Showing posts with label Australia. Show all posts
Showing posts with label Australia. Show all posts

Friday, December 7, 2012

WORLD: FOOD WASTE

Mind your wallet if you waste...

To make the matter worse, rather horrifying, this phenomenon is not just confined to the US but can be felt and found across the globe. Consider this: half of Australia’s landfill is made out of food waste. Likewise more than 30% (worth £10 billion) of all food purchased in the UK never reaches destination (read: the stomach), 30% of total fish is lost in Africa due to discards, post-harvest loss and spoilage. If one collects all the food found in bins in the UK, the whole of Wembley stadium can be covered eight times in a year! Japan leads the race hands down by wasting 20 million tons of food annually. The other side of the story is even more interesting. The University of Arizona believes that if Americans cut their food waste by 50%, it would reduce the environmental impact by 25%, while researches in the UK estimate that if food wastage is contained, the reduction in CO2 emission would be equivalent to pulling off 20% of cars from the UK’s roads! The whole contention of donating 0.7% of GDP to developing countries will be redundant if the Hayashi Ya model is replicated all across. What an idea Hayashi Ya!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

For More IIPM Info, Visit below mentioned IIPM articles.

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Friday, August 31, 2012

Global Investment Guru Jim Rogers

Global Investment Guru Jim Rogers, who Co-Founded the Quantum Fund along with George Soros (The Fund Returned 4,200% in ten years, as compared to the S&P 500’s 47% in the same duration), believes that commodities are a strong investment avenue for indian firms, and that the govt. should cooperate to make india inc. more profitable

Then again, Indian tourism also has a bright future, as even the Chinese can come to India easily now for the first time in 300 years and tourism can be of great potential especially when there is peace between India and China now. The natural resources in India especially mineral wealth ensure a great future and with reforms coming up in infrastructure and the promises made by the government on infrastructure, therein lies a huge potential. If India finds competent companies to look on and manage these sectors, all of them have a very bright future.

But, India is failing to attract investors because no one wants their money to be blocked, as investors will never want to move their money out of US or Australia to a country like India where their money is almost trapped. Bonds are one of the best investment options and I really want to look up to the bond market in India, but it is not open. India has a huge population and many people can invest in bonds but the problem lies in the fact that the currency is not convertible and rigid barriers to entry of foreign investors does not allow the Indian bond market to open up properly. It is one of the best times to open up the bond market, making India a hot investment destination and Indian companies the biggest profit making corporations in the world.

For that to happen, India must open up to capital account convertibility, which is of great significance to corporates around the world. India should actually develop an offshore bond market as most of the Indian citizens don’t have money offshore, and it’s really strange that India still has a non-convertible currency. Indians are investing all around the world but there has to be some money that should even come to India. And investors will always take it as a great opportunity, if they allow reforms. The politicians in India should actually realise the benefits of currency convertibility in a globalised economy. And with the sovereign debt crisis going on in the Europe, investors are sure to move to countries which are not in trouble, and India is certainly a big destination for these investors, as they will prefer their money to be safe in a developing economy than a debt-shadowed economies like in EU.

There is a strict need of reforms in the Indian system to make it a hot destination for the investors. India has a debt to GDP ratio of almost 90%, which is actually alarming and studies show when you reach that level, you do not grow significantly and you have trouble attracting anyone. In India’s case, debt is going to rise continuously. Even if you look at the government’s budget projections, debt is going to rise for the years to come. Without some tap on debt and the non-convertible currency, its surely a big problem for Indian companies to dream about a windfall of profits, as there would be no investments. So while China will continue receiving all the FDIs, India will have to be satisfied with just FIIs. India as a whole and Indian companies should look at various smart strategies to build upon their bottomlines. But they need government cooperation too. The first thing is to look at core strong sectors and encourage the foreign companies to invest in the country. Believe in core sectors, reforms, equity and bonds, and profits will automatically follow.



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Wednesday, August 1, 2012

Big Oil’s ‘split’ting headache

The world’s largest publicly-listed oil majors did achieve operational efficiencies by riding the M&A wave that began post the Asian Crisis. But times have changed and with their merged state being questioned today, some are mulling over a new strategy to split upstream and downstream operations. Is this a wise move?

