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CSR Planning to Increase Sugar Value

CSR Ltd., Australia's second-largest maker of building products, is planning to spin off its sugar unit to take advantage of a 27 percent jump in prices for the sweetener in the past year and improving capital markets.

CSR Ltd., Australia's second-largest maker of building products, is planning to spin off its sugar unit to take advantage of a 27 percent jump in prices for the sweetener in the past year and improving capital markets. The demerger plan is targeted for completion by the end of the year ending March 31, the Sydney-based company said today in a statement. The sugar business is valued at A$1.2 billion ($958 million), UBS AG said in a report last month. CSR has a market value of A$2 billion. Shares of CSR, Australia's biggest sugar refiner, rose 6 percent on investor optimism for the plan, flagged by the company more than two years ago. Sugar is the best-performing commodity in the past year because of a world wide production shortfall. "They'll lose diversification of earnings but that will probably be viewed as less significant than investors now gaining a pure exposure to sugar and building materials separately," said Will Seddon, who helps manage $250 million at White Funds Management Pty. in Sydney.

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Australian Agriculture Exports May Achieve $26 billion

Australia, the world's fourth-largest wheat exporter, may produce more of the grain than previously predicted after rain lifted crop prospects, National Australia Bank Ltd. said July 22. Australian farmers sow crops including wheat, barley and canola from about April to June for harvest from November. Wheat production in Australia will rise in the next financial year, Penm said, without giving precise figures. An El Nino weather pattern may become a risk for Australian farming conditions later this year, he said.

Australia's farm exports may rise 2 percent in the year to June 30, 2010, helped by "relatively favorable" crop conditions and a recovery from the global recession, the country's commodity forecaster said. Total exports from farming may total A$32 billion ($26 billion), the chief commodity analyst for the Australian Bureau of Agricultural and Resource Economics, Jammie Penm, told a grains conference in Melbourne today. Increased grain demand may be offset by a rising Australian dollar, which would reduce earnings on export sales, he said. The Canberra-based bureau last month predicted the nation's wheat crop will increase 2.7 percent to 21.9 million metric tons in the year ending June 30, 2010, with exports surging 14 percent to 14.6 million tons. Barley output will jump 13 percent to 7.7 million tons, with exports climbing 12 percent to 4.4 million tons, the agency said June 23. Pricing Volatile Grain prices in Australia are likely to remain volatile in the wake of deregulation that removed the nation's monopoly trading mechanism, said Michael Iwaniw, managing director of ABB Grain Ltd., the country's biggest barley exporter. The removal of the "single desk" for grain exports has created a void, with no single entity representing the industry, he said. Growers are warehousing more grain and genetically modified crops will eventually become "widespread'' in Australia, said Iwaniw, who today brought forward his departure from the Adelaide-based company to the end of this month. Canada's Viterra Inc. agreed in May to acquire ABB for A$1.6 billion. Earlier at the conference, Australian Agriculture Minister Tony Burke said the government could not close its eyes to increasing the use of genetically modified crops. The nation needs to lift its farm productivity in the next three to five years and genetically altered crops may be part of that, he said.

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Costco to Invest $ 22 Million in Australia

The store on the fringe of Melbourne's central business district will be followed by an outlet in Sydney's western suburbs before Costco looks at more openings in the nation of almost 22 million, Australian Managing Director Patrick Noone said in an interview. The Issaquah, Washington-based retailer enters a market where Woolworths and Wesfarmers' Coles unit control almost three quarters of supermarket sales. "We'll have to see a competitive response from Coles and Woolworths," said Saxon Nicholls, who manages the equivalent of $439 million at Herschel Asset Management Ltd. in Melbourne. "The Australian retailers already have substantial scale in the market and it will depend on Costco getting its own scale in Australia."

