Online Stockmarket Trading Update

The impact of the Queensland floods is significant and will affect a number of companies in different sectors. The loss of life is tragic and the economic impact will be felt for some time. There is the immediate direct impact, and then there are the secondary effects which will take some time to play out.

Announcements in Market Analyser

Using the search functionality in Market Analyser we can quickly identify those companies that have been affected by the floods. As part of the ASX listing rules, companies must keep the market informed of any significant development in their trading or any event that may impact on the company’s profitability. This means you as an investor or trader can easily keep up with market developments as they occur.

To do this select Menu > Fundamentals > Announcements and type the word ‘flood’ into the Search Text or XCode box and click Go. You can then double click on the headlines to read the full announcements.

Companies that have been directly affected include:
* Caltex, which has shut down its oil refinery in Brisbane
* Cockatoo Coal, that has had its Baralba coal mine flooded, and
* New Hope Corporation, which has suspended all mining operations in Queensland.

There are many other companies directly affected, but on the bright side a number of the companies in this list report no material impact on their earnings.

Industry Impacts

There are a wide variety of industries affected by the floods, including mining, mining services, transport operators, agriculture, retailers, tourism and, obviously, the insurance industry.

Coal Miners

Coal miners in the Bowen Basin have been affected heavily, with mines owned by Wesfarmers, Aquila Resources, BHP Billiton, Cockatoo Coal, New Hope Corporation, Macarthur Coal, Peabody Energy and Rio Tinto being affected by the floods.

The companies are unable to supply coal to meet contracted obligations and have invoked force majeure clauses in their supply contracts. This lack of supply has pushed up coal prices in the short term and other coal miners unaffected by the floods are likely to benefit from higher prices. These include Whitehaven Coal, Gloucester Coal, Coal of Africa and Coal and Allied.

Mining Services

Some mining services companies will be affected with Boom Logistics reporting that it has lost $1.2 million in revenue during December because of the wet weather, prior to the January floods. The majority of the mining service companies are well diversified and supply mines across Australia or globally and there is likely to be very little impact on these companies. Downer, Monadelphous and Bradken have all reported no significant impact. Macmahon and Industrea have reported some impact with at least one of their mining contracts having been affected.

Transport Operators

Transport operators, particularly rail and ports, have been hit hard with railway lines closed and coal deliveries severely reduced. Asciano and QR National have been significantly affected. Also a number of ports have been closed including Brisbane and Gladstone, but these companies are not listed on the ASX.

Agricultural Companies

Many agricultural crops have been significantly affected by the flooding, but Graincorp got off lightly with most of the wheat already harvested. Queensland Sugar was not so fortunate with it becoming necessary to import sugar as much of the local crop was affected. Incitec Pivot suspended fertiliser production, while Nufarm reported it is likely to have reduced sales in the short term as crops, mainly sugar and cotton, have been affected.

Retailers

Some retailers have been affected directly, with The Reject Shop having closed its Queensland distribution centre which supplies 90 stores as a result of flooding. Woolworths’ and Wesfarmers’ supply chains have been affected, but this impact is likely to be temporary. Myers and David Jones have had some individual stores affected by flooding. The more important effect of the flooding is a temporary slump in retail spending that is likely to follow the disaster as people focus on cleaning up, rather than shopping. As insurance and relief money starts to flow into the area retail may pick up longer term, but expect an even slower than normal January for retailers which have a strong Queensland presence. Billabong and Coke have already reported lower sales due to the wet and unusually cold weather. Mind you, chocolate sold out in Christchurch following the earthquakes, so maybe there is some upside for food retailers.

Tourism

As with retail, the wet weather may affect tourism operators through lower sales. Virgin Blue and Qantas are the obvious losers with their share prices already being affected.

Insurance

Finally the insurance companies will be affected as the insurance claims begin to roll in. Both QBE and Suncorp will payout large sums associated with the flooding. Though most of this will be reinsured to limit their losses Suncorp has already announced it will spend an additional $120 million to cover any further losses this year. The total cost to Suncorp will be in the region of $220 million.

This is an overview of some of the companies that may be affected by the Queensland floods. You will still have to identify trading opportunities in these companies and you can do this using the charting and technical analysis tools in Market Analyser.

By Jeff Cartridge
Education Manager