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Lateline Business -

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(generated from captions) the web site at Here is

'Lateline Business' with Ticky

Fullerton. Tonight - lots of

bottle, Lion Nathan stands firm

on its offer for Coca-Cola

Amatil. We think it's a

compelling offer. We think it

needs due consideration. We

certainly hear what the board

of CCA are saying and we

respect that. No bonuses this

year, Macquarie Bank employees

take a pay cut after a drop in

profits and a billion

write-down. We think that's a

sound result given the

unprecedented global market

conditions that we have

actually experienced. And the

view from the bunker, the

Reserve Bank Board releases its

logic behind the interest rate

cuts. I think what's come

through is the extraordinary

respect they have got for

what's happening in the global

economy and the almost

inevitability that it's going

to wreak havoc here.

First to the markets, and

following Wall Street's overnight decline Australian

steep shares experienced a day of

steep losses.

The All Ords falling 3.5% to

a fresh 4-year low. Recession

fears saw the ASX 200 drop 130

points, mining stocks leading

the falls, sell-offs spreading,

the Nikkei dropping 2%, Hong

Kong's Hang Seng plunging 4.5%,

and the T F100 in negative territory. Macquarie Bank

shares have roared back to life

despite the millionaires

factory unveiling a 43% fall in

first half earnings, although

the turmoil on financial

markets took a toll invest

juniors were relieved Macquarie

weathered the storm in good

shape so far. Nicholas Moore's

first earnings result as Macquarie Group Chief Executive

saw the end of 16 years growth.

After 6 months in the job he

was putting on a brave face. We

think it's a sound result given

unprecedented global market conditions we have conditions we have experienced. Our capital position

throughout the period is strong

and continues to be strong. Net

profit fell 43% to $604 profit fell 43% to $604


After the record result of

more than a billion dollars in

the previous corresponding

half. It follows asset write

down of $1.1 billion, relating

to Macquarie's managed funds.

The hit-to earnings was

suffered by a halving in

employee bonuses to $1.2

billion, fee and commission

remained strong, falling 13%. remained strong, falling 13%.

Macquarie Bank watcher Ryan

Hoffman says after the problems of other financial engineers

such as Babcock & Brown, and

Allco equity the strength of

the Macquarie result was a

relief To the extent they could

cut costs through reducing

bonuses the net result to

shareholders of the fall in

income, around 37% has not been

a complete disaster as it would

be in other businesses. The

stock market shared the view

with Macquarie Group ending the

day up 17%, $24. Like other analysts Ryan Hoffman questions

the way Macquarie valued the

assets in some of its listed

funds. Two of the biggest positions, Macquarie

Infrastructure Group, and

Macquarie Airports, which they

have significant investments in

have not been marked to market

values, if they had of been,

the result would have been

16-20% worse. Macquarie Group

unveiled the first half result

on a day Citigroup revealed it

was shedding 52,000ons,

including 2,500, a small number

of the Australian employers

Nicholas Moore says Macquarie

is also shedding jobs. If we

are pulling back from Italian

mortgages, it will have jobs

consequences, if we pull back

from Australian mortgages, it

has job consequences, if we

pull out of personal lending it

has job consequences.

Macquarie is forecasting a rut

of $1.2 billion, warning

there's hurdles to overcome,

including write-downs, it's

paying an interim dividend of

$1.45, 80% franked. There were

few comforting observations in

this month's Reserve Bank Board

minutes when the RBA cut rates

by 75 basis points. The minutes

revealing the bank is prepared

to move quickly to prevent a

recession, preserving household

wealth that is threatened by

falling house prices and share

prices. Here is Philip

Lasker. Don't let that calm

exterior fool you the Reserve

Bank Governor Glenn Stevens and

his board revealed a level of

concern in the minutes borne

out by their decision to cut

the official cash rate by 75

basis points I think what's

come through is the

extraordinary respect they have got for what is happening in

the global economy, and the

almost inevitability that it's

going to wreak havoc here. Just

days before the meeting, the

board papers recommended a cut

of 50 basis points subject to

further developments. The

governor raised the stakes at

the meet, proposing members

consider either a 50 or 75

basis point cut. The news has

been changing rapidly over the

last six weeks, so I think it's

a good thing the Reserve Bank

isn't bound by the

recommendations of the staff.

And it also shows that the

board itself is having an

Independent input into the process. There was discussion

about falling house prices and

equity markets cutting

household wealth by 8% between

January and September. And it

only got worse in October.

