Update Ambev (ABV)
(I am on vacation until August 24. During that period JubakPicks.Com will operate on a reduced posting schedule of one or at most two posts a day.)
The noose got a little tighter around Mexican brewer Grupo Modelo, Mexico’s largest beer maker.
On July 12 the company lost in arbitration with Anheuser-Busch InBev, the world’s biggest brewer. Grupo Modelo had sought to void the transfer to Anheuser-Busch InBev of the 50% stake of Modelo that Anheuser-Busch owned before the merger with InBev that created the beer giant.
The ruling clears the way for Anheuser-Busch InBev to eventually acquire the rest of Grupo Modelo.
AmBev (ABV), the Brazilian brewer and Pepsi distributor that’s controlled by Anheuser-Busch InBev, isn’t a direct party to any of this arbitration or negotiation. But I think this outcome works in AmBev’s favor.
Put more fiber in your portfolio
Last night’s bad economic news out of Japan means this one goes on our watch list. As a Japanese company, Toray Industries (TRYIY.PK), moves with Japan’s stock market. But much of its business and most of its growth are from outside Japan. (For more on the bad economic news out of Japan see my post http://jubakpicks.com/2010/07/30/for-surprises-this-a-m-forget-us-gdp-and-look-to-japan/ )
Toray Industries was founded in 1926 as Japan’s first maker of synthetic textiles. Today the company is still weaving and knitting exotic textiles—including for two of the global growth stories of the next decade,
First, reverse osmosis membranes for water desalination. Global installed desalination capacity will grow at a compound annual growth rate of better than 9%, according to projections from Pike Research. Total desalination sales will approach $90 billion n 2010 through 2016, Pike Research forecasts. Although the desalination industry as a whole remains strikingly unconcentrated with the top five suppliers together controlling only 25% of the market, the market for reverse osmosis membranes is strikingly concentrated. The companies, Dow Chemical (DOW), Nitto Denko (NDEKY.PK), and Toray Industries control 65% of the market.
China disrupts the oil and gas industry–again
You wouldn’t think that anybody, especially an anybody as savvy as ExxonMobil (XOM), could overlook China.
But that may be exactly what ExxonMobil did in formulating its plan to pin the company’s growth on natural gas—and in particular on liquefied natural gas (LNG).
According to U.K. oil and gas consulting company Wood Mackenzie, China looks like it will need only half as much additional liquefied natural gas in the decade beginning in 2020 than big oil companies such as Royal Dutch Shell (RDS), BP (BP), Chevron (CVX), and, yes, ExxonMobil had projected.
Projects such as ExxonMobil’s Qatargas Trains 4 and 5, RasGas, Al Khaleej Gas, the South Hook liquefied natural gas terminal, and the Golden Pass LNG terminal—and this is only a partial list of ExxonMobil’s planned investments in LNG in 2009 and 2010–that made investment sense when it looked like China would be importing an additional 16 million tons of LNG annually in the coming decade now face a scenario in which China will need to add only half as much to its annual imports.
That will hit all the international oil companies hard but it will hit ExxonMobil especially strongly because the company has based its investing strategy on natural gas in general and liquefied natural gas in particular.
What’s changed since, say, March 2010 when ExxonMobil announced that it will increase capital spending by 4% in 2010 to almost $28 billion in a big bet on natural gas on top of its purchase of U.S. natural gas producer XTO Energy for $28 billion?
For surprises this a.m. forget US GDP and look to Japan
All eyes will be on the market reaction to the U.S. GDP report this morning.
I think you’d be better rewarded by watching Japan.
I don’t think the U.S. GDP number for the quarter that ended way back on June 30 addresses any of the market’s real hopes or fears. The question investors’ are asking is “Will growth slow in the second half of the year?” A backward looking GDP number doesn’t answer that. And it’s all too easy to rationalize the number no matter what side of the growth debate you’re on. If it’s low, you say “Doesn’t prove anything about the second half.” If it’s high, you say, “Wait until we see second half numbers.”
By the way, the report released at 8:30 ET today, July 30, said the U.S. economy grew at a 2.4% annualized rate in the second quarter. That is almost exactly the 2.5% expected by economists. The government also announced that first quarter growth had been revised upward to 3.7% from 2.7%.
But Japan? Now that’s a different story. In overnight news the country delivered surprising—and this is surprising bad—economic news. And because it was unexpected the news roiled markets across Asia.
In Japan unemployment unexpectedly rose for a fourth straight month to a seven-month high of 5.3% in June. Industrial production fell by 1.5%, the most in a year. Economists had been expecting a 0.2% gain.
And perhaps most ominously for this deflation-shocked country, consumer prices, excluding food, fell by 1% from June 2009.
Update Potash of Saskatchewan (POT)
Listening to the Potash of Saskatchewan (POT) conference call today, July 29, I kept thinking that some one was going to yell, “Cue the plague of locusts.”
In Russia grain production will fall by 20% because of drought, the company said. Canadian wheat production is forecast to be down 20% because of flooding during planting season. In India, after a string of bad harvests from insufficient monsoon rains, too much rain is rotting crops in storage.
The company forecast that China will have to import about 75% of its soybean needs in 2010 and 1.7 million tons of corn. India could hit record levels of grain imports.
Food commodity prices are likely to rise as 2010 goes on and next year, so farmers in countries such as Brazil and the United States that did have good harvests to export should have plenty of cash to increase purchases of fertilizer.
That will make 2010-2011 a tight year for fertilizer supplies.
