Dairy blues dog the Kiwis. The All Blacks are hot favourites for the Rugby Championship starting tonight, and Rugby World Cup later in the year, but they might be the only bits of good news for the rest of this year as the country starts hunkering down for an almighty whack from the sliding global dairy markets. Global prices are now at their lowest since 2008 on the auction platform as the world’s biggest dairy group, Fonterra, operates after a 10.7% fall in the latest auction on Wednesday night.
Fonterra yesterday announced the sacking of 523 people over the next few months (and hinted at more later in the year) after the latest price slide. The Kiwi dollar fell to a six-year low against the greenback (this is actually good news and will offset a tiny part of the sharp fall in dairy prices). The dairy price fall will badly damage the Kiwi economy. Earlier this year, economists were saying the price drop then would cut NZ’s national income by around NZ$5 billion. Based on the big price falls since then, that estimate is now as high as NZ$13 billion, over the next year to 18 months, which will cripple the economy. The Fonterra board meets on August 7 to consider a new, lower price for its 10,500 dairy farmer shareholders and suppliers (the dividend on the shareholder trust will be cut). And next Thursday the Reserve Bank of NZ will cut its key rate by another 0.25% to 3% (after the surprise 0.25% cut in June). — Glenn Dyer
Not enough cough, sneeze, wheeze. For months now, TV, radio and newspapers have been telling us that we could be in for a bad flu season. These stories are a staple of news broadcasts and stories in late summer, autumn and early winter. Usually, it’s a “new” strain of flu, overlain by a bit of bird or SARS paranoia. The bottom line seems to be, in most cases, that we should go and see our doctor and have a jab if we are old, infirm or young. On Wednesday night we got the perfect update in that area — from Primary Health Care, one of the biggest operators of GP surgeries across the country. And so far, the flu season of 2015 (unlike the ski season of 2015) is proving to be a bit of a disappointment for the medicos and Primary, so much so that it has played a part in a surprise earnings downgrade for the full year. — Glenn Dyer
Anglo joins BHP. Anglo American is another serial moaner and groaner about everything under the sun: costs, red tape, employees, unions. You name it, like Rio Tinto and BHP, Anglo’s managers have had a whinge or three over the years. It’s big in coal mining in Australia, like BHP and Rio, and has a black hole in Brazil that is supposed to be a viable iron ore mine. Anglo bought the Minas-Rio project in 2007 as the China boom was tantalising anyone with a wallet. The project fell more than five years behind schedule and costs jumped to US$8.8 billion from an initial US$2.7 billion estimate, prompting the company to write down the value of the project on two previous occasions by US$8.8 billion as iron ore prices fell. Overnight, Anglo revealed a new round of impairments — $US3 to $US4 billion, including more write-offs at Minas-Rio, and at its coal mines in Australia. At this rate, Minas-Rio will be in Anglo’s books at nil value. The details of the write-downs, especially in Australia, will be known next month with the company’s earnings result. Anglo joins BHP which this week cut $2.8 billion from the value of its US shale-gas assets (taking the total write-offs there to well over US$6 billion. There’s more to come. — Glenn Dyer
Barbie can’t google. For a sixth quarter in a row, sales of Barbies have fallen as the world’s most famous doll continues to be ignored by her target demo — young girls, who now are more interested in their smartphones, Facebook, Instagram and whatever else is cool. Mattel, the owners of Barbie, said sales of the iconic doll fell 19% in the June quarter, which helped drive group sales down by 7% to US$988 million. (Barbie can’t google, post on Facebook or take a selfie). Sales in Mattel’s wheels segment, which includes the Hot Wheels and Matchbox brands and is aimed at young boys, rose 19% from a year earlier, but its entertainment business suffered a 16% slide in sales. Sales of the preschool brand Fisher-Price were up 2%. Mattel shares are down 35% in the past year, 19% in 2015 so far. So despite more assurances from the company’s new management team that Mattel is back on the right track, investors are not listening. Unlike Barbie, they are online, watching Netflix (which passed General Motors overnight in terms of market value, US$49.1 billion to US$48.6 billion). — Glenn Dyer
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