Board members made the

disturbing observation that:

We have seen house prices

falling in Australia, that's a

rare event. It accounts for a

bit over 60% of household

wealth, it's a negative effect

from there. There was

discussion about the deteriorating global

environment and a fall in China's industrial production

suggesting a slow down, the

banks liaison activities

reinforcing the views that the

worsening global conditions and

financial market turmoil could

seriously damage consumer and

business confidence. So the RBA

cut by 75 basis points because

it wanted a meaningful

reductions to be passed on to

borrowers by the banks and

giving the changing balance of

risk to the downside there was

an advantage in moving the

setting of monetary policy

quickly to a neutral

position. In financial markets

there was debate about whether

official rates were at a

neutral level, some arguing the

level changed because these

days lenders were not

necessarily passing on the full

cut in official interest

rates That suggests that

neutral has to be lower to get

the same impacts on household borrowing costs. Whereabouts it

was 5.5 before, it's probably

4.5 now. At 5.75, it's sending

a strong signal that a big move

is in the wings on 2

December. It can't happen soon

enough for small business, the

latest chamber of commerce and

industry showing small business

conditions slumped to lowest

levels since the survey began

in 1996. Of the official

interest rate reductions of 2%,

a little of over half of 2% has

been passed to small businesses. A fact that did

not go unnoticed by the Reserve

Bank Board, which ofbed that

bank profits were solid in the

-- observed that bank profits

were solid. For a look at the

local markets I spoke with

Marcus Padley from Patersons

Securities. Any reaction on the

share market to the latest

Reserve Bank minutes. Yes, we

saw the Aussie dollar fall and

Bonds fall, that tells you

people have taken out of the

RBA a comment that interest

rates are less likely to go

down so much in December, and

we were anticipating a 95%

chance of a 1% rate cut in

December, we are anticipating

91% chance with talk that the

RBA may not do that, they may

have 50 basis points and have

an extraordinary meeting in

January, they don't usually

meet in January and have a rate

cut then. Basically the market

is not taking heart from it, it suggested interest rates are

less likely to come down. A new

four-year low on the market.

Could it go lower. Of course it

could. It could go higher. The

market is now down 47.3%, from

the top, we have hit the lowest

point since the top of the

market today. In 1987 the

market went down 49.4% in six

weeks, we are bordering on

hitting that. The banks are

half price, they are down 51%,

the National Bank is down 27%

in two weeks. The resources

sector has been a drag on the

market. Yes, we have a

recession officially in Japan,

adding to the eurozone Singapore, Hong Kong, New

Zealand, and the US, of course,

resources just not the place to

be, the commodity price

sliding, including the oil

price and charts are around

suggesting commodity prices go

back to the long term trend

suggesting they have further to

fall except nickel, which is

within its long term trading

range. On the retail side

Woolworths shares marked down

6%, Wesfarmers jumped 3.5. The

explanation for that is the

lifting of the ban on short

selling in non-financial stocks

lifting tomorrow. Financial

stocks in the ASX 200 is on a

shorting ban until 27 January,

and you'll notice that a lot of

stocks there are liquid big

stocks that are prime targets

for shorting, you can move the

price, but not a lot of volume,

including latons, Toll,

Brambles, Perpetual, down, and

Wesfarmers has been added to

the financials list as a stock

remaining on shorting ban, so

it seems there's a big switch

out of Woolworths into Wesfarmers. Down 24% is Babcock

& Brown. What is the market

rationale there. Babcock &

Brown having a miserable time.

There's no good news at the

moment. One fund manager is

quoted saying that the company

was in liquidation mode, for

instance, they've been moving

management rights of some

listed entities back to the

listed entities themselves,

which is almost like

preparation for disappearing.

Can't make that call, but I

think it's a buyers beware, and

traders avoid in case it goes

into a trading halt. Marcus

Padley thanks for joining us.

Other major movers on the

market. Asciano continued its

decline , diving 14%. Miners

again out of favour, Rio Tinto

dropping 7.5%. Westpac let the

banks down with a 5% fall.