The reason was obvious. On a cold December evening in 2003, ExxonMobil’s (former) CEO, Lee Raymond, made public his decision to extend his occupation of the corner office until mid-2006. Why? Integration at the four year-old, $230 billion-worth merged entity called Exxon Mobil was still incomplete, rendering it unfit in terms of “operational efficiencies” to be handed over to the younger oilman Rex Tillerson. Raymond wanted to give Tillerson more face time with Wall Street. In a little over two years, Tillerson was handed over the reigns. Since then, onlookers have watched Exxon’s share chart rise with their mouths gaping. If Tillerson today seems as though he knows his way around rigs, it is because he has steered handsomely a big ship, for over half-a-decade. [Today, had Exxon been a nation, it would be counted as the fourth-largest oil producing country, with a daily production volume of 4,968,000 barrels of oil-equivalent per day (boepd), only behind Russia, Saudi Arabia and US (source: US Energy Information Administration).] For Tillerson, the “grow big” story has worked. He has toiled hard to make the company the most integrated player in the oil business today, through superior capital allocation plans and a relentless pursuit of technology and operational improvement. It has delivered the highest returns on capital relative to peers since the past five years. But Exxon’s tale only represents the pretty part of the merger mania. Conoco Phillips is on the other end of the see-saw.

There is a new fad in town. That of merged entities trying their hands at spin-offs to improve efficiencies and market value. Even experts and Wall Street bankers – who had previously championed the cause of the inorganic way forward – are today questioning whether these individual companies would have been better off as individual entities, and more valuable in terms of aggregated market capitalisation. Truth is oil companies, over the decades, have increasingly lost control over the price of oil, which fluctuates at the whims and fancies of oil producing nations and the derivatives market. This further means that for big oil, improving on operational efficiencies has become most critical. And to achieve that, the not-so-happy merged oil companies like ConocoPhillips are contemplating a split of their upstream and downstream operations into two independent public entities – one dealing with exploration and production (upstream) while the other with refining and marketing (downstream).

And such contemplation – to undo what the merger wave did a decade back – is coupled with action. Months after Marathon Oil (an oil and gas firm with revenues of $73.6 billion in FY2010) split into two independent entities in January 2011 (Marathon Oil – the upstream arm, and Marathon Petroleum – the downstream arm), ConocoPhillips (COP), the world’s third largest integrated energy company (on July 14, 2011) followed suit. Although it is too early to analyse the outcome of this move, fact is that the popular market reaction has not been too encouraging.

In the case of Marathon, a day before the announcement of the split, its m-cap stood at $31.3 billion. Today, it is down to $30.5 billion. Definitely not a positive sign. If a split unlocks value (as it happened in the case of Motorola Inc., ITT, Daimler Chrysler), it starts showing loudly in the investor crowd almost instantly. In case of Marathon, it didn’t. Our case of analysis to understand why a split for an integrated oil company is a tough pill to swallow (and better not undertaken for operational reasons), is COP. Since the announcement, it has shed value to the tune of $16 billion – down by 15%. Why is it that the investors are not optimistic about the split strategy to work for COP? Given that the company has already closed much of the valuation gap with its industry peers – exceeding it in some cases – any extraordinary appreciation in m-cap over the short term is highly unlikely. Also, there are factors that will make all gains from the split partially ineffective. The first and foremost being its recent walk on the inorganic path, which has increased the job for the taskforce supposed to work on the split. Acquisitions have dominated its growth strategy during the past 4-5 years. The company bought American natural gas assets (Burlington Resources), Russian oil supplies (20% stake in Lukoil), and stranded gas in Australia (Origin Energy). These “expensive” deals culminated in a $34 billion goodwill-impairment charge. With its ill-timed acquisitions and a $11 billion share repurchase plan failing to deliver returns, the investors understand that this split strategy is “only” a survival attempt.


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Saturday, July 21, 2012

The new age Commercial Plane was not Airbus

The Worst start to building The new age Commercial Plane was not Airbus’. It was Boeing’s. Its biggest project – The Dreamliner 787 – has turned a Nightmare. There are other problems too. What went Wrong with Boeing? & can CEO Jim McNerney play Captain America? 

