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Lateline Business -

View in ParlView

(generated from captions) here is Leigh Sales in Sydney.

East Timor's President Xanana

Gusmao has announced that the

country's stated of emergency

will be extended from 48 hours

to 10 days amid fierce of

further instability. One

potential flash point will be

funeral of rebel leader Alfredo

Reinado whose body was returned

to his family late today. Peter

Cave reports from Dili. Despite

an overnight curfew, there's

little sign on the streets of

Dili of anything out of the

ordinary, with children

attending school and markets

doing a brisk straid. Bit's a

fragile calm with a number of

possible flash points. One is

the funeral of Major Reinado

and one of his men, which is

expected to take place on

Friday. There were intensely

emotional scenes as well as

defiance after the bodies were

released and taken to a family

home in Dili late today.

Hundreds tried to force

their way into the small

suburban house and there are

fears the funeral they trigger

clashes between Reinado

supporters and local and

foreign security forces. The

other possible flash point is

if troops begin arresting those

believed to have taken part in

the attack earlier this week,

this is what is under way here

in the hills outside Dili. The

troops have sealed off roads

leading into the town while

other Australian troops are

carry ing out raid on the suspected hide-outs of

Reinado's men. This road block

several kilometres away was as

far as we were allowed to do. A

group of persons of interest

have been identified in the

vicinity of the village. I will

not comment on the details of

this ongoing operation at this

time. Earlier, East Timor's

Prosecutor General said he had

begun issuing arrest warrants. 18 preliminary have

been requested today and in on

going cases like this it is not

final. In a vacuum of official

detail about what happened at

President Ramos Horta's villa

on Monday, several local web

blogs have provided eyewitness

t accounts which suggest that

Reinado was shot after the

guards after taking over the

house and before he came face

to face with the President. One

of the President's personal

body guards stepped into the

line of fire attempting to save

him. That guard was flown into

Darwin today with severe head

wounds. Staff at the hospital say President Ramos Horta

himself is making good himself is making good

progress. It will probably take

six weeks before he's feeling

90% good and proons six months

before he is feeling entirely

over such an injury. Prime

Minister Kevin Rudd is expected

to visit the hospital before

flying to East Timor later this

week. Australia's biggest

terrorism trial began in

Melbourne today. 12 men who

were arrested and charged two

years ago stand accused of form

ing a home grown terrorist

group. The prosecution told the

secretary it would present

evidence that the men were

hoping to launch an attack on

Australian soil and wanted to

target a busy place like a

football stadium to maximise casualties. Police surrounded

the entrance to the court and

once the 12 defendants were

inside, a dozen officers ringed

them in the dock. The accused

have always plood pleaded not

guilty to the terror charged it's estimated that the trial

before a jury of 15 could run

all year. The prosecutor,

Richard Maidment SC, told the

court the case against the

defendants is largely based on

the results of phone taps and

secret listening devices in

their homes. Mr Maidment says

the jury will hear almost 500

conversations as the Crown puts

its case that the 12 formed a

home-grown terror organisation

with 47-year-old Benbrika been

as its leader.

The accused I

Mr Maidment said the group

considered an attack overseas

but its preferred option was

Australia. He said

Richard Maidment says the

group had not decided on a

specific target but drew

inspiration from overseas

terrorist attacks like the

London bombings. The

prosecution also alleges that

Benbrika expressed an

admiration for Osama bin Laden.

And taught his followers of the

benefits of martyrdom,

including entry to paradise.

The court heard Benbrika told

his followers that enn carrying

out an attack it would be

acceptable to kill, women,

children and the elder ly. Mr

Ben Maidment

Mr Maidment also told the


The prosecutor's opening

address alone is expected to

take up to three weeks.

Danish authorities have

arrested three people planning

accused of planning to kill a

cartoonist who drew a

provocative karct tur of the

prophet Mohammed. The two

Tunisiance and a Danish citizen

were arrested in an antsteror

operation in western Denmark.

The cartoonist is one of 12

whose drawings caused outrage

in the Muslim world two years

ago. They were attacked in

Muslim countries. Police said

the cartoonist and his family

had been under close protection

since the threat emerged. In

the United States, Barack Obama

has stolen a march on Hillary

Clinton in the race for the

democratic party's presidential

nomination. The senator won

another three primaries today,

taking the lead in the national

delegate count. Mark Simkin

reports. So we've got the

started the day which buying doughnut s. Barack Obama

doughnuts for his volunteers.

