Crikey’s informed readers already knew. This Thursday, James Packer’s Crown Resorts is due to reveal its December half-year result — and it won’t make for nice reading. According to its 33.6% owned Macau casino associate Melco Crown, times are tough in the once-booming gambling den of Asia — or, at least, much tougher than previously admitted to. A combination of a smoking ban, the slowing Chinese economy (especially in property), and particularly the Chinese government’s continuing brutal crackdown on corruption caused the Melco to report a 20% slide in fourth-quarter profit and to cut its 2015 outlook. But this is not news to Crikey readers.
We pointed this out 10 days ago when the latest gambling-revenue figures from Macau were released, which showed an eighth month of plunging revenues in January — down more than 17%. The data was released while James Packer and his business partner, Lawrence Ho, were in Manila opening Melco Crown’s newest clip joint. Both were upbeat and there was no mention of the impact of the crackdown in Macau on Melco’s (or Crown’s) finances. But, on Friday, media reported that Ho had said, “I think at the end of last year I had, I was probably one of the more optimistic people, saying that the market should be up, high single digits, [or] single to mid-single digits. I think I would revise down my whole year forecast to be probably … slight negative growth year-on-year.”
Now, that won’t be music to James Packer’s bean counters, or Crown’s P&L account. Melco Crown has been generating around half of Crown Resorts’ earnings (based on that 33.6% stake in Melco Crown). It’s not just Melco and Crown that are being hit. Wynn Resorts, one of the biggest players in Macau, was hit by a 32.6% slide in revenues in the December quarter from its Macau casinos (and revenues were down in Las Vegas as well), so net profit plunged 44% on a 25% drop in group revenue for the quarter. Melco Crown has a new casino opening in the third quarter of this year, which will be interesting. Melco Crown revenues fell 20% in the quarter. Time for an each-way bet? Listen for Packer and his executives to start complaining about everything; from a lack of consumer confidence and weak leadership, to the situation in Macau and a weak economy. Everything but the obvious: that his business is built on people losing their hard earned in his casinos and many are tired of being on a dead end street. — Glenn Dyer
Zombie iron ore mine in Brazil, anyone? In 2012 and 2013, it was hard to pick up a newspaper without reading something about our iron ore moguls and the big companies and their visionary executives — BHP, Rio, Gina Rinehart and, of course, Andrew “Twiggy” Forrest. The Australian Financial Review and The Australian were full of their mutterings and meanderings. They were, in fact, a flock of very noisy, very aggressive miners — if it wasn’t the mining or carbon taxes, it was industrial relations, politics, Julia Gillard, the joys of Tony Abbott and industrial relations. They had a view on everything. Two years on and it’s a very different story — the wagons have been circled, the bunkers dug and hunkered into, and the hard hats are on, while prices and their world collapses. BHP and Rio have been hacking and slashing, and dooming and glooming, yet still producing as much iron ore as possible (and ruining the business plans of Twiggy, Gina and a host of competitors in Australia, Brazil and China). Rio is handing out billions of dollars to keep noisy shareholders (mostly in London) happy, BHP is about to unveil a reduced profit next week, while later this week, Twiggy’s Fortescue reveals its December half-year financials — they will be much lower, and the company is confident there’s no need for any write-downs or impairments. Unlike at rival Anglo American.
On Friday night, Anglo revealed its second multibillion-dollar impairment of its big Brazilian iron ore mine, Minas-Rio. Anglo took a US$3.8 billion pre-tax impairment in the value of its Minas-Rio. That’s after the US$5 billion of impairment charges in 2012, which helped force then-CEO Cynthia Carroll out of her job. The mine cost around US$14 billion to bring into production (which is more than what Rio Tinto made from its iron ore business in 2014). Anglo spent US$5 billion to buy the mine and has spent almost US$9 billion to develop it, and has now written nearly US$9 billion off its value. Silliness. The latest write-downs were forced on the company by the added development costs and the plunge in global iron ore prices in the past year. The company reckons it is still profitable (at its written-down value). Anglo plans to boost iron ore production in Brazil — to between 24 million and 26.5 million tonnes in 2016 from between 11 million and 14 million tonnes this year — as Minas-Rio ramps up. Despite the confidence, it is a zombie mine, being kept alive by a company that can’t afford another massive write-down, which would follow the rational decision to close the mine (Anglo already produces around 50 million tonnes of iron ore a year from its South African mines). Anglo is reportedly trying to sell coal mines in Australia. — Glenn Dyer
Save the roses? Fifty Shades of Grey, the movie version of the bodice-ripping “novel” of the same name, is on track to have the biggest ever opening weekend for an R-rated movie. According to US website Deadline.com the movie is on track to take around US$158 million (just over $200 million) in 57 countries around the world. It opened late last week to catch the Valentine’s Day rush. The previous record holder for an R-rated film was The Matrix: Revolutions at US$117 million. The movie will take more than US$90 million in the US domestic market alone. Of course, not everyone is a fan. The Roman Catholic Church in the US, especially Cincinnati, plus conservative, protestant Christian groups have urged a boycott, as have several women’s groups in the US and UK. And just imagine if the movie had not been given an R rating — too mild, not wild, and just another Mills and Boon special — and the audience would have stayed away in droves. An estimated 100 million-plus copies of the book have been sold so far. A money-making machine. Next, a Broadway musical? (big hit, I Take A Whip To You, sung to the tune of I Get A Kick Out of You?) The movie is about BDSM — I gather that means Bonds, Debt, Shares, Money, or Boring, Dull, Silly, Mendacious? — Glenn Dyer
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