0311 GMT - Tower's reinsurance renewal is favorable when compared with Forsyth Barr's prior expectations regarding total reinsurance costs in FY 2024, analysts James Lindsay and Will Twiss say in a note. Relative to key rivals, Forsyth Barr sees the reinsurance renewal covering FY 2024 as positive, assisted partly by Tower's risk-based pricing being recognized by reinsurers. As a result, the investment bank reduces its reinsurance expense estimates on Tower for FY 2024 and FY 2025. However, following Suncorp and IAG's FY 2023 results, Forsyth Barr cuts its expectations for Tower's gross written premium in FY 2024 and FY 2025 on likely weaker-than-expected growth. (alice.uribe@wsj.com)
0307 GMT - Rising costs to build and run mines could be a contributor to higher inflation over time, says AMP Capital chief economist Shane Oliver. "The cost of mining is only a small part of the overall cost of commodity prices, but it all adds up," he tells WSJ. "Particularly, when increased military spending and decarbonization are increasing the demand for metals at a time when supply is constrained by years of low investment in new mines." While increased mine costs won't necessarily prevent inflation rates from returning to target, it is "one factor along with the broader reversal of globalization and associated onshoring or friendshoring, bigger government and aging populations with less workers relative to consumers that will result in a more inflation-prone world going forward," he says. (rhiannon.hoyle@wsj.com;@RhiannonHoyle)
0148 GMT - Competition for labor, equipment and raw materials will likely continue lifting construction and operating costs for lithium producers, especially while demand growth for the battery ingredient remain high, says Robin Griffin, vice president of metals and mining research at Wood Mackenzie. "Development and operational risk will also likely increase over time, as lithium is sourced from more complex deposits in higher risk jurisdictions," while "more expensive debt and equity, and higher disruption rates are to be expected," he says. Carbon pricing could accelerate cost increases for not just lithium, but all metals and mined commodities, he says. Griffin highlights the lithium industry's 90th percentile costs--seen as a key support for market prices--as already 2.5-times higher today than in 2010. "Higher marginal costs will typically mean higher prices on average," he says. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)
0051 GMT - Silver Lake Resources' latest update of its reserves prompts Euroz Hartleys to reduce its price target by 7.1% to A$1.30/share, but the bank thinks there may be more to come from the Deflector operation than thought. Silver Lake's current reserves assessment suggests that mining at Deflector won't continue beyond another two years. In a note, analyst Kyle de Souza highlights that Silver Lake's focus will now shift to exploration at Deflector and that this represents near-term upside for the operation. "We assume conversion of exploration results into reserves for our price target, and see potential for Deflector to push through to FY 2027," Euroz Hartleys says. Silver Lake is up 3.1% at A$0.84 today. (david.winning@wsj.com; @dwinningWSJ)
0041 GMT - With the El Niño weather pattern officially declared by Australia's Bureau of Meteorology, Morgans ponders what this means for Nufarm's business prospects. The BoM forecasts rainfall for October-December to be below the median for much of Australia. "Dry conditions in Australia into FY 2024 creates earnings uncertainty for both Nufarm's APAC and Seed Technologies (large exposure to Australia) business units," analyst Belinda Moore says in a note. "The lower-than-expected Carinata plantings in 2023 due to drought in Argentina, will also impact Seed Technology earnings." Morgans lowers its FY 2024 Ebitda forecast by 7.5% and its net profit projection by 25%. "We expect a weak 1H (to be) followed by growth in 2H," adds Morgans. (david.winning@wsj.com; @dwinningWSJ)
0038 GMT - The impact of strike action in the U.S. auto industry is unsettling for BlueScope Steel investors. The United Auto Workers union has expanded industrial action at selected distribution hubs of General Motors and Stellantis, with some 18,000 members now on strike across the auto industry. In a note, Macquarie highlights that automotive represented 50% of end-market exposure at BlueScope's North Star operation in FY 2023 and around 35% of the total U.S. portfolio. "Given BlueScope's ability to manage North Star utilization at nearly 100% during Covid, we expect the strike to have a limited impact on the plant's operations," Macquarie says. "But discounts to benchmark could widen in alternate markets." (david.winning@wsj.com; @dwinningWSJ)
0033 GMT - Crop-chemicals supplier Nufarm's gearing is in focus for Macquarie. Nufarm's gearing will remain above its target range in FY 2023 because later sales in 2H will result in elevated receivables. "Importantly, inventories have fallen through 2H," Macquarie says in a note. "We see a path to lower gearing in 2H of FY 2024 as Nufarm collects on receivables and inventory reduces further." Still, Macquarie points out that gearing tends to move seasonally higher in 1H and then reduces in 2H. It assumes Nufarm has gearing of 2.7 times in 1H FY 2024, before falling to 1.8 times in 2H. (david.winning@wsj.com; @dwinningWSJ)
2301 GMT - Star Entertainment Group's debt financing announcement earlier in the week was expected, says Morgans analyst Leo Partridge in a note, but the news of a A$750 million equity raise was not. "The news of a second raise was surprising, given the company only last approached the equity markets in February," says Partridge. Even though this move by Star was unanticipated, Morgans reckons the announcement removes a layer of uncertainty for investors, leaving only the impending Austrac fine. The broker thinks this is likely to be announced either later this year or early next year at the latest. Morgans cuts Star's target price 25% to A$0.90 a share. Star was last down 4.8% to A$0.60. (alice.uribe@wsj.com)
2301 GMT - Crop-chemical supplier Nufarm's stock had fallen by 11% over the past month as investors appeared to anticipate yesterday's disappointing trading update, and Jefferies thinks it may not rebound any time soon. "The likelihood of less favorable seasonal conditions may continue to overshadow sentiment in the short term," says analyst Richard Johnson in a note. Still, Nufarm's downgrade on Thursday was relatively small. Nufarm says it now expects FY 2023 underlying Ebitda of A$430 million-A$440 million. It had previously guided to modest growth, so the update implies a modest fall on the A$447 million Ebitda achieved in FY 2022. Jefferies cuts its price target by 15%, to A$5.30/share. Nufarm ended Thursday at A$4.72. (david.winning@wsj.com; @dwinningWSJ)
2222 GMT - Brickworks loses a bull in Ord Minnett, which worries about stiffening headwinds facing its Property business. In a note, analyst James Casey highlights that Property has been a key driver of Brickworks's earnings over the past five years, driven by higher rental income, revaluations and development profits. "However, Property earnings will come under pressure as capitalization rates expand," Ord Minnett says. "Further, weak housing markets, both domestically and in the U.S., will impact Building Product earnings." Ord Minnett downgrades Brickworks to hold, from buy, and lowers its 12-month share price target by 6.4% to A$26.20. Brickworks ended Thursday at A$24.07. (david.winning@wsj.com)
(END) Dow Jones Newswires
September 29, 2023 01:01 ET (05:01 GMT)