He was savouring the

possibility of another big victory.

(All cheer) Obama! Blaks and

university-educated whites are

flogging to the African

American and both group s are

well represented in this part

of the country. Thank you for

voting. Get all your friends to

vote. People did vote in huge

numbers. Maryland, Virginia and

DC usually don't get to

influence the nominating

process and people queued up to

be part of it. Hillary is

nothing more than her husband

in different clothes and I

think we've been there and done

so. So moving on to somebody

new. I like her better. I think

he's a flash in the

pan. Barack Obama won all

three primaries by overwhelming marriagins. Nationally he has

won the most States and

crucially the most

delegates. Today the change we

seek swept through Chesapeake

and over the Potomac. And

though we won in Washington DC,

this movement won't stop until

there's change in Washington DC

and tonight we're on our

way. Barack Obama has the

momentum while the campaign

once considered invincible is

struggling. I'm tested, I'm

ready. Let's make it

happen. It's not happening for

Hillary Clinton at the moment.

In a space of a week, the

former First Lady's lost seven

straight contests, lent her

campaign $5 million, replaced

her campaign manager and today

her deputy campaign manager

resigned. Two more State also

vote this month, and Clinton

insiders expect to lose both of

them. Instead, Hillary Clinton

is focusing on the

delegate-rich states that vote

next month, including Texas.

Now to the weather - monsoonal,000 showers for

Darwin, a shower or two for Brisbane. Morning drizzle

clearing in Melbourne. A humid

change developing in Perth.

Mostly fine for Sydney and

Hobart. Fine in Adelaide and

Canberra. That's all from us.

Lateline Business coming up in

a moment. If you would like to

look back at tonight's forum or

review any of Lateline's

stories or trips, you can visit

our website. Now Lateline

Business with Ali

Moore. Tonight, Rio result -

the mining giant says its

underlyingernings is up, the

future is bright and BHP

Billiton will have to pay more

if it wants to win its takeover

target. BHP Billiton needs Rio

Tinto more than Rio Tinto needs

BHP Billiton. Which bank? The

Commonwealth take s a from the

subprime crisis and higher provisions for bad

debts. Market turmoil,

additional funding costs,

higher provisioning in

extraordinary the corporate

portfolio. And the good life -

strong sales and new products

lift earnings for Coke. In this

sort of environment sometimes

that hasn't been enough but

certainly today the market

liked the results and any

upside I think is deserved.

To the markets and ignoring

Wall Street's positive lead,

Australian shares ended the day

in the red. The All Ords lost

1%, dragged down by the Banks.

The ASX 200 dropped 6 points.

In Japan, the Nikkei Edgerton

ed up half a per cent. The hang

essential rose for a second day

and in London falling bank

stocks have drog dragged the

FTSE 1% lower. Rio Tinto has

announced a 2% drop in

four-year tsh sh - full year

profits to just over $8 billion

and reiterated its rejection of

bilth's takeover offer. But

while net profit was lower,

Rio's underlying profit rose 1%

on the back of higher commodity

prices. And was up 9% in the

second half. Rio 's executive

say they've had no contact with

BHP Billiton since the takeover

was first pro proposed in nof

and they say they're not

worried about Chinalco seeking

to increase its stake. Di Bain

reports. Week after BHP

disappointed with the market

with its reduced half-year

profit, Rio's bosses were able

to boast about record earnings

of more than $7.4 billion. BHP

Billiton needs Rio Tinto more

than Rio Tinto needs BHP

Billiton. And of course as said

the recent earnings momentum in

the second half just bears this

out. Rio's copper and iron ore

businesses were the biggest

earners. Despite huge cost pressures it was able to grow

the business in contrast BHP

report add 2.4% fall in

half-year earnings. We,

relative to BHP, as an idea

portfolio to benefit from what

looks like a strong market and

strong prices environment.

