Archive for May, 2011

Korean Air posts 49 percent gain in net profit

Monday, May 2nd, 2011 | Finance News

SEOUL, South Korea – Korean Air's net profit in the first quarter jumped 49 percent on investment and foreign currency gains.

Korean Air earned 282.1 billion won ($263.3 million) in the three months ended March 31, the company said. That compared with net profit of 188.7 billion won a year earlier.

Korean Air Lines Co. is South Korea's top airline and the world's biggest international air cargo carrier.

Consolidated sales in the first quarter rose 7 percent to 2.82 trillion won, the company said.

Boosting the airline's bottom line were equity gains from investments in affiliates of 138 billion won — more than eight times higher than the year before — and a 65.7 percent foreign currency-related increase of 205 billion won, the company said.

Shares in Korean Air fell 0.7 percent to close at 69,300 won.

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Tokyo Electric may face $25 billion in liabilities: report

Monday, May 2nd, 2011 | Finance News

TOKYO (Reuters) – Tokyo Electric Power may be asked to shoulder half of an estimated $49 billion in total compensation for damages stemming from its crippled nuclear power plant, with other power firms to shoulder the rest, a Japanese newspaper reported on Tuesday.

Officials from the government, Tokyo Electric, and creditor banks have been scrambling to craft a scheme that would allow the utility to cope with the bill of compensating those displaced by the crisis at its Fukushima Daiichi plant, while continuing to operate as a private firm.

The draft government plan reported by the Asahi newspaper could mark a significant development in those efforts because it puts a ballpark figure on the total cost at 4 trillion yen ($49.2 billion) and suggests a cap on Tokyo Electric's burden.

Uncertainty over the likely cost of compensation as well as the prospect of unlimited liability for Tokyo Electric, commonly known as Tepco, has unnerved investors since the crisis, triggered a widening of corporate bond spreads.

The plan calls for Tepco to pay 2 trillion yen ($24.6 billion) in compensation over 10 years. Of the 200 billion yen in annual payments, half would come from a roughly 16 percent hike in electricity prices, the Asahi said.

The other half of the 400 billion yen annual bill would come from Kansai Electric Power and 7 other nuclear plant operators, which will put money into the fund in proportion to their electricity output, the Asahi said.

To shore up Tepco's finances and prevent debilitating credit rating cuts, the fund will buy 1.6 trillion yen worth of preferred shares in the utility, whose market value has shrunk by three-fourths since the crisis to about $8 billion.

A Tepco spokesman said the information in the Asahi report was not based on any disclosure from the company.

CAP ISSUE

Tepco has started making provisional compensation payments to residents and local governments after the March 11 earthquake and tsunami tore through the Fukushima Daiichi plant, causing it to leak radiation and prompting an evacuation of surrounding areas.

The question of whether to put a ceiling on Tepco's burden has been one of the most contentious issues in discussions on the compensation scheme, delaying its official announcement from an initial target of the last week of April.

While Tepco and its creditor banks have pushed for an upper limit, arguing it was essential to prevent a drop in its credit rating to junk status, many politicians have sought to take a hard line on the utility, characterizing it as the primary bearer of responsibility for the nuclear disaster.

Chief Cabinet Secretary Yukio Edano said on Monday that there would be no ceiling set on Tepco's liabilities and that it should not qualify for an exemption from compensation under Japanese law.

The mention of specific liabilities figures in the draft government plan may be aimed at allowing Tepco to make the cost calculations it needs to close its books for the past business year ended in March, the Asahi said.

Tepco is now expected to report a net loss of about 800 billion yen for the past year, and will aim to return to profit in four years and resume issuing bonds from the financial year starting in April 2015, the newspaper said.

The draft estimates the cost of scrapping the six reactors at Fukushima Daiichi plant at 1.5 trillion yen and the additional fuel costs to run thermal power generators at about 1 trillion a year, the paper said.

