It’s a good thing the listed car and truck dealer, Adtrans has been all but taken over by A.P. Eagers in its current offer, otherwise the profit update yesterday might have put a rather large hole in the share price.
A.P.Eagers has close on 75% of Adtrans’ issued shares (including its existing stake of 27.9%) with its $4 a share plus 15c final offer bid launched a month or so ago with the support of the Adtrans board.
There was no sign of any problems back in September when Adtrans boosted the final dividend 44% to 15c, but yesterday the company revealed that earnings had slumped because sales of used cars and trucks had fallen.
Adtrans is mostly based in Victoria and South Australia. Franchises include Ford, Toyota, Hyundai, Kia, Chrysler, Jeep and Dodge in cars, and Iveco/International, Fuso, Freightliner, Mercedes-Benz, Hino and Hyundai in trucks, as well as BCI and Higer buses.
Chairman Graham Bignell (the founder, who has accepted the offer for his shares) said in the statement that he was "disappointed to report that trading in the first quarter of the new financial year has been below budget and unsatisfactory.
"The main causes for profit being lower than expected have been the substantial decline in used car sales, new truck numbers and generally difficult trading conditions, some associated with the current wave of consumer sentiment.
"Management accounting for the three months shows our result for the quarter ended 30 September 2010 is $2.1m before tax, or $1.4m after tax.
"Whilst we expect slightly better trading, particularly in used cars in the current December quarter, nevertheless we still expect our results for the current half financial year to be around 35% under last year’s excellent performance.
"In addition, the Company faces takeover-related expenses of around $1,250,000.
"The takeover is proceeding smoothly and like the majority of shareholders, my family and I have signified our acceptance of the AP Eagers offer.
"Shareholders will be further updated on the current year’s trading and the AP Eagers offer with a full report at our Annual General Meeting on 28 October 2010.”
With the shares supported by the offer, they closed steady on $3.95.
The news, which came just before trading finished for the day at 4 pm, didn’t impact the shares of the largest car group in the country, Automotive Holdings. The shares rose one cent to $2.33.
On a day when the overall market lost a nasty 1.6% to 1.7% in value, the shares of serial under performer Nufarm stood out with a gain of more than 11% at one stage before ending the day up 4.2%, for no good reason.
The 16c rise to a close of $3.95 followed reports of rising incomes in the US farm belt and a fertiliser takeover in Israel.
This all sparked speculation that Nufarm might be saved from itself by a turnaround in demand, or a new takeover or some sort of deal.
The shares rose 11.3% to a high of $4.22 before they fell back in afternoon dealings.
The US Department of Agriculture released on Monday night revealing forecasts of a boost to farm incomes.
That was after the USDA had cut its corn harvest by 300 million bushels and cut stocks estimates as well. That sent corn prices raising higher on Friday and on Monday when the Chicago Board of Trade lifted the daily trading limit (each day) to 45c from 30c. Corn prices closed limit up, so they have jumped 75c in two days.
The USDA says the country’s farm sector will see a 24% jump in income this year to around $US77 billion thanks to higher prices for cotton, soybeans, wheat and now corn.
That’s got analysts thinking US farmers will boost their use of fertilisers, or switch away from cheaper generics to higher priced products from the likes of Monsanto (which lost money in the last quarter) and Nufarm.
And a report on Bloomberg said Chem China was buying 70% of Israeli-based farm chemical company Makhteshim-Agan Industries. That got the specs thinking, ‘new bid, or renewed bid for Nufarm’.
But with Sumitomo sitting on a loss making 20% stake in Nufarm, bought at $14 a share, a Chinese company won’t bid.
So the shares eased when the dreaming stopped.