Looking forward, Rio Tinto will

only strengthen relative to

BHP. At an American business

conference in Perth, Rio's

China group Sam Walsh said

BHP's offer of 3.4 share s for

every Rio share was way off the

mark and the company had not

spoken to Chinalco since it

bought its stake?Riover earlier

this month. They have made a

direct purchase off market at a

figure that's considerably

above where BHP is currently. Rio's cold reaction

to BHP's offer is being

interpreted by analysts as the

first round in a takeover bout

that will go on for at least

the next 12 months. The general

consensus is the takeover will

happen, it's just a matter of

price. We have a closer look at

today's result when we cross to

London later in the program.

The Commonwealth Bank saw its

shares drop 6.5% today after

its earnings came in below

expectations. A big lift in

Commonwealth's provisions for

bad debtings among its business

customers sent shudders through

the market with the other big

banks also sold off as

investors concluded the sector

has seen its best days. As

well, the Commonwealth was hit

by higher funding costs as a

result of the subprime crisis.

Andrew Robertson reports. The

Commonwealth is the first of

the big banks to report its

results and, after years of

bumper increases in earnings,

times have changed dramatically

in the last six months or.

So Market turmoil, additional

funding costs, higher

provisioning in regard to the

corporate portfolio, and lower

shareholder investment returns

that have come through and

impacted the top line

result. Commonwealth Bank

lifted half-year profit by 8%

to 2.4 billion dollars below

market expectations. In signs

of the changed operating vort,

whale funding costs were up

$100 mother while provisions

for bad loan s jumped 71% to

$333 million. That. That's to

reflect both the current state

of the market and some specific

accounts. We have an exposure

that I think has been reported

on Centro, an unsecured expoesh

our of $160 million and we're

confident that that and any

other expoesh rur properly

provided for. Investors

focussed toven bad lovern

provisions as they marked

Commonwealth shares down 6.5%

to a 1446 month low. Dr Peter

Vann says it could have helped

the bank to give more specific

information about where the

risk in its loan book lies. I

don't expect to get line by

line account of the dollar

amounts and that is probably un

commercial for them to do that,

but they do need to create an

amount of comfort for the

community. Ralph Norris

believes his customers are well

placed to cope with higher

interest rates. The bank

however has takanne hit, only

passing on two-thirds of the

increased in the cost of

borrowing the money it lend for

mortgages: The re t reaction

for the market has been for the

bampgs to absorb some of that

additional cost and I expect

that we will continue to absorb

costs in that regard. As I said

earlier, we of course have a

balance between customer and

shareholder interest. As the

problems on world debt marks

increased, earns in the

Commonwealth's two biggest

divisions suffered. Retail

banking which accounts for 42%

of revenue was up 8%. Business

banking was steady with the

drivers of growth being the

much smaller wealth management

and international

divisions. The underlying

fundamental volumes that CBA

are getting in business

activities and the retail

lending, particularly in the

deposits are really quite good

compared to what they've been

doing. They've gained in the

market share which is

commendable. Ralph Norris

believes the upheaval on debt

markets could have another 12

months to run with more bad

news to come to from the United

States. He stresses the

Commonwealth has no exposure to

the US subprime market and he's

confident all the big

Australian banks will continue

to be able to borrow money if

and when they need it. If you

have a good name, you're well

rate and you have a good

balance sheet and well

capitalised you wouldn't have

difficulties in raising funds

in the market. But it will cost

more and while the

uncertainties remain, investors

have voted with their cell

buttons today, deciding the

golden age for banking is over

now. Australian companies

exposed to the US have had a

tough 12 months and building

product s maker Boral is no

exception. The slump in the US

housing market trigger add 10%

fall nits interim results. But

investors saw some upside on

the back of the strong

performance from the local

company's operations. Boral is

on target to deliver a fourth

straight year of declining profits. Nobody likes to profits. Nobody likes to be

down. And we don't like to be

down but we are going through a

very difficult market in the

US. That's where the downside

is coming from. Australian

businesses are well up and

we're pleased with that but

nobody likes to record lower

earnings than the year before.

But Boral's problem is not ex

refricted to its exposure to

the United States. Its biggest

local market is NSW, a market

yet to turn around despite a

chronic undersupply of housing.

