Business and Commerce News

Consents for 2,470 new dwelling units, excluding apartments, were issued in June 2004. The trend series for the number of new dwelling units, excluding apartments, has been declining since October 2003.

In June 2004, consents for 977 new apartment units were issued, compared with 271 in June 2003 and 183 in June 2002.

Consents for 32,851 new dwelling units were issued in the year ended June 2004, up 3,777 (13 percent) from the year ended June 2003. The total number of new dwelling units for the year ended June 2004 is the largest total recorded for a June year since 1974.

Thirteen out of 16 regions recorded more new dwelling units in June 2004 than in June 2003. Auckland (up 478 units) recorded the largest increase when comparing the two June months, followed by Bay of Plenty (up 281 units) and Wellington (up 159 units). The Auckland region contributed 1,336 units (39 percent) to the total number of new dwelling units in June 2004.

The total value of consents issued for non-residential buildings was $335 million in June 2004. Consents issued for offices and administration buildings were worth $79 million (24 percent of the total) in June 2004. This was followed by consents issued for storage buildings worth $49 million (15 percent), factories and industrial buildings worth $39 million (12 percent), and hotels and motels worth $35 million (10 percent).

The total value of consents issued for all buildings was $1,008 million in June 2004, compared with $739 million in June 2003 and $591 million in June 2002. For the year ended June 2004, the total value of consents issued for all buildings was $10,123 million, up $1,820 million (22 percent) from the year ended June 2003.

After excluding one-off factors, Contact’s tax-paid adjusted earnings for the three months to June 2004 were $41.7 million, compared with $42.2 million in the same period the previous year.

“The June 2004 quarter further demonstrates the benefits of integration between generation and retail operations during periods of marked electricity spot price volatility.” said Contact’s chief executive, Mr Steve Barrett.

In the latest quarter, wholesale electricity revenues totalled $131.0 million, compared with $323.5 million in the June 2003 quarter, reflecting very high spot prices during the early winter months last year when low rainfall into hydro catchments coincided with uncertainty about the availability of thermal fuels.

“By comparison, the early months of winter 2004 were characterised by very high rainfall into hydro catchments, resulting in national hydro storage standing at 148 per cent of the historical average at the end of June - the highest level ever recorded for that time of the year,” said Mr Barrett.

“Given continuing high water storage levels, we expect that wholesale electricity prices are likely to remain below their average levels for the next few months” said Mr Barrett.

“However, looking beyond these weather induced effects, we expect that the longer term dynamics will predominate. Demand for electricity is growing steadily, while uncertainty about future fuel and technology choices for new investment in generation mean that current total generation capacity is becoming increasingly constrained.”

“In addition, we know that almost all choices for future generation will produce electricity at higher costs than in the past, putting upward pressure on electricity prices,” said Mr Barrett.

Reflecting ongoing competitive activity in the retail electricity market, Contact’s retail customer base was down slightly on the previous quarter. Contact had just over 600,000 customers as at 30 June 2004 (508,000 electricity and 92,000 gas).

“As previously announced, Contact is expanding retail coverage nationwide and this quarter launched retail offers into three new regions: Waipa, Marlborough and Central Hawkes Bay,” said Mr Barrett.

“We will be rolling out into remaining areas over the next few months,” said Mr Barrett. “Contact continues to remain active in customer acquisition with expansion of our retail electricity service nationwide and has an active customer retention programme in place.”

Earlier in the year, Contact signalled that it would consider a special dividend to distribute imputation credits to shareholders prior to any sale by Edison Mission Energy of its majority stake in the company. On 21 July 2004, Edison Mission announced the conditional sale of its stake in Contact to Origin Energy.

In light of this announcement, Contact’s Board has determined that the company will pay a fully imputed special dividend of 10 cents per share. The record date for the dividend will be 18 August 2004. This special dividend can be viewed as an advance on the final dividend which would otherwise be declared in November, and is designed to ensure that Contact holds negligible imputation credits at the time of the expected change in majority ownership.

Shareholders who are participants in Contact’s share top up plan will receive additional shares in lieu of the special dividend, and the close off date for shareholders not already registered in the scheme but who wish to participate will be 4 August 2004.

The NZTBC’s Executive Director, Bruce Wallace said, “The strength in revenue growth is significant in the light of the many commentators looking for a sharp slowdown. Television has recorded double digit quarterly growth for six consecutive quarters since December 2002 so it is no surprise that the trend has moderated however the industry remains confident about future positive growth.