What caused Boeing’s health to deteriorate? McNerney has forever been known as a game-changer – a CEO whose radical change ways revived a corporation like 3M (it was under him that the company slimmed down, returned to profit-making and even dropped its old name – Minnesota Mining and Manufacturing). He tried the same at Boeing. To ensure that bottomlines improve, he adopted the outsourcing model. The idea was that instead of working with the traditionally accepted manufacturing practices, Boeing would work with engineers and labourers outside the company. It first started with the 787 program in 2005 and was then replicated on the 747s & 777s families. That meant trouble. A typical 787 (& 777) has 70% of its parts manufactured in Japan, Korea, Sweden, Canada, Italy, Australia, France, Germany and 15 other locations in US, that Boeing workers in Seattle put together. The entire exercise was destined to end up as a fragmented engineering act and a complex set of 50 confused suppliers, with minimum check on quality and overstretched supply-chain. McNerney took the big risk, Boeing took the beating. While its reputation & revenues did fall, the associated R&D costs have not only hurt bottomlines in the past year by up to $4.1 billion, but also threaten to erode the same in the years to come, as Robert Spingarn, analyst at Credit Suisse tells B&E, “Many bullish analysts and investors have been relying on declining 787 and 747-8 R&D to allow for meaningful earnings growth. But, even as these development programs inch closer to completion, the prospect of new R&D for a refreshed or new 777 and a clean-sheet 737 may offset any benefit. Either way, upside could be an issue if R&D cannot be tamed and if Boeing’s Defense business weakens beyond expectations.”

So what can Boeing do to expedite the process and ensure that cost control (outsourcing) and timeliness go hand in hand in future? Airbus, which contracts 52% of its aircraft body-making, is the answer. It assembles parts (in France & Germany) manufactured in 12 locations in the four nation cluster – Britain, France, Germany and Spain. And if cost reduction be the prime condition, Airbus’ assembly line for the smaller A320s in China is quite an example. The solution to convert Boeing’s global outsourcing mess into a strategic geographic advantage lies in creating regional assembly hubs. Like Airbus, it could begin with an assembly station in China for the new planes, to cater to the demand in the Asian region (like the $10 billion order from Air China & HNA Group for 5 747-8s, 6 777s & 32 787s received in March 2011). And considering that Boeing has to fast increase delivery pace in order to cater to a fresh demand, the newer assembly stations will only reduce its order-delivery lag. The question now is not whether it can cultivate a conservative approach to outsourcing or not. Rather, it is how Boeing can learn fast and act. Airbus, despite a more calculated approach saw its jumbo A380 suffer a couple of initial delays, resulting in $24.8 billion in added costs & lost orders between 2006 & 2009. Boeing has already lost many times more. Question is – will the hole in its pocket get bigger?

Fire on board, to software integration issues, to discovery of weak points in the composite metal used, to an in-flight engine shutdown, the Dreamliner has been more of a ‘nightmare’liner for Boeing. Though experts are of the opinion that this is not the end of the road for Boeing, and that revenues will continue flowing despite the fires and engine malfunctions of the 787s & 747s. The hefty order-log already recorded and expectations of huge demand from Asia and replacement orders in US & Europe will help its cause, as New York-based Alexandria Carroll of Goldman Sachs tells B&E, “For the near term, 787 & 747 challenges have the potential to create further volatility. However, we expect very strong new aircraft order demand, strong global air traffic, and the company’s supply restraint through the last cycle to all be larger positive drivers of the stock than challenges, which are a negative. The associated R&D tailwind catalyst are likely to be realised over the next few quarters.” Adds S&P’s Tortoriello, “Emerging economies in Asia and the Middle East will continue to improve, which should sustain demand for narrow-body aircraft, supporting Boeing’s total backlog of about 3,400 aircraft as of December 2010. In addition, US airlines continue to take deliveries to improve fuel efficiency of aging fleets. Further, the third-quarter 2011 delivery of the 787 should act as a catalyst for the stock, with about 850 aircraft recently on order.” While Goldman Sachs estimates revenues for Boeing in FY2011 to to touch $67.97 billion (a y-o-y rise of 5.69%), the figure as per Credit Suisse stands at $69.76 billion (rise of 8.48%).

Having said thus, McNerney has to realise that the storm will only gather over the coming quarters, faster and stronger than it did in the three years gone by. It’s more than half of his company’s revenues at stake (assuming that the Pentagon will continue to patronise Boeing’s Defense business as EU does to EADS-Airbus), and the clock for him is running backwards. He’s done nothing to make investors smile (Boeing’s Mcap has fallen by $2.13 billion since he took over in June 2005) and McNerney might be out before Boeing even gets out of this rut. In short, he has little time to prove that an intergalactic outsourcing strategy can work. If it hasn’t in seven years, it perhaps never will. Many airlines have bet their future on Boeing, and this equation can turn turbid sooner than expected, irrespective of how many dollars and elbow grease the new projects have called for. And it is already showing signs of that.


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