The maker of bricks, roof tiles

and cement products increased

sales 5% to just over $2.6

billion. But the higher tlar

and weak opinions the US hit

earnks, which dropped 10% to

$132 million. But the numbers

came in ahead of market forecasts, helping the stock

gain s 6% by the close. I think

there were some broker s who

were very negative going into

the result. Some brokers were

ex pecting there would be

downgrade ing to them and that

didn't happen today. Chief

executive officer Rod Pearse

delivered a sobering message to

investors, warning a full

turnaround in the United States could take

could take a de decade. This is

something we have to go

through. There has clearly been

an overbuild. Harvard Housing

who are probably the best re

viewers of long-term housing

formation in the United States

is saying, I think, if you take

a 10-year view we should see

average state starts of average state starts of thd 1.8

million. And even that is still

below the 2006 peek of starts

per year. Patience will be

required for investors waiting

for a turnaround in the

struggling NSW market. Building

analyst Rod Mellor from BIS

Shrapnel says conditions in the

residential housing market will

remain patchy. The bottom of

this cycle has been fair ly this cycle has been fair ly

modest at a national level but

near NSW it's been disastrous.

Dwelling construction last year

went under and we probably

would be building at least

45,000 and maybe more. And a

full recovery in the NSW market

is now likely to be further

delayed by the threat of higher

interest rates. Coca-Cola

Amatil has beaten expectations

to post a record profit,

sparking a 4% shire price jump.

The softdrink and befr raj

maker says earnings were

boosted by strong sales, better

earnings and new lines. Coke

has confirmed a $50 million

loss in the sale of its South

Korean business, though. Coke

is it dr or so the advertisele

jingle used to say and that's jingle used to say and that's

what investors are anything.

Coca-Cola Amatil has reported a

net profit of $311 million, up

10% on last year. Profit from

continuing operation s rose 17%

to a record high. Underlying

earnings growth was really

strong. We had manchin

expansion, return on funds

employed so all the operational

metrics improveed and in this environment sometimes that hasn't been enough but today

the market liked the results an

any upside I think is defed

is. The result include add $50

million loss on the sale of

Coca-Cola's Korean business

Bukan Canavan argues the

company is better off without

the non-performing asset. Coke

has used the money to pay down

some debt and that has

contributed to rising returns

on assets or return on assets or return on equity.

Although there z was a one-off

because of that sale, I think

the market will have looked

through that and be quite

positive they've put that

troubled asset behind

them. Profit growth was driven

by stronger trade ing volume s

and prices helping to cover a

rise in expenses like wages and

packages materials. But like

many other businesses, Coke is

being affected by this summer's

heavy rain in NSW and

Queensland. Whilst we have seen

a little softness in volume, I

wouldn't say it's been enough

that we would say this is going

to have a significant impact on

our first half performance. Outside the core

softdrink business, Coke is now

focusing on building its

presence in the alcohol market. The overall premium beer market in Australia is

growing strongly and we're

certainly picking

certainly picking up share in

that. Perroni has gone to the

soth most popular beer and

that's rising so I am very

pleased with the first up

performance of that

division. Terry Davis says Coke

probably has the largest sales

force in the country, helping

it to take on the liquor heavy

weights as they tussle for

control of an increasing

crowded industry. Rising

interest rates and share market interest rates and share market

volatile ity have pushed

consumer sentment to a 15-month

low. The Westpac-Melbourne

Institute fell and the climb

comes on top of an 8% slide.

For the first time since

November 2006, more people are

pessimistic an optimistic about

their finances and the

economy. No doubt part of that

pessimism is due to the

emergeous of many are now

calling a bear market. For a look at

look at today's action, spoke

earlier to Martin Lakos from

Macquarie Private Wealth.