Costco Wholesale Corp., the largest U.S. warehouse club chain, expects to lower Australian grocery prices with its first outlet in the country, providing new competition for Woolworths Ltd. and Wesfarmers Ltd. Costco, which will charge as much A$60 ($49) in annual membership fees to Australian customers, will open its Melbourne outlet Aug. 17 with a 14,000 square meter (151,000 square foot) store, almost three times the size of typical supermarkets. The store on the fringe of Melbourne's central business district will be followed by an outlet in Sydney's western suburbs before Costco looks at more openings in the nation of almost 22 million, Australian Managing Director Patrick Noone said in an interview. The Issaquah, Washington-based retailer enters a market where Woolworths and Wesfarmers' Coles unit control almost three quarters of supermarket sales. "We'll have to see a competitive response from Coles and Woolworths," said Saxon Nicholls, who manages the equivalent of $439 million at Herschel Asset Management Ltd. in Melbourne. "The Australian retailers already have substantial scale in the market and it will depend on Costco getting its own scale in Australia." Jim Cooper, a Melbourne-based spokesman for Coles, said the retailer would consider Costco's impact once the first store is open, declining to comment further. Benedict Brook, a spokesman for Woolworths, declined to comment. Low Profit Margins "We operate with low margins and with our membership fees, we can sustain low margins," Costco's Noone said. "Lower prices are important because people shop with us to get value." The Australian outlets will carry about 3,800 product lines, compared with 27,000 in some Coles outlets, with some variation for local tastes, Noone said. Instead of bulk packages of peanut butter popular in the U.S., Costco may stock items such as large sizes of Vegemite, the salty Australian spread. Costco's impact on Coles and Woolworths may extend beyond any market share it wins, as the company's practice of pricing goods as much as 15 percent below rivals is likely to influence perceptions of value, said analysts at Macquarie Group Ltd. "Membership fees allow Costco to operate at low margins and are a fundamental difference in the business model," Macquarie said in a July 7 note to clients. "All other retailers of like products could be forced to price within these bounds, depending on consumer response to Costco." Unemployment Rising The company enters a market where unemployment is increasing. Australia's June jobless rate rose to the highest in almost six years as the global recession reduced demand for commodity exports and mining companies fired workers. The nation avoided falling into recession this year after the government distributed more than A$12 billion in cash handouts to individuals and families. Noone, an Australian who has worked for Costco for two decades, said the size of the Australian network will depend on the success of the first two outlets, with the company typically targeting a ratio of one store per 500,000 people. "It all depends on how well we do what we say we are going to in Australia," Noone said. "When I was in Canada we started building warehouses to that ratio but when I left our brand name was such that we could build to 200,000 or 300,000 people and have a successful store." Coles and Woolworths are trialing hardwood floors, redesigned fresh produce sections and new shelving in their supermarkets. Costco is sticking with its warehouse design that uses concrete floors, exposed light fittings and inventory stacked on wooden pallets. The Australian unit has no plans to sell coffins, as some of its U.S. outlets do, Noone said. He expects the product range to evolve as Costco gains acceptance from consumers. "If we can get good volume we will stock it and sell it," Noone said. "We look at areas we can show great value and that is why we sell diamonds and liquor and candy and all the other things."

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Australia's Central Bank Kept Interest Rates Unchanged

Australia was one of the few major economies including China and India to grow in the first quarter as government cash handouts and rate cuts stoked consumer spending. Growth may slow after recent reports showed exports dropped to a 14-month low, bank lending fell, home building approvals declined by the most since 2002 and job advertisements tumbled for a 14th month.

Australia's central bank kept interest rates unchanged for a third month amid signs the lowest borrowing costs in half a century and government spending are helping the economy skirt the global recession. There is still "some scope for further easing of monetary policy, if needed'" said Stevens, who slashed borrowing costs by a record 4.25 percentage points in six moves between September and April. "Economic conditions in Australia have to date not been as weak as expected a few months ago," he added. The Australian dollar rose to 79.86 U.S. cents at 3:16 p.m. in Sydney from 79.67 cents just before the decision was released. The two-year government bond yield fell 1 basis point to 3.81 percent. A basis point is 0.01 percentage point.

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CSR Planning to Increase Sugar Value

CSR Ltd., Australia's second-largest maker of building products, is planning to spin off its sugar unit to take advantage of a 27 percent jump in prices for the sweetener in the past year and improving capital markets.

CSR Ltd., Australia's second-largest maker of building products, is planning to spin off its sugar unit to take advantage of a 27 percent jump in prices for the sweetener in the past year and improving capital markets. The demerger plan is targeted for completion by the end of the year ending March 31, the Sydney-based company said today in a statement. The sugar business is valued at A$1.2 billion ($958 million), UBS AG said in a report last month. CSR has a market value of A$2 billion. Shares of CSR, Australia's biggest sugar refiner, rose 6 percent on investor optimism for the plan, flagged by the company more than two years ago. Sugar is the best-performing commodity in the past year because of a world wide production shortfall. "They'll lose diversification of earnings but that will probably be viewed as less significant than investors now gaining a pure exposure to sugar and building materials separately," said Will Seddon, who helps manage $250 million at White Funds Management Pty. in Sydney.

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Australian Airlines Addresses $66 Million Shortfall

National Australian airline Qantas has committed $66 million to cover a shortfall caused by the current economic crisis.

