Burger Fuel: Share Price out of Gas

Just a wee update for you Burger Fuel (BFW) watchers from outside New Zealand and there are a lot of you-expat Kiwis perhaps?

Anyway, after almost two weeks the share price hit a low of NZ .80c on Wednesday 8 August. The volume was low as usual but its downwards spiral continues.

With a total of 7000 shares on the buy side with the next offer at 75c and the bulk of 53000 shares offered for sale being under the $1 IPO price sub 50c is looking like a good possibility before the year is out.

I will be interested in the company at anything below 30c.



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c Share Investor 2007

Fletcher Building : A solid foundation for the future

Fletcher Building Ltd's [FBU.NZ] results today were solid and as expected.

The after tax profit of $NZ 484 Million Dollars represents an increase of 28% over 2006 and excluding abnormals $399 M , representing an increase of 5% over last years $379 M.

All divisions showed strong growth except building products and steel and total revenue increased 7% to almost 6 Billion.

The recent purchase of the Formica Corporation looks to add to the strong showing in coming years, that Fletcher expects from their laminates and panels division which this year showed excellent growth.

The current slowdown in housing will affect FBUs' profit growth over the next few years, as wasteful Government spending comes home to roost with the resultant effects of high interest rates meaning less spending on house renovations and new home building.

Other Fletcher divisions look likely to help bolster profit going forward though.

Infrastructure spending on New Zealand roads, public transport and the Auckland Football Stadium are set to help FBU smooth out probable drops in other areas. With little sign of infrastructure spending showing a slowdown this division will likely be the star over the next 2-3 years.

Commercial construction will also likely take up some of the slack left by lower housing starts.

The general election will have a material effect on profit for Jonathan Ling and his management. It is likely that a probable National Government in 2008 will allow more Kiwis to keep their own money due to lower taxes and this will clearly stimulate a tired and crumbling economy.

Management have been diligent in keeping costs down while helping allay possible divisional downturns by broadening Fletcher's focus. With a now larger footprint offshore and a more multifaceted local offering FBU will be able to smooth out the normal economic cycles that the building sector has.

The outlook for the coming year profit wise looks good for a moderate increase barring any major meltdown of the global economy.

FBU shares were down by more than 3% today.


Disclosure: I own FBU shares

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c Share Investor 2007

Fisher & Paykel Appliances: In a Spin over nothing

Given the recent increase in the Kiwi dollar since this article about Fisher & Paykel Appliances [FPA.NZ] was written in May and published elsewhere, I thought I would update it.

In May the scenario was as follows.

So Fisher and Paykel(FPA) are moving their NZ washing division to Thailand and closing down their operation in South Auckland. So what.

It is very sad that semi-skilled workers in a low wage area no longer have work and that a New Zealand company long imbued with a kiwi badge will now be slapped together by a man or woman that may have paddled a boat or cycled to to work. Is it really a surprise or something out of the ordinary? Well, quite frankly no.

While the left of Lenin media and every two-bit polly and union rep have a go with their own wide of the mark opinion, blaming the F & P move on a high dollar and high costs the fact is that F & P have never been competitive but are now being forced to by the market reality of cheap well constructed and better designed appliances coming from the very places that Fishers are now moving to.

There may be incentives layed at the feet of companies like F & P to go to far flung areas where labour is cheaper than a life but it is just a market reality that this kiwi company has finally faced. You cannot compete with huge white ware companies on the small scale that F & P do. You are either a niche player with a product that commands a premium and those days are now over for Fishers or you ramp up production and compete on cost. F & P don't have scale so they will struggle in that market as well.

It is a natural progression in any capitalist nation for a business to want to cut costs at every opportunity. If that means moving the business to another town or across the world to another country then must needs must.

While it is clear that Government has driven up the dollar with wasteful and profligate spending it is also even clearer that govt could do one thing to not only keep current industry here but bring more manufacturing from abroad. No tax breaks from govt lackeys trying to pick winners, no incentives for this and that. Cut corporate tax to 10%.

The Irish have found for the last 10 years that this works. In a similar sad position themselves, as we are now, 1 million kiwis living overseas and the same amount on welfare, the far scattered Irish came back home and the success of their economy is the stuff of legend.

The moaners need to stop moaning. Central and local govt need to butt out of business and that means stealing well needed capital through high taxes and compliance costs must end. Govt is not the answer to the problem here ,it is the reason

It would behove the mass business media to focus on the real story here. The answer is not more welfare, this time for business, the answer is lower costs, regardless of a "high dollar".


Three months on, in August, Fisher and Paykel's share price has dropped further and margins will have been squeezed even more.

The good news for the company though is that the factory in Thailand will be closer to completion and therefore we will see a more competitive base for them to compete with the high volume producers.

Likewise the Kiwi dollar looks to be on a turn and with in conjunction with the cheaper production costs the savings will go straight to the bottom line.

Of course steel and other commodity prices have risen further still but Gary Paykel's shift to Asia means this will have less of a consequence than if they had remained bogged down in South Auckland.

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c Share Investor 2007

Government Market Manipulation - AIA/DAE Airport Deal

The comment today by Phil Goff, that his Labour Government was not in favour of Auckland International Airport(AIA)being merged with Dubai Aeronautical Enterprise(DAE) was either cunning or utterly moronic.

Regardless of motivation, the result was almost 5% being wiped off the share price today.

Institutions with this sort of sway, especially Governments, would be wise not to meddle in markets of any kind. We know this always ends in disaster.

Recent Government meddling in the New Zealand Share Market has seen "inopportune" comments made to markets by Prime Minister Helen Clarke, then one of her ministers, over Air New Zealand(AIR)and at least two ministers regarding Telecom (TEL) with resultant losses for New Zealand Share Holders.

New Zealands' Minister of Finance, Micheal Cullen (incidentally a Dr of History not economics)has also tried to influence the Kiwi Dollar by making negative comments about our economy. In tandem with Cullen our Reserve Bank thought they knew more about trading Forex than the likes of Warren Buffett, they tried to undermine our currency by selling the Kiwi and lost millions and the dollar increased by more than 5c against the Greenback within weeks and Buffetts' warchest got just bigger.

Today's negative comments about AIA and the Governments lack of backing were at best reckless naivety and at worst designed to lose market speculators in AIA stock money.

New Zealand doesnt own the Airport, it is owned by shareholders, Auckland and Manukau City Councils own a minority stake and like individual shareholders it is up to them whether they sell their property. Not those in Government who don't know or care about business and private property rights.

To use its privileged position to influence markets to their desired outcome/s is not only dishonest but shows a complete disregard for the way markets are supposed to work.Governments opposition to the AIA/DAE deal should have been made at the appropriate time, that is, at the conclusion of the Commerce Commissions decision. Never before.

Individuals and those in the Financial Industry, if caught, face penalties for market manipulation. Phil Goff should face censure and fines brought on it by the NZX or the Commerce Commission or both but is, as usual, unlikely to face any censure.

Mainstream Media have been, as usual, quiet on the subject.