Nielsen Media Research reported category growth over 2003 in computers, home improvements, and banking with significant increases in 2004 from automotive, retail, food, cosmetics and travel.

Wallace said that television companies had strong forward bookings which underlined the ongoing recognition by advertisers that television was their medium of choice.

The returns are from TVWorks (3/C4), Prime Television New Zealand, Television New Zealand (TV ONE/TV2) and SKY Network Television.

Statement made by David Graham, Chairman, Ballance Agri-Nutrients Limited

Productivity and efficiency gains assisted fertiliser cooperative Ballance Agri-Nutrients to post a Group operating surplus of $49.1 million on revenue of $416.6 million for the financial year ending May 31, 2004.

On the strength of this strong result Ballance has announced a combined end of year cash payout to its 17,800 farmer shareholders will be $18.4 million during a year in which it lowered fertiliser prices to five year lows.

By maintaining our payout at a level similar to last year’s high return, and combining it with price reductions that saved farmers well over $10 million on their fertiliser purchases, we have given farmer shareholders a double bonus during a year when there were concerns about future farm profitability and its affect on farm cashflow.

Sales volume at 1.4 million tonnes was similar to last year’s volumes.

Our total payout to shareholders for the 2003-04 season will be the equivalent of $18.58 a tonne. This payout will be made up of an average cash rebate of $15 a tonne, and an imputed divided of 8 cents per share (equivalent to a further $2.40 cash a tonne and $1.18 in tax credits a tonne for fully paid up shareholders).

During the year we deliberately balanced our twin objectives, that of making quality fertilisers available to members at the lowest possible economic cost, while securing our future success by reinvesting heavily in the business.

We invested $21 million in capital works that saw major improvements in our manufacturing, distribution and IT capabilities. A further $2.5 million was invested in our own research and development activities in addition to funding initiatives undertaken by Fert Research, the industry’s fully funded research association.

This investment was in the main funded from a strong $58.3 million operating cash flow, and at year end the company is in a positive funds position with short term deposits more than offsetting bank debt.

Our balance sheet is in a very healthy position, with the Group’s equity ratio including minority interests being 69.5% and total assets at year end $326 million.

Our strong financial performance came from our ability to continue to build on the gains and benefits achieved by maintaining our focus on delivering high quality plant nutrients and expertise to our farmer customers.

We also maintained a tight control on costs, with operational expenses representing only 17% of our total revenue.

While we benefited from a strong NZ exchange rate to the US dollar, which reduced raw material costs, this was more than offset by international freight costs and fuel prices spiking to unprecedented levels.

During the year Ballance introduced two new innovative products to the market – Bioshield grassgrub, a biological control agent, and n-care, a world first granular nitrification inhibitor that can be blended with nitrogen fertiliser.

As well as having major commercial potential and offering environmental benefits in New Zealand, the potential exists for the intellectual property associated with both to be marketed overseas.

The value of the Group’s 100% owned Kapuni urea plant was written down by a further $20 million (it was also written down by $20 million last year), reflecting the ongoing uncertainty about the ability of the operation to gain long term gas supplies at prices that will allow us to manufacture urea at commercially acceptable prices.

We already import significant supplies of nitrogen fertiliser as demand is higher than can be manufactured at Kapuni.

The write downs of the past two years reflect a prudent approach to Kapuni’s future, and if long-term supply contracts at realistic prices cannot be achieved the plant will be closed.

Our 100% owned aerial top dressing operation, Super Air, consolidated its position as a strong central and north North Island operation. Super Air’s fleet consists of 17 aircraft.

The board has every reason to believe that the 2004-05 financial year will represent another good year for Ballance in terms of volume sales and financial performance.

We have completed many of the major capital expenditure projects necessary to make our operations efficient and competitive, and we have low levels of debt.

In the current year our total planned capital expenditure is a manageable $24 million, and this will be funded from cash flow.

Ballance is committed to remaining a specialist nutrient management cooperative, and will maintain its emphasis on delivering quality products, expert advice, convenient distribution, and assisting farmers increase their farm output while operating in an environmentally sustainable way.

Director of Fair Trading Deborah Battell said that in the Commission’s view, dealers have now had sufficient time to get their procedures in order since the regulations took full effect in December 2003.

