Forum Archive Index - May 2001

["hugh webber" <hugh.webber@clear.net.nz>]

I took the trouble to attend the recent AGM in Chch and can report 
(a) I was unimpressed with the Chairman's complete naivete in the area
of media relations (b) I was impressed with NZR's new sizable value
investor Emerald Holdings (they bought out Fletcher Petroleum) and their
director Geoff Cumming.
There was a comment from the floor that investors were somewhat perplexed
by NZR's previous extreme volatility in share price (from a high of $44 to
a low
of under $10), profits and dividends. Geoff Cumming spoke saying that his
group were very interested in shareholder returns and he would be pushing
on this
front. Geoff is a recently naturalised NZer (from Canada) and he was very
knowledgable
on the industry.
NZR's profitability relates to the refining margin in Singapore, the RM is
the difference
between output prices for petrol etc and crude oil input prices. From what
I can gather 
the RM is holding up (their year ends 31/12) but it probably won't be quite
as good as
last year.
The chairman's speech unfortunately centred on the possibility (which he
seemed to
assume was a certainty) that NZR would be in for some significant capital
expenditure
to ensure it could produce less polluting fuels. However he didn't have a
date
(somewhere in the distant future), did not refer to the US and Australian
withdrawals 
from Kyoto, seemed unable to quantify the cost or the extent of government
or
oil company participation and said vaguely that NZR is subject to a host of
market
related factors and implied that the chips would fall where they will and
didn't seem to
particularly care. After all he still gets paid I spose and NZR is only one
of his major
jobs. I was hoping for an intelligent dissertation on world refinery
capacity shortage,
the difficulties of building new ones, the implications of the Kyoto
breakdown, the
implications of the renewed OPEC activism, a new commitment to shareholder 
return stability, whether NZR would hit its target of reducing costs to $75
million
which it missed last year but I think he was on a different planet. He
typified what
Ron Brierley used to refer to as the old sleepy NZ directors old boy club.
Anyway
here's hoping someone takes him aside for some coaching for next year or
NZR 
spends a bit on getting some PR ideas.
Naturally the news media leapt upon the concept of 
vast new previously unthought of capital
expenditure to meet Kyoto imperilling NZR's future viability and plastered
it around 
and NZR's share price was hit the next day and since then.
However it seems a pretty good bet that even with some reduction NZR's
gross yield
for calendar 2001 will be streets ahead of the next highest listed NZ
company which
I believe is Newmarket Property. However I think Newmarket has been
unnaturally
elevated by a shareholder gurantee of profitability for the first few years
which has now
run out so I'm steering clear of Newmarket myself.
Last year he made somewhat the same speech and said NZR was in for a
disastrous year
after which it then proceeded to have its best year ever so I wouldn't
actually rely on
anything the chairman said. He put it down to the impossibility of
predicting anything
in the refinery game, like the weather. Probably that's a bit passe with
the factors above
and its time for some intelligent analysis of the factors involved.
It is said that NZ investors are allergic to high value per share figures
as they get less
shares for their money. That seems to be an incredibly simple minded
approach 
to me but maybe it takes all sorts to make a world.
Disclosure: Hold NZR shares - I bought in in time for the $2 per share
fully imputed 
dividend in March 2001. I note the NZR balance sheet is very strong cash
wise and in terms
of imputation credits there and coming on stream.
Now, don't go making pigs of yourselves guys, I may want to buy some more.
(why do I do this? why don't I just let them stick to AQL etc....). 


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