REX collapses, BHP spends $3b on copper, Chinese back buying Aussie wine

Published Jul 30, 2024, 6:45 PM

Wednesday 31 July 2024

Regional airline REX falls into administration. 

And more, including:

  • BHP spends $3 billion as it chases copper assets in South America 
  • Canberra warns Australians in Lebanon to leave immediately
  • And Chinese buyers rush to purchase Australian wines

Plus don’t miss the latest episode of How Do They Afford That? - debt repayment strategies, from the debt snowball to the debt avalanche. Get the episode from APPLE, SPOTIFY, or anywhere you listen to podcasts.

Regional airline REX falls into administration, VHP spends three billion dollars as it chases copper assets in South America and Chinese buyers rushed to purchase Australian wines. Welcome to Fear and Greed. Daily business news for people who make their own decisions. It is Wednesday, the thirty first of July twenty twenty four. Are Michael Thompson and Good Morning, Sean Aylmer.

Good Morning Michael, Sean.

The main story this morning. Regional Express has fallen into administration, with the Airlines Board agreeing to ground flights between capital cities and focus on regional travel.

E Y will act as the administrator and Virgin Australia has moved to quickly secure three leases of rare craft from the flailing airline that are known as REX. Virgin will also step into fly passengers booked on flights that REX canceled late last night after a board meeting. The announcement was made now in a statement, d Y said, and I acquired Virgin Australia has made an offer for REX customers with an existing ticket on a flight canceled due to the administration process. The opportunity to transfer their ticket free of charge to the thirteen overlapping Virgin Australia services. Rex and Virgin Australia are also exploring opportunities to support regional customers, which include Virgin Australia selling Rex's regional services through code share or interline arrangements and making blossly frequent fly benefits available to Rex's regional customers. Virgin then came out later in the evening and said it would support Rex's employees who could apply for jobs at the airline, as well as via code sharing and interline that's ticket selling in line agreements on the remaining regional flights. It all came after a very busy day the Prime ministrans in the Albanize. It was asked before this announcement. He conceded that the government is speaking to the airline about the issues it's facing. He wasn't very clear though, whether it we'll support financially. Now asked whether the government was ready to bail out Rex, Miss tra Alberanez, he said the airline had already received substantial government support with no conditions attached. He said the government would look at any proposal put forward by Rex, but I'm sure we'll find out more about that in coming days.

There's really been quite the saga, hasn't it. With the executive chairman, Lim Kim High, who controls around fifty percent of shares, being forced to step down last month.

It has been incredible saga. The board, including a long time associate of mister Limb, was unanimous in its decision to replace him as chairman after asset queried related party transaction with mister Limb's brother in law and Rex's acquisition of fly and fly Out operate at National Jet. There's also been a vote to spill all board members except for one who happens to be a representative appointed by private equity firm PAG PAG. PAG invested in Rex in November twenty twenty and is its main financier. It has a right to two board seats under the terms of its one hundred and fifty million dollar investment, but it only utilizes one. However, it is now pushed for that spill of the board away from the boardroom. Analysts say its regional operations have been solid, but the decision by Rex to buy nine Boeing seven three seven jets from Virgin when that airline went into administration and start flying the Brisbane Sydney Melbourne triangle. Just hasn't been successful recently. It added to Melbourne to Perth route ninety nine dollar fares maybe though are too low. Rex's travails come after low cost carrier BONDSA collapsed earlier in the year. The outlook for REX does not look promising.

Yeah, that sounds about right, Sean. After the show, you have an interview coming up with. This is a great chat with international aviation consultant Neil Hansford, who knows this space so well.

You don't often get the phrase smart asked Pimply merchant bankers on a Fear and Greed podcast, but we do. In this interview, Neil plane spoken. Neil tells us what he really thinks about the airline industry and about who's running REX, in particular Killer and it is a fasct. I mean, he's just got such great insight. He's been doing it for forty years. He knows these airlines so well, and he doesn't always say what I expect him to say. Neil and I learned a lot from the interview as well, so it's definitely well worth a listen.

I think He might be the most direct person we have ever had on this show, and it's worth listening to just for that. It is coming up after the show the interview with Neil Hansford, so stick around for that one. Turning to local markets now Sewan, how did they perform yesterday?