The regulations were introduced to provide a standardised mechanism for consumers to obtain information about used motor vehicles, requiring the display of a Supplier Information Notice or SIN on used motor vehicles offered for sale. The Commission is responsible for enforcing the regulations under the Fair Trading Act.

Ms Battell said that to date, the Commission had conducted inspections of 89 premises in the greater Auckland, Wellington and Christchurch areas. The inspections focused on registered motor vehicle traders with permanent sales yards.

“Although the majority of registered traders were using the SIN cards, 64 percent of traders displayed SINs that were incorrectly filled out or did not comply with the regulations in terms of format. As a result, the Commission has issued 57 warnings or compliance advice letters,” Ms Battell said.

Some of the recurrent issues to emerge from the inspections included the failure by dealers to present the card in the format required in the regulations or to have the cards prominently displayed. One motorcycle dealer did not have any SIN cards displayed on vehicles for sale. Dealers should be aware that any motorcycle over 60cc falls under the regulations.

In addition, a large number of dealers failed to provide accurate or adequate information on the SINs as required under the regulations, including current price information, warrant of fitness expiry dates, trader registration details, VIN/chassis numbers and odometer information.

Ms Battell said the Commission was particularly concerned that dealers were seeing SIN cards as a marketing tool and were therefore modifying them to suit their own needs.

“SIN cards were designed to provide a standard set of information to consumers. It is important their format is consistent and that all information is filled out so that consumers can easily make comparisons and therefore make better informed purchasing decisions.”

Going forward, the Commission will extend its inspections to areas outside the three main centres and will begin inspections of car fairs and road side sales.

“The Commission will start to take stronger enforcement action, including taking prosecutions, where it finds failure by traders to comply with the regulations, particularly in cases where the same traders are breaching,” Ms Battell said.

The exemptions relate to Origin’s intended acquisition of the controlling interest in Contact Energy Limited currently held by subsidiaries of Edison Mission Energy.

The exemptions have been approved subject to a number of conditions including a requirement that Origin make a related takeover offer to all the minority shareholders of Contact Energy.

The principal exemption will enable Origin to acquire Edison Mission’s controlling interest in Contact Energy at an upstream or holding company level, rather than at the direct Contact Energy shareholder level. The conditions of that exemption include:

certification by an independent adviser approved by the Panel; and

appropriate certification of equivalence by the directors of Origin and of Mission Energy.

These certifications are intended to ensure that the consideration being paid by Origin to Edison Mission for its controlling interest in Contact Energy is the same as the consideration that will be offered by Origin to Contact Energy shareholders under the takeover offer required to be made by Origin.

Another exemption enables Origin to become the controller of 100% of the voting rights in Mission Contact Finance Limited at the same time that it obtains Edison Mission’s controlling interest in Contact Energy.

The exemptions will be granted by the Panel after various procedural steps, including drafting of an exemption notice by Parliamentary Counsel Office, are completed.

The lower population growth during the June 2004 year was due to a fall in permanent and long-term migration. Permanent and long-term arrivals exceeded departures by 22,000 in the June 2004 year (42 percent of the population growth), whereas in the June 2003 year the net gain from permanent and long-term migration was 42,500 (61 percent of the population growth). Natural increase (excess of births over deaths) was 30,200 in the June 2004 year, an increase of 2,700 when compared with the June 2003 year (27,500).

The population aged 65 years and over (65+) continues to be the age group with the highest population growth. The 65+ age group has grown by 69,600 (16.7 percent) over the last decade, to reach 485,600 at 30 June 2004. The working-age population (15–64 years), which accounted for 66.2 percent of the population in the June 2004 year, was estimated to be 2,690,200 at 30 June 2004. This is an increase of 321,400 (13.6 percent) when compared with the June 1994 year. The number of children aged under 15 years grew by 50,300 (6.0 percent) during the same 10-year period, to reach 885,500 at 30 June 2004.

The terms of the settlements have the unanimous approval of the Creditors’ Liquidation Committee and are confidential. In the Liquidators’ opinion the settlements have considerably shortened the time needed to complete the liquidation and saved the creditors substantial administration and legal costs.

The company’s receivership has yet to be finalized and settlement negotiations with the pilots’ representatives in relation to a number of employee claims are at an advanced stage. The other major outstanding issue before liquidation of the company can be completed is an application by the liquidator of Tasman Pacific Regional Airlines Limited, a subsidiary of the company, that both liquidations be pooled - this application is currently before the Court.