Boral falling 7% on speculation

it will sell shares to boost

the balance sheet. On

currencies the Australian

dollar lost ground against

major competitors. On

commodities, the price of gold

is little changed. Crude oil

retreating towards $54 a


Well, the focus was on

yesterday's $8 billion bid for

Coca-Cola Amatil, Lion Nathan

today delivered its full-year

results. Annual profit fell

3.3% to $272 million. The

acquisition of boutique brewer

James Boag duringed on the

result, but the numbers from in

line with earlier guidance,

despite the challenging

economic times, the owner of

the Heineken, Tooheys and XXXX

expects stronger earnings next year. I spoke to Chief

Executive Rob Murray, a short

time ago. Rob Murray, welcome to 'Lateline Business'. Yes,

nice to be here. Underlying

profit up over 4%, and a

projection of over $300 million

in profit for 2009. Beer must

be recession proof. I don't

know whether I'd go that far. I

think, and I don't know if we

are in a recession now, you

look at the health of our

business, you'd have to say

whatever recessionary

influences have come along,

they haven't damaged the health

of our business, we are going

well, staying focussed every

day, hopefully it will carry

on. The big news is a merger

with Coca-Cola, Amatil. The major shareholder, Kirin Brewing is supporting the

takeover, funding the carve

side. Are they driving the deal. Certainly they are a big

part of funding the cash side

of the bid, as you say, of

something like the $4.5 billion

of cash provided, they are

providing about $3.8. They

didn't come up with the

proposal. We work

collaboratively with Kirin, and

we took a proposal to them and said there's an opportunity,

you'd have to play a major

role, they saw the opportunity

and came for the ride. We are

grateful for the support

they've given us. Your plan to

by CCA has been dismissed as

too low. How did you come up

with that amount We looked at

what we thought was reasonable.

If you look at comparatives

paid for bottlers predominantly, against any of

those businesses, this would

compare favourable. We think

it's a compelling offer, it

needs due consideration, we certainly hear what the board

of CCA are saying, and we

respect that, but today, given

this news came out in the form

of a fairly untimely leak from

your point of view on Monday,

we have very keen to make sure that our shareholders

understand that we have put a

good compelling offer here. If

CCA shareholders get to learn

that at the same time, that's

good from our point of view. We

certainly will rrp any

conversations we have with the

board of CCA subsequently. Despite the leap,

it seems strange you didn't

seek to get the support of

CCA's major shareholder the The

Coca Cola Company, before the

offer was made public. Our view

a that whichever way you look

at it you need support for the

traction from the board of CCA

and the TCCC. It's respectful

to go through the entity that

is CCA , and that entity is,

afterall created to look after

the interests of all of its

shareholders, one of whom is

the TCCC. We are under no

illusion s that there need to

be a dialogue with the TC cx C.

We know that, respect them,

appreciate their judgment in

helping run the business, we

appreciate the brands behind

the business theirs. What is in

the deal for TCCC. We think

putting the two businesses

together would create a

fantastic platform that would

be in a position to extract

significant synergies, a

benefit of which TCCC would

get. We can't deny we heard

their feedback, but I think

there's every reason to believe

some dialogue could

continue. TCCC talks about

conditions to be satisfied to

win its support. I guess they

might range from guarantees

about the ongoing running of

the soft drinks business or the

sale of some of Kirin Brewing's

soft drinks assets, or perhaps

importantly giving up the

chairman's role of the new

merged entity. We don't know.

I guess we - there's been a

limited amount of dialogue

between Kirin and the TCCC.

That needs to continue. It's

not been direct with us, we are

available to have that dialogue

if the need arises, and we wouldn't take anything off the

table. Do you think TCCC would

be wary of Kirin Brewing's

growing market share under the

deal You'd have to ask them.

On the one hand they compete to

a certain extent in some parts

of the world. They are partners

in others. Kirin Brewing have a

long history of working with

the TCCC, and I think that

those two parties need to have

a dialogue that the rest of us

need to respect. Kirin Brewing

can consolidate the 46% holding

in Lion Nathan, down the track

international accounting

standard means they'll need

over 50% to consolidate, can

you see Kirin Brewing creeping

up to that level. It's not

clear cut. The implementation

of what is talked about is somewhat uncertain. The

proposal we put to CCA see

Kirin Brewing with a little

more than 47% of what I will

call for the sake of arguments

merge co-, if they needed to

creep behind that, over 50%,

they could. At the same time to

protect the shareholders we are

seeking to put partner ship

principles in place with Kirin

Brewing, saying if they wanted

to go from around about that

50% level any further, they'd

need to launch a full bid for

the company. In the meantime

the company will operate as it

does today. Rob Murray, sound

like a work in progress, thanks for talking to 'Lateline

Business'. Thank you. You can

see an extended version of that

on the web site at Well,

on the day that the Prime

Minister is encouraging quick

spending on infrastructure at a

local level a new proper from

law firm Blake Dawson presents

a view of Australia's

infrastructure projects with a

growing trail of Budget

blow-outs, delays and disputes.