The SNPASX two hundred closed down half a percent to seven nine hundred and fifty three points, with the Materials index leading the market lower, while techtoks also underperformed. Come Off Bank and Westpac were higher, but National Australia Bank and ain Z were lower. The ladder down more than one percent. Wistech Global and Woodside were among poor performers. The best among the top the twenty or thirty stocks outside those two banks telst csl Wes, Farmer's, Woollies, Coals and QB. In corporate news, Ramsey Healthcare dropped three percent after announcing the retirement of chief executive Craig McNally at the end June twenty twenty five. The private hospital operator has appointed ex Aully Supermarkets managing director Natalie Davis to start as CEO elect In October this year, minor Igo rallied three percent and then fell close to four point four percent. Well, in fact, that's where it ended. It ended down four point four percent. That's after reporting higher underlying earnings. Credit Corps shares rallied fourteen percent after its guidance came within analyst expectations, and Star Entertainment said it wasn't aware of any information that could have triggered the massive fifteen percent jump in its share price on Monday.

What about international markets? Much going on?

Always, Michael, Always, Oil prices are under pressure and the back of concerns about demand out of China. At one point, Print had fallen below eighty US dollars a barrel, goals steady the Aussie dollars buying sixty five and a half US cents. But since you asked, that is much going on. Question in a fairly condescending manner, If you don't mind me saying.

It's an inquisitive manners.

Genre is inquisitive? Fine, Well, I think it might be worthling. At profit seasons they're going on in the US and Europe. Two or three weeks into the June quarter profit season, it's been a mixed earning season around the world. Broadly, companies alluring full year sales and profit guidance as higher interstrates and weakness in China's economy hurts global consumer sentiment. But there's solid earnings growth. But I think that outlook statements, all those outlook statements are taking the shine off the pretty good results. A number of high profile companies have underwhelmed investors, according to report on Reuters, including mc donald's automakers, Nissen and Tesla, consumer giants Nesley and Uni Leader. Now it's roughly forty percent of US and European companies reporting results. Earnings have come in about as expected, but you know, after the strong run by world equity markets, about as expected seems just a little bit disappointing. There's a bunch of big names reporting and coming Apple, Microsoft, Samsung, Toyota, exce On Mobile, Shell, Lorrial, and added US. We'll keep an eye on those, but it'll just be interesting to see if that sort of trend of solid reporting up to now, but just the future doesn't look quite as bright.

Sean, Can you give us any hints as to what will be featured in the Fear and Greed weekly newsletter which comes out hours away? Yeah, mere hours away. Any any ideas as to what you're going to be just really unloading on, unleashing upon today.

Actually I am doing something on interest rates. Obviously we have the CPI figures out today, so it's fairly clear that there be something on interest rates. I want to do something on earning season as well, and a bit of a crack at airlines too. Fantastic, Michael, I guess I've got some idea this time last week I had no idea what I was going to.

Do, and you accuse me of being condescending before, and I have risked, I know, a big risk of appearing a little bit condescending going you have no idea what you're going to write. But it is always worth subscribing to the Fear and Greed weekly newsletter. It is entirely free. Just head along to Fearangreed dot com dot au, pop your email address in. And the beauty of it is that in Fear and Greed the podcast, you get the news. In Fear and Greed the newsletter, you get the views. I mean, you get Sean's views. And I this is going to come across as sounding really sarcastic, but I think they are really interesting views. Sean.

Good, thank you very much. I take that as a compliment.

You took it the way it was an intent. It was intended, So I actually really please about that. Considering the way we've been going so far, it could have gone either way. So sign up at fearangreed dot com dot au and keep your eye on your inbox around midday it or come through not long after the CPI figures come through. All right, we'll be back in a moment with the rest of the day's business news. Sean ba HP will spend three point two billion dollars to set up a joint venture with Canada's London family to buy Toronto listed copper minor Philocorp, which holds stakes in two copper projects, one Argentinian and one Chilean.

