I”, to explain his thinking. For a top 20 company, it sounds remarkably collegial.

”People think we’re scientists bubbling away with test tubes,” he says with self-deprecation. ”But we think we’re also pretty good at business. We’ve been financially conservative, but operationally very bold and aggressive.”

McNamee’s goal, he says, was to create ”a great Australian company”. He’s done that, and after 23 years at the helm, plans to hand over in July 2013 to Paul Perrault, now head of CSL Behring, its Philadelphia-based plasma subsidiary. A doctor by training, McNamee drifted into pharmaceuticals in his 20s while in Germany after a brief try at emulating his brother Paul on the professional tennis circuit. At 27, he was recruited back to Australia by Fauldings, helped Button draft the Factor f pharmaceuticals industry plan, then ran Pacific Biotech before being conscripted to CSL.

From the outset, McNamee set his sights on building a global business, created by specialising, building scale, innovating, exporting – and making strategic takeovers. They began at a small scale before CSL was floated on the stock exchange in 1994, valued at $300 million. It is now valued at about $20 billion.

”Most of Australia’s assets are stressed: small assets, low scale,” he says. ”It’s either get bigger, or get out. You either consolidate, or get consolidated. We elected to be the consolidator.”

CSL developed its expertise in mergers and acquisitions through smaller takeovers before astounding critics in 2000 by taking over a firm roughly its own size, its Swiss counterpart ZLB Bioplasma, at a time when McNamee was fighting testicular cancer. Four years later it followed that up by acquiring a second big target, US-based Aventis Behring. A third ambitious bid, for US rival Talecris, was blocked by US regulators in 2009.

McNamee says CSL succeeded because it was patient, disciplined and had worked out how the merged companies would fit together.

”Most acquisitions fail, in my view, because people overpay. We were very disciplined about what we bid, and we had a very clear idea of how we would add value to it … You only buy a business when they’re suffering; if they’re not suffering, you overpay.

”You have to decide why you are the natural owner of that business. We never wanted to be a big company. We wanted to be a fine company … very good at what it did.”

CSL is now organised into a global supply chain, collecting and processing plasma and manufacturing a range of products. Its plants in Broadmeadows and Parkville supply Australia, Asia and the Pacific. Its factory at Kankakee, near Chicago, produces plasma intermediaries for all CSL plants and supplies North America. Its plants in the Swiss capital Berne and in Marburg in Germany, supply Europe and the rest of the world.

Mergers were only part of McNamee’s game plan. At the outset, he moved to lift productivity sharply by slashing CSL’s staff. He made exports a prime goal. He cut out low-margin products, and – with some exceptions for Australia – narrowed CSL’s product range to those where it could be globally competitive. And he was lucky that the Hawke government was already building a global-scale plasma plant at Broadmeadows.

With Australian local manufacturing under so much pressure from the high dollar, those remain his core strategies. ”You have to set your focus on world markets,” he says. ”We need to focus on being good at a smaller number of activities. We have to be in the premium products end.

”Switzerland and Germany have worked out how to deal with the problems of an overvalued currency, and that’s primarily the problem we face. If the high dollar is here to stay, we need innovative industries and clusters. We’re very fortunate to be in the Parkville area – the (research) networks it created have been very important for us.”

One other thing McNamee firmly believes Australia must learn from Germany and Switzerland is the importance of wage restraint, to remain globally competitive. CSL has just been through an unusually bruising wage negotiation in which its unions used strike action to win wage rises of 3.75 to 4 per cent over each of the next three years.

This was very different from the way its enterprise-based unions in CSL’s Swiss and German plants operate. Germany entered the euro with an overvalued deutschmark, but won back its lost competitiveness with 15 years of wage restraint. Swiss workers have wage restraint ingrained in them. The OECD reports that since 1995, average wages have risen 22 per cent in Germany, 33 per cent in Switzerland – but 107 per cent in Australia.

So far, CSL has been able to cope with a dollar above parity, but McNamee warns that is no longer inevitable: ”If you combine a high dollar with wages growth that sits ahead of the global competition, it’s inevitable that will put many assets at risk – including CSL’s.”

But this time next year, that will be someone else’s problem. Brian McNamee is not sure what he’ll be doing, but at 55, he’s got a lot of life in him.

This story Administrator ready to work first appeared on Nanjing Night Net.

Founders scoop off the cream

DIRECTORS’ trades picked up this week against a background of the earnings reporting season getting into full swing.
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The scorecard registered $18 million to $32 million in favour of sellers.

The selling tally was boosted by various folk who founded or have been associated with the building of successful businesses.

Penelope Maclagan joined Computershare three decades ago, five years after it was started by brother Christopher Morris.

The pair have been taking money off the table quite regularly, the latest sale by Maclagan raising $3.8 million.

She retains a useful $120 million of stock.

Elsewhere, Roger Brown’s interests collected nearly $14 million through the sale of ARB Corporation scrip, a few days after the four-wheel-drive vehicle accessories group reported marginal earnings growth.

Executive chairman Brown – who started the business with pipe-bending equipment in his mother’s driveway – has presided over a rare gem of a company whose scrip has appreciated at 18 per cent-plus compound a year for two decades, with similar earnings growth.

Roger Brown, along with brother Andrew – the group’s managing director – retain $79 million worth of paper.

Webjet, also no slouch in the price appreciation stakes, hit a new $4.22 high recently and non-executive director Steven Scheuer reduced his stake by about 7 per cent. He sold shares at $4.13. They closed the week at $3.91.

Meanwhile, if memory serves correctly, ANZ chief Michael Smith did once buy some bank shares on the market in 2008, paying $22.75 a share. The jolly Englishman, though, has got almost all his shares through incentive measures and he has cashed some in to pay tax and, believe it or not, to repay debt.

Interests associated with concrete king Raymond Barro continued buying Adelaide Brighton shares.

The market was unimpressed with the company’s 7 per cent pre-tax earnings increase for the half-year and the shares fell 11 per cent.

Barro stepped into the market and spent more than $15 million.

The reporter owns ABC and ARP shares.

This story Administrator ready to work first appeared on Nanjing Night Net.