Martin Lakos, much of today's

market sentiment can be blamed

on the Commonwealth Bank given

that the shauf yore - offshore

lead was positive. Certainly

the Commonwealth Bank in terms

of share market prornl ance

drog ed down honourable member

of the banks. There were

positive mover bus Commonwealth

bank was sold down bank was sold down very heavily

on what we considered a besign

result. The stock was sold down

down to $46.20 or $3.20 in

excess of 6% and it really

carried through the rest of the

bank. St George bank down $1.88

also, 6% to 25.52 And those

that bucked the trend? We had a

good performance out of

resources - BHP Billiton up

Andriyo up 81 to $128.60.S We s

we farnlers is up and Woodside

is up 36 cents today and Leighton holdings which had

been sold is up $1:35. So certainly there is some glim

mer the market. Some glimmer,

what is happening here, given

that the banks and the

companies that you mention are

all operating in the same

market? Why up for some and

down for others? It really does

appear that traders are

overinfluencing the market. The

Commonwealth Bank if you look

at historical dividends that is

last year's dividends it is now

on a historical year that is

fully franked. St George is on

an historic yield as well. Fundamentals should be

suggesting there's some value

in the market. That result by

Commonwealth Bank, although

certain aeks sections of it

were disappointings, the

margins seemed to be OK we

think some of this is getting

overdone and investors should

be taking good advice from

their advisers but starting to

look at some of these sectors

that are being treated quite

harshly. You say there's some

value in the market but if you

look at the outlook they're look at the outlook they're not

particularly optimistic, you

would be pretty tbrief wade in

right now. That's what we've

been saying in the last six

months across the market,

consensus growth has declined

from an average of 12% and has

been declines 1% per month more

recently. Interestingly, the

banks however really stand out

amongst the industrials as a

sector that is still growing at

8 or 10%. That is the sort of

thing we're looking at for

those sorts of anomaly s in the

market place. 2009 still hasn't

- we still have a 17% average

earnings growth outlook for

2009, a large proportion of

that is still the resource

sector. But even so the outlook

for 2 nouz 9 is much

better. So you're not

painteding too neg live a deg -

negative a picture? We are try

ing to be realistic. We reck nice that what is happening in

the debt market is still

impacting. And sentiment is

still impacting so it's mover

about looking at good solid

companies with low levels of

gearing. Those companies with high levels of gearing or

balance sheets that are too

high are being penalised in

this current environment. It's

being very selective at this

point in time for many investors. Thank you for talking us to. Thank

you. Turning to today's other

company news and Village

Roadshow has confirmed it's in

preliminary talks with MFS

about its assets. MFS is the

owner of the Melbourne A carium

and is seeking to refinance its loan

loan and jal co finance s is

rumoured to suspend its shares.

In a rare piece of good news

it's listed investment arm

Allco Equity Partners report

add 5% rise in profit. To the

other major movers on our

market today. A better than

expect ed first half profit saw

Computershare rise 10%.

On currency markets, a

global growth wor worry has

seen the Australian dollar lose

ground and gold has continued

its run of losses.

The more than $8 billion

profit reported by Rio Tinto

down 2% - returning to the more than than $8 billion profit reported

by Rio Tinto as its fends off

bict's offer. While that net

profit was lower the underlying

profit was up, just over 1% and

came in ahead of analyst's

expectations. To see what

overseas markets are making of

Rio's latest figures we're

joined from London by Stephen

Pope, chief global market

strategist at Cantor Fitzgeraldcant. The more strategist at Cantor

important underlying earnings

were enough, this is enough to

underscore the argument that

BHP Billiton will have to pay

more? Yes, I think so. Particularly if you start

looking at the second half

where the figures have been

quite impressive. Overall the

figure was up 11% so generally that's probably why they were

quite quick in the cause of

last week to dismiss the

revised BHP bid and they feel

they should be they have a story to tell why

independent. What do you make

of the tax benefits of the

all-can acquisition. If you

back them up, this is close to

what was forecast. Many people

have latched on to that idea

that they've got a huge boost

out of the tax treatment

situation that came from jal

can. I am sure many of the BHP

board will be looking at it and

say ing if you think about that

will it be a long lastingesque

and does it put our pricing so

far out of sync and the answer

is probably no, not as far as

Rio thinks the true vuls lie. A

profit is a profit and it's all

going into a fund future expansion. The FTSE is down

this morning. How is investors

taking this? How is Rio

travelling? I was saying that

both mining stocks were a n ton

back foot a bit. People have

built it up in anticipation of

some good results and moved

back in line with the rest of

the market. I wouldn't say they're particularly

underperform k. I feel there's further pressure coming down

because the US futures are

looking weak as well. If you

look at what Tom Albanese, the

CEO said adds part of his

results presentation today, he

made a number of fairly pointed

comparisons with BHP -

compounded growth rate in

volumes, Rio's commodities have

better price outlook s than

BHP, Rio's business is

accelerating away. It appear s

he has hardened his

position. He did seem steely in

perm terms of his position,

that this is a company that

doesn't need any outside help.