National Australian airline Qantas has committed $66 million to cover a shortfall caused by the current economic crisis. The injection of funds will be spread over three years in order to reflect "the adverse performance of financial markets over recent months". Previously, there were concerns that Quantas could be forced to inject an estimated $283 million to fix shortfalls caused by investment losses. Merrill Lynch recently estimated that the investment losses have cost Quantas' pensions plan $394 million since last June, turning a $296 million surplus into a a $98 million deficit.

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Canadian Fund Bids for Australia's Mac Satellite

A Canadian superannuation fund has launched a friendly $1.37 billion takeover bid for Macquarie Communications Infrastructure Group, in a move that put the squeeze on short sellers yesterday across the constellation of Macquarie's struggling listed satellite funds.

A Canadian superannuation fund has launched a friendly $1.37 billion takeover bid for Macquarie Communications Infrastructure Group, in a move that put the squeeze on short sellers yesterday across the constellation of Macquarie's struggling listed satellite funds. Coming on the last day of the group's financial year, the deal should also bring in some eleventh-hour fees and help justify asset valuations which have come under scrutiny. The Canadian Pension Plan, a government-backed fund, will offer $2.50 per MCG stapled security and its associated management vehicle. While this represents a substantial premium to Monday's closing price of $1.50 for the satellite fund, which owns a collection of broadcast assets including television transmission towers, the offer falls well short of MCG's record high of $6.83.

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Australian Banks Optimistic

The big bank bosses have declared Australia has weathered the worst of the global financial crisis, with some predicting official interest rates as low as 2 per cent later this year as the Reserve Bank attempts to keep the economy pumping.

The big bank bosses have declared Australia has weathered the worst of the global financial crisis, with some predicting official interest rates as low as 2 per cent later this year as the Reserve Bank attempts to keep the economy pumping. Bankers acknowledge their image has taken a battering in the crisis, with National Australia Bank admitting there was a perception banks had been profiteering from fees or failing to pass on in full interest rate cuts. In a wide-ranging speech to the Australia-Israel Chamber of Commerce, NAB's chief executive, Cameron Clyne, said banks had failed to explain the pressures on their own funding costs and how these had affected their ability to price mortgages. Still, Mr. Clyne remained upbeat, given the signs of confidence emerging in economic indicators. With markets finally responding to moves by governments around the world to stabilize the financial system, he said the downturn in Britain and the US appeared to be "relatively close to the bottom".

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Australian Shares Surge to One-Month High

Australian stocks jumped 3.1% to a one-month closing high as banks and mining companies climbed on hopes for an economic recovery taking hold, while agriculture stocks were boosted by strong rains.

Australian stocks jumped 3.1% to a one-month closing high as banks and mining companies climbed on hopes for an economic recovery taking hold, while agriculture stocks were boosted by strong rains. At the close, the benchmark S&P;/ASX200 index was up 3.1%, or 103.5 points, to 3451.9, while the broader All Ordinaries index was up 2.9%, or 96.1 points, at 3393.4. The Australian dollar continues to get a boost from the stronger equities prices. It had recently lost some ground to 66.09 US cents, but was still up from yesterday's local close of 66.07 US cents. It was also worth 64.99 yen, 50.75 euro cents, 46.794 British pence and $NZ1.244. The three-day rise in the stock market has provided some confidence to investors and some expect the uptrend to continue.

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Australia's Packer Buys His Way Out of US Casino Deal

James Packer's company Crown has agreed to fork out the best part of $400 million to save the company from having to go ahead with a $1.75 billion US casino deal made at the top of the market.

James Packer's company Crown has agreed to fork out the best part of $400 million to save the company from having to go ahead with a $1.75 billion US casino deal made at the top of the market. The suite of three casinos Crown had agreed to buy have plummeted in value since Crown signed an agreement nearly 15 months ago. The compromise deal is a face-saver for both sides and was welcomed by the market with shares in Crown closing up 70c, or 13 per cent, to $5.90. The deal came after intense negotiations between Crown and Millennium Gaming Inc, which owns the casinos - two in Las Vegas and one in Pennsylvania.

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Australia Pledges $6.4m to Zimbabwe

Australia says it will provide funding to Zimbabwe, the first major donor to announce aid to the government since the start of power-sharing last month.

Australia says it will provide funding to Zimbabwe, the first major donor to announce aid to the government since the start of power-sharing last month. Canberra is providing $6.4m in direct aid to restore basic water, sanitation and health services. But Australia was "under no illusions about the fragility of the political situation," Foreign Minister Stephen Smith said in a statement. Analysts say the new government will be heavily dependent on Western donors and investors to rescue Zimbabwe's crippled economy. The US and UK governments have said they will only restore aid to Zimbabwe when they see evidence of genuine power-sharing between the rival parties.

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