Yeah. BHP might have lost the fight for Anglo American earlier in the year, but clearly its appetite for copper remains. It already has a five percent stake in one of the projects, the Philo del Sol, and will get part of the nearby Jose Maria. It is a long term play. Both minds a five thousand meters above sea level. There's absolutely no infrastructure in the region. I mean, calling them minds is probably a little ambitious. Because production is still expected to be years away. But the idea is that the joint venture partners build the infrastructure. They can be shared by both sites, and BHP will own a large chunk of the assets. Now BHP has for many years kind of it likes to spread the risk by taking interest in some of these smaller place to see how they go. And they are higher risk, but they only need one or two to really take off, and you're getting your money back for the all the others that perhaps didn't take off anyway. BHP's share price closed down one point four percent yesterday.

Okay, so down one point four percent, not great news, but still much much better than for TOSCU Medals trading day FORDSCU fell ten percent yesterday. What was going on there?

Media reports suggest a large investor was trying to offload one point nine billion dollars worth of discounted stock after Monday's closing bill. Now that's a decent chunk of the minor. The tumbling of its share price yesterday means it's down nearly forty percent since early in the year.

Bit of good news for the wine sector sean with data from Wine Australia showing a surge in exports to China since the abolition of tariffs in late March.

Since exports restarted sales to China have surged from about eight million dollars in the twenty twenty three financial year to four hundred million dollars last financial year. Almost all of that would have been in the June quarter wine worth at least twenty dollars a bottle. Not the stuff you drink, Michael, the stuff I drink that drove the increase. Wine Australia says to sales, probably it's about restocking rather than retail sales, and consumption of domestic and imported wines in mainland China is still less than a third of what it was six years ago. There were five hundred and seventy four Australian companies exporting to mainland China last financial year, up from one hundred and fifteen the year before. But prior to the imposition of duties there are about two thousand companies exporting to mainland China, so we've still got a waste to go.

Indeed, now, the former chief legal officer of Super Retail Group has filed proceedings in the Federal Court against the retailer it's chief executive and chairman to enforce a settlement agreement relating to her dismissal.

Another saga, this one Harmer's workplace at Lawyers is representing Rebecca Farrell, the former legal boss, and says she's a whistleblower who exposed serious corporate governance issue within the company. She claims that a settlement was reached with super Retail on May six about her departure and other possible legal actions. Super Retail surprise investors in late April when it disclosed to the ASEX that it expected a claim for between thirty million and fifty million dollars to be lodged by Harmers. This is according to report in the AFR. The company disputes the allegations and will defend the action. Super Retail months ago said it expected the action to accuse CEO Anthony Herety of having an undisclosed intimate relationship with former head of human resources Jane Kelly, who left the business last year. It also outlined accusations of bullying and inappropriate company trouble.

Building approvals tumbled six point five percent during June following a rise in May, demonstrating that the construction sector is still in the doldron sean.

Ah sure is. The monthly result was well well below expectations, a bit of a disaster really. The full and total approvals was mainly driven by New South Wales, which fell nineteen percent to under sixteen hundred houses. That's actually the lawest recorded figure for the state since January twenty thirteen, a mere shortages of materials and labor. Private sector dwelling approvals excluding houses in June fell to the second lowest monthly level since January twenty twelve. A twenty two percent year on year four came amid tough conditions for apartments due to high construction costs and interest rates. The point here is not only is it difficult to find the funds to actually build the places, it's really hard to find the labor and the materials as well. It's all coming together. It's a bit of a basket case construction at the moment, or at least the residential construction sector not much good news at all.

Indeed, now Cander has warned Australians in Lebanon to leave immediately, amid escalating military action and concerns that flights may be hard to find as airlines scale back.

The advice in the government's Smart Traveler site yesterday says that the security situation could deteriorate rapidly throughout Lebanon with little or no notice. Some airlines have already postponed or canceled some flights, and further cancelations and disruptions could occurb. Alternatively, airlines could set very high ticket prices for remaining flights. Daily military action has increased in southern Lebanon, including rocket missile fire as well as air strikes out of Israel. It comes as Opposition leader Peter Dutton departed Australia for an official visit to Israel. US diplomats are racing to a full blown war between Israel and the Iranian backed Lebanese movement hes Blah after an attack on the Israeli occupied Golden killed twelve people at the weekend. Israel and the US have blamed Hezbla for the rocket strike, though the group itself has denied responsibility.