To blame is an inadequate

scoping of the projects

becoming an endemic problem. To

discuss the challenges I spoke

to John Dunkley, Chief

Executive of builder and

construction kl BGC. Welcome to

'Lateline Business'. Yes, hi,

thanks. As a key player in the infrastructure business, what

do you take from this

report. Basically the problem

has got worse. Two years ago

40% of the respondents said

that projects scoping was an

issue, but this time, 54% of

the respondents have said the

project scoping is on issue. I

gather one in four big

projects, and one in five small

projects had cost overruns of

20%. 20% doesn't sound very

much, but, in fact, some of the

major billion dollar projects

and about 25% of them are

reported over runs of over $200

million. 20% doesn't sound much

until you multiply it by a

billion, and you get big

numbers and shocks. We can

think of some very high profile

failures, like the Cross City

Tunnel in Sydney, but equally,

we have found situations where

the problems seem to be

discovered too late in so many

of these projects. When the

project is committed, it's

committed on a half baked scope

of works. And a timetable

that's too tight. It's setting

itself up for a disaster.

Project overruns, typical

delays over 40% of the projects

experience delays of more than

4 months. Time is money. I was

talking to a client the other

day. I said, "In this resource shortage, can't we limit the

amount of resources on a

project and stretch the time

out a bit", he said, "Time is

money, we can't afford the

time". 40% of respondents said

there was insufficient time to

do the scoping. Kevin Rudd

today has been talking to all

the local Mayors in Australia

and asking them to spend,

spend, spend, $300 million on

local infrastructure. I think

you have to put that $300

million in context. That is for

local Government. I mean, the

megaprojects we are talking

about probably - the ones

surveyed amount to $60 billion,

and the average cost is about

$360 million, so in round

terms, that's 30 projects, or

25, so really, all - the

Government work that - the

Government scheme is going to

add a little bit of money, but

right across the board. I think

it will benefit the community

because it's spreading so wide

by, and the council said will

do footpaths and the parks and

all those improves that don't

take a lot of engineering. Does

it concern you that the big

lick of money, the Government's

infrastructure fund may be

under pressure to spend fast,

with less time for

scoping. Well, that's really,

you know, one of the issues is

the Federal Government and the

State Governments need to look

at what they are going to

spend, and how quickly and what

demands that will put on the

industry. They need to get

involved with all the stakeholders, that's the use

efs, the contractors, and work

out a balanced approach, if it means spend Territory

Government wisely over a longer

period, but at the -- spending

it wisely over a longer period.

At the moment everyone is

competing with everyone else

hoping to Shu horn their

project in the queue and get it

done. You have a Government

keen to stimulate the economy,

and get the money out

fast. Correct. One of the

spin-offs, I suppose, from the

resource sector is that the

resource sector is spending a

lot of money on resources,

that'll dry up a little in the

short term, but, of course,

that's creating massive royalty streams which the Government

wants to spend rightly on

public infrastructure, one is

begetting the other and we

don't have the skilled people

in place to deliver everything

all at once. John Dunkley,

thank you for talking to us

tonight. Thanks. Administrators for ABC Learning

Centres are pleading with staff

and creditor to be patient as

they work through the company's

offence, they met staff unions

and those ode money by the troubled company.

Administrators and receivers

were working on a business plan

to carry the company past

December 31st. My focus is on

keeping this business open,

keeping it trading profitably

into the new year, securing

jobs, at the end of the day

that'll provide the best

outcome for all creditors,

importantly, for parents and

staff. Unions representing

staff say parents are deserting

the centres in droves, $31

million in entitlements ode to

staff The biggest answer

iloutside us, what is the

answer to parents and jobs

behind 31 December. A Match

Review Committee has been set

up to work with other

creditors. In a blow to the

country's solar panel industry,

a company is going off shore.

200 jobs will be lost when BP

Solar closes the doors of its

company in March. It's too

small to make solar cells

cheaply, it's moving to bigger

factories in Spain, India and

the US. We'll import product

from March next year, with the

aim of reducing the cost. So we

deliver what consumers ask for,

lower cost renewable

energy. The Federal Government

Treasury expects the renewable

industry to expand 30 times by

the middle of the century. A

day after WA lifted its been

ban an uranium mining, the Torr

mant 10km Yeelirrie deposit

located 1,000km north of Perth

contains 52,000 tonnes of

uranium, BHP Biliton operates a

large uranium mine, Olympic Dam

in South Australia. WA's newly

elected Government predicts the

ending of the 6-year

prohibition will see new mines

dug, generating tense of

billions in royalties. A look

at the business diary, RBA

Governor Glenn Stevens is due

to speak at the CEDA annual

tinner in Melbourne. KPNG

publishes a survey on regional banks.

Before we go, a look at

what's making news in the

business sections of tomorrow's

newspapers. 'The Age' examines

Macquaries better than expected

half year profit, as does 'The

Australian', and Sydney rshes,

and the 'Australian Financial

Review' looks at the mlents

from the Reserve Bank's latest

board meeting -- Dow is down

146, 1.75%, and the FTSE shed

71 points. I'm Ticky Fullerton, goodnight.

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