Business stories from the past week, compiled by Jason Maywald.
1) News.com.au – ANZ delivers flat $6.47 billion profit in ‘challening conditions’
The major lender has flagged record low interest rates and increased competition for its relatively poor profit result.
ANZ Bank has been stung with a sharp decline in its core Australian division due to a “challenging” year weighed down by record low interest rates and increased competition.
The major lender will pay a partially franked dividend for the first time in 20 years after low interest rates and customer compensation dragged on its local retail operations and led to a flat full-year profit of $6.47 billion.
The bank held its final dividend at 80 cents per share but reduced the franking level from 100 per cent to 70 per cent for its first partially franked dividend since 1999.
Chief executive Shayne Elliott said the franking decision was a result of pressures facing the profitability of the bank’s Australian business, which posted a 12 per cent fall in profit to $3.2 billion amid record low interest rates and strong competition.
2) TheAustralian.com.au – Google to buy Fitbit, in consumer wearables race
Google reached a deal to buy wearable fitness products company Fitbit Inc. for roughly $US2.1 billion ($3 billion), a move that intensifies the battle among technology giants to capture consumers through devices other than smartphones.
For Google, the deal marks a further push into health as it faces regulatory threats to its massive internet-search and advertising business. It also puts Google in renewed and direct competition with Silicon Valley neighbour Apple, which in the past week said rising sales of wearables and related services were becoming a bigger driver of its business.
Google’s parent Alphabet Inc. will spend just a sliver of its $US121 billion cash hoard to branch out with Fitbit’s products. Alphabet’s $US2.1 billion bid was for $US7.35 a share in cash, a 19 per cent premium to Fitbit’s closing price Thursday and more than 70 per cent above where the stock was trading last week before deal talks were first reported by Reuters.
3) TheGuardian.com/au – Australian aluminium smelters ‘not sustainable’ due to high power costs, Rio Tinto says
Mining giant Rio Tinto says its Australian Aluminium smelters, which employ more than 2,600 workers, are not sustainable at current power prices.
The company runs three smelters in Australia, which are under financial pressure due to the high price of electricity, which makes up about a third of their costs, and the low price of aluminium due to a flood of cheap supply coming from Asian competitors.
The resources minister, Matt Canavan, has recently championed the industry, saying Australia was “one of the best aluminium producers in the world” and claiming it needed a continued supply of “cheap baseload” electricity from coal.
“If we turn our back on coal, you turn out the lights on aluminium, it’s as simple as that,” he told ABC Radio last week.
However, speaking in London on Thursday night, the chief executive of Rio Tinto’s aluminium division, Alf Barrios, issued a blunt warning that current prices from coal-fired power were too high.
He said this was despite “fantastic work” done by the team at the Australian smelter division, Pacific, to improve the performance of the plants.
4) TheAustralian.com.au – It’s time for R.M. Williams to walk the talk
Half a billion dollars is what the private sellers of R.M. Williams would be happy to take to part with the legendary Australian bootmaker.
For the past few years, the business has been 82 per cent- owned by L Catterton, a fund backed by LVMH and the richest man in Europe, Bernard Arnault, 13 per cent by fund manager for industry super IFM Investors, and 5 per cent by Hugh Jackman, the undeniable character himself.
Goldman Sachs is running the sale, information memoranda and a flyer with Jackman’s snap on the back have been sent to prospective buyers and proposals are expected back in mid-November. The whip has cracked.
The man charged with reinvigorating R.M. Williams, founded in 1932 by Reginald Murray himself, is CEO Raju Vuppalapati. And according to the pitch, the company now boasts 12 successive quarters of sales growth and eye-watering projections on EBITDA going forward.
By luck or good management, last weekend in London was the launch of the company’s flash new Yard Boot 365. A departure from tradition, R.M. Williams teamed up with lauded Australian designer Marc Newson — he of the Lockheed lounge — to create a boot which Vuppalapati calls the next icon for the company.
5) GoldCoastBulletin.com.au – Kmart boss’ plan to transform Target to rival Myer and David Jones
The discount department store institution is having one last throw at the stumps as it embarks on a major transformation.
It’s make or break time for Target.
That’s the verdict from one of Australia’s leading retail commentators Gary Mortimer as the discount institution sets out on a transformation to turn around shrinking sales.
Target has been an Aussie favourite for decades but the success of its sister discount chain has diminished its relevance.
Over the last few years, Kmart has become a go-to hotspot for stylish goods sold at a bargain price, and this has cannibalised its Wesfarmers stablemate.
Ian Bailey — boss of the pair of discount department stores — wants to reposition Target and create a clear differentiation between the two.
The plan is to reduce total floorspace across the country by 20 per cent. He also wants to bump Target up to the next category of retailers, selling finer apparel and fabrics.
This plan will edge the chain closer to the middle market at the point of the market below the once prestigious David Jones and Myer.