interview over to the However when he gave one

television channels here in

lorndon, it seemed as though he

was almost throw ing these

facts out as though he was

trying to repel a wave of wave

attack here. I sense what

you're looking at is the last

throw of saying we are a

valuable company, we have a

great protection, we have the

growth potential but if you

have the right price or can put

the cash p the deal, we will

sit down and talk. Eventually

you will get there. It will

just be a lengthy process. I

picked that up from the

chairman Paul skinner, who

talked about the transaction

and when you look at regulatory

approvals it is a long and

winding road. There seemed to

be a recognition of

something. Yes, in a way you go

back a couple of weeks and

there was always the talk s

that the books has been opened

for BHP. I think that story got some credence going forward and

it's recognised if do get the

parties to agree on a price or

price for the share s plus cash

then you will have a long

process of regulation but it's

a sense of fair due dillience

that the Australian Government

would get involved and the

European Union would want to be

involved but a combination of

this magnitude in an industry

that is so sensitive to global

growth, I think it's authority

have a close look but don't

block it. When you look at that

issue of cash and management

was asked if cash would make

them look more fondly on it,

are you of the view that cash

would make a difference? Yes, I

think we're still in a

situation where we know credit

markets are tight, bafrg s

still have a difficult time in

adjust ing their own book s so

I sense that cash is king. I

believe if you got to around,

say, this 3.4, maybe 3.7 to 1

plus $6 a share that - ?6 a

share that would get Mr

Albanese and his colleagues to

put a share up at the table and

have a look at what they can

discuss. The other question

that wasn't answered today was

whether UK shareholders are

hold ing back and very

supportive of Rio not engaging

with BHP but Australian

shareholder s are urging talks.

Do you get any sense from the

UK there is a split in the

geographical shareholders? I

think the sent in the UK is you

have a good number of -

institutions that hold shares

in both and it's inevitable

inevitable that you will have

consolidation in this industry

so why not start at the top.

Whilst we are tango ing and

like scorpions in the desert it

is wasting time. It should be a

chance to pay up the money,

let's start being serious about

this and we can look forward as

to what particular assets might

need to be disposed so we keep

the Chinese happy and we know

that's why they got involved.

So I think it will go forward.

UK institutions maybe want it

to go forward and stop pussy

footing around the issue and

let's get reel here. Thank you

for your insiects. Thank you.

Now a look at tomorrow's

business diary - funds manager

AMP posts its full year

earnings. The ASX releases its

interim results. Brewer Haight

Haight releases its half year earnings.

earnings. Before we go, a

look at many wha's making news

in the business sections of

tomorrow's papers - the taij

focuses on Rio Tinto strong

second half. The 'Australian'

says funding costs for bank and

businesses are at a 13-year

high. The 'Australian Financial Review' leads on the

Commonwealth's banks latest figure an the 'Sydney Morning

Herald' examines the same

story. This's all for font. As

I leave you the FTSE is down 63

and the dhow futures are up

slightly. If you want to review

any part of our program, you

can visit our website. You can

watch the show online or down

load it as vodcast. And

question would love to hear

from you.

I am Ali Moore. Goodnight.

Closed Captions by CSI

HEAVY BLOW, SCREAM (Children yell)

Unidentified young female. Not young enough for the swings. I've spoken to the pathologist. Massive blow to the side of the head.

Heavy implement cracked her skull wide open. We think it was this.

When did she die? She's as stiff as a board. Last night sometime. There's also a lot of abrasions. From a struggle? Or from being tied to the swing. My guess is after death but before rigor mortis set in. More than tied.

Sculpted. No blood anywhere. Last night's rain washed the place clean, I'm afraid. Any evidence of sexual assault? Not immediately obvious, no. Sir!

Look at this. That's weird. Credit card, health club, matriculation card.

Amy Penn. Date of birth - 4th August 1983. Second-year student. Medicine at Glasgow University. Got an address?