The plan also calls for annual cost cuts of 150 billion yen by the next financial year and a total of 300 billion yen to be generated by the sale of real estate, stocks and other assets, the Asahi said. ($1 = 81.225 Japanese Yen)

(Additional reporting by Hugh Lawson; Editing by Muralikumar Anantharaman and Nathan Layne)

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Asia stocks fall, Canadian dollar gains

Monday, May 2nd, 2011 | Finance News

SINGAPORE (Reuters) – Asian shares fell on Tuesday, with falling commodity prices dragging on mining stocks, while the Aussie dollar eased after the central bank held interest rates and Canada's currency rose as the ruling Conservatives won a federal election.

The U.S. dollar struggled to pull away from a three-year trough, while oil and copper prices eased as investors focused on the still-fragile state of the recovery in many developed economies.

A slew of data this week will help gauge the strength of the world economy, with particular focus on U.S. non-farm payrolls on Friday.

"Everyone is waiting to see how uncertainties in the macro-economic situations of major economies will pan out," China Futures Co. analyst Yang Jun said.

European shares were expected to open mostly down, with Euro Stoxx 50 futures shedding 0.4 percent, while S&P 500 futures fell 0.3 percent, pointing to a weaker start on Wall Street. Financial spreadbetters called London's FTSE 100 (.FTSE) flat-to-higher after a four-day weekend. (.EU) (.N)

MSCI's broadest index of Asia-Pacific shares excluding Japan (.MIAPJ0000PUS) fell 0.9 percent, with South Korea (.KS11) stocks losing 1.3 percent and Australian stocks (.AXJO) down 0.8 percent. Japan's financial markets were closed for a public holiday. (.AX) (.KS)

"Our number one headwind for equities right now is the Aussie dollar," said IG Markets institutional dealer Chris Weston.

The U.S. currency has been under pressure for months due to the Federal Reserve's ultra-loose monetary policy, which has opened up a yield gap between the dollar and currencies such as the euro and the Aussie.

DATA SURPRISE

The dollar index (.DXY), which tracks the dollar against a basket of major currencies, crept up 0.1 percent, still not far from three-year low plumbed in New York trade.

The euro was around $1.4815, having risen to a 17-month high above $1.49 after surprisingly strong manufacturing data boosted the chances of another European Central Bank interest rate rise.

The Aussie eased from a 29-year high above $1.10, to trade around $1.09 after the Reserve Bank of Australia kept interest rates unchanged, as expected.

The central bank, the first in the developed world to begin tightening policy in late 2009, said underlying inflation was likely to head higher, laying the groundwork for further rate rises in the months to come.

"That addition to the statement suggests they're preparing to move in the next few months -- though there's no sense of urgency about it," said Brian Redican, a senior economist at Macquarie.

LOONIE GAINS

The Canadian dollar edged up as provisional results from Canada's election showed the pro-business Conservatives cruising to victory, on course to transform their minority administration into a majority government.

The loonie has lagged other commodity-linked currencies, in part due to uncertainty about the outcome of Monday's election, with the opposition New Democrats pledging to raise corporate taxes, increase social spending and toughen climate change policies.

"I think generally this is probably very good for the Canadian dollar," said Firas Askari, head of foreign exchange trading at BMO Capital Markets. "We haven't had a majority government in some years and I think this provides a measure of stability that the market was looking for."

Oil, the asset often most sensitive to perceptions of geopolitical risk, fell nearly half a percent, but remained about $2 above the Monday low hit after news of the killing of Osama bin Laden in Pakistan by U.S. special forces.

While the death of bin Laden could reduce the threat against the United States by militant Islamists in the long-term, the potential for retaliatory attacks in the short-term would support prices, analysts said.

"The potential of violence from retaliation has more upside than downside risks, and would support the market," said Serene Lim, commodities analyst with ANZ Bank in Singapore.

U.S. crude futures eased 50 cents to $113.02 a barrel, while Brent crude fell 42 cents to $124.70.

Spot gold was a little firmer at $1,547.59 an ounce, after retreating from a record $1,575.79, and copper fell 0.3 percent.

Weaker industrial metals prices dragged on shares of big mining firms, with BHP Billiton (BHP.AX) down 1.4 percent and Rio Tinto (RIO.AX) 0.7 percent.

(Editing by Richard Borsuk)

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