Okay, just returning to the airline industry, Sean and New Zealand, which is jointly listed on the ASX and at Home, has dumped its carbon emissions reduction targets, saying they're unachievable. By twenty thirty.

The Kiwi carrier had been aiming to slash its carbon intensity by twenty eight point nine percent compared to twenty nineteen levels through the use of sustainable aviation fuel, a lower emissions aircraft, and other changes, But now Air New Zealand says many of the leavers needed to meet the target are outside of its control and remain challenging. Chief Executive Greg Foran said it had also become apparent in recent months that potential delays to fleet renewal plans posed an additional risk to the target's achievability. Air New Zealand has previously been one of the more outspoken carriers on sustainability issues. It was one of the first to announced plans to develop carbon neutral aircraft for regional roots and partnership with Airbus, though I think some of that is now gained by the wayside.

Okay, turning to international news, now, protests are spreading across Venezuela after President Nicholas Maduro claimed victory in a tense weekend election.

The National Electoral Authority said mister Maduro had won a third term with fifty one percent of the vote, a result that extends a quarter century of socialist rule. Later, it proclaimed mister Maduro would be president from twenty twenty five to twenty thirty one one, adding he had won and I quote the majority of valid votes. But governments in Washington and elsewhere cast out on the results and called for a full tabulation of votes. Independent expert polls pointed to a landslide win for the opposition. Street marches followed, including the firing of tear gas in a bid to disperse the protesters. Some very disturbing scenes in that.

Finally, Sean thee saying goes that it's good to follow the money, and it seems to have worked for people who have followed Warren Buffett's money.

Yes, so it's interesting that his company, Berkshire Hathaway has cut its massive profitable bet on Bank of America. The US is second largest lender by a total of more than three billion US dollars. The conglomerates started building an investment in the bank in twenty eleven, its long range as the top shareholder. Even after the sales, Berkshire still holds about nine hundred and sixty two million chaares worth almost forty billion US dollars. But it is interesting that the legendary ninety three year old investor is cashing out. America's share prices up twenty two percent this year. Maybe Warren Buffett knows something we don't.

All right now, Up next is the Fear and Greed Daily interview with international aviation consultant Neil Hansford. This is not to be missed now.

He lets fly on what he thinks is going on at Rex, its owners, some of the management decisions. He talks also about Virgin and Quantus and it is a fun interview, more colorful than normal. Dare I say?

It is up next in the Fear and Greed playlist on your podcast platform or at Fearangreed dot com dot au, which is also where you sign up for the Fear and Greed free weekly newslet are coming out later today, and also if you happen to notice the Ask Fear and Greed bonus episode that popped up in your playlist at midday yesterday, worth a listener as well. Every week twice a week. In fact, we answer listener questions in our new bonus podcast called Ask Fear and Greed. If you have a question sended on through via the website or go to any of the social media platforms and flicker through there, and we'll do our best to answer it, won't we, Sean.

We will now, Michael, Whenever the newsletter comes out, I don't think newsletter, I think how do they afford that?

Yes, because of course it's Wednesday and that is the day that how do they afford? I'm all about the newsletter these day, asn't I keep forgetting to plug? How do they afford that? It does come out every Wednesday. It's our sister podcast featuring me and financial planner Canna Campbell talking about all things to do with personal finance and money and making your money work hard of you to date, Sean, we're talking about debt repayment strategies. There's a whole lot of different strategies from the debt avalanche and the debt snowball and a whole bunch of other ones, and we kind of go through them all one by one and kind of analyze them and can it. She's kind of like Neil Hansford in a way and that she's very direct and tells me exactly what she thinks, and she doesn't hold back so I.

Reckon Kenner is nothing like Neil Hansforth.

Well only in the sense that she tells us what she thinks, yes, exactly, then that respects it's a fair comparison. I hope. I'm sorry Kenna, I'm sorry Neil. If I've offended anyone, I'm sorry anyway. How do they afford that out today? I'll put a link in today's show notes as well. Thank you Sean, Thank you Michael. It is Wednesday, the thirty first of July twenty twenty four. Make sure you're following the podcast and please join us online on LinkedIn, Instagram, x TikTok and Facebook. I'm Michael Thompson. And that was fear and greed. Have a great day.

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