The Distillery: Bowser blows

Business scribes have been taken by the extent to which Australian Competition and Consumer Commission chairman Rod Sims is happy to talk about his plans for big corporates. The competition tsar has put Woolworths and Coles, and their respective petrol price deals, in sharp focus following a speech at a lunch for the Australian Institute of Company Directors.

Also in this morning’s edition of The Distillery, two commentators have a look at OZ Minerals after the copper-gold miner missed out on Rio Tinto’s Northparkes mine.

Firstly though, The Australian’s John Durie begins with Sims’s assertion of what the supermarket giants should and shouldn’t be doing.

Here’s Sims: “If Coles and Woolies wish to offer their customers a discount, it should be off supermarket products, not petrol. While large shopper-docket discounts provide short-term benefits to some consumers, the likely harm to other retailers, and therefore to competition and the competitive process for petrol retail, could well be substantial.”

And here’s Durie: “The point is well made. After all, depending on whose figures you want to use, Coles and Woolies speak for about 80 per cent of dry grocery sales, 60 per cent of alcohol sales and 50 per cent of petrol in Australia. The retailers will dispute the numbers, but they cannot dispute the trend, which is seeing them take an increasing share of the household wallet. They are not stopping, and by the time the game is finished they could have a finger in just about every consumer activity in the country.”

Furthermore, Fairfax’s Elizabeth Knight points out that it’s not just the money that Woolworths and Coles are enticing consumers to spend at their stores for a fuel discount that gives schemes like this their power.

“Fuel discounts are a particularly effective way for the supermarkets to entice loyalty and at the same time mine their customers for data. If they were of only marginal benefit the supermarkets would have ditched them to appease the regulator, which is already fighting the two industry giants on their treatment of suppliers and potential abuse of market power. The ACCC has always been sensitive to the perceptions of the general public and how the media portrays the effectiveness of its bite. The behaviour of the big supermarket chains is one that has caught the attention of the media and Canberra. Sims has long wanted to make some inroads into curtailing their power.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd observes that public interest in fuel prices is, well, fuelled primarily by consumer’s “confusion and uncertainty” about the way in which petrol is priced.

“The habit of petrol retailers to push up prices just before Easter and holiday weekends has fed cynicism about the real cause of petrol price movements. An ACCC inquiry into fuel prices in 2007 concluded that petrol prices were determined by movements in international petrol prices. But the latest inquiry was prompted by ACCC concerns that the industry may have breached the law in the way it shared information on price changes.”

Meanwhile, The Australian Financial Review’s Matthew Stevens emphasises that the timing of OZ Mineral’s writedown on the same day we discovered that it has missed out on Rio Tinto’s Northparkes mine stake is nothing more than coincidental.

“It is slightly disconcerting, given the recent critical focus on miners and disclosure, that OZ took this news to market but five days after publication of its quarterly production numbers and little more than two weeks ahead of the release of its full year financials. But, as OZ explained, the accounting standards required an asset impairment test from the moment that its market capitalisation was lower than the carrying value of its assets. According to the company, that test was triggered at Friday’s close of $4.13 a share, which translated into a market cap of $1.25 billion against a stated asset carrying value of $1.3 billion. And a weekend of burrowing around by the audit committee and others has resulted in a substantial non-cash impairment on Prominent Hill because of lower than anticipated copper prices that have not been fully mitigated by the drift in the Australian dollar.”

Business Spectator’s Stephen Bartholomeusz notes that OZ was considered a strong favourite to win Northparkes not just because of its cash hoard and lack of debt, but its need to fill a looming production gap at Prominent Hill.

“Despite the foreshadowed writedown, which is non-cash, OZ Minerals could have very comfortably financed an acquisition of Northparkes. That would suggest that it wasn’t prepared to pay the price of success. OZ Minerals has been very disciplined in not using its cash hoard and unleveraged balance sheet to overpay for assets.”

In other company news, The Australian Financial Review’s Philip Baker notes Commonwealth Bank of Australia’s fresh all-time high along with the growing expectations that the Reserve Bank will cut interest rates at the next meeting.

“Coincidence? Maybe, but probably not,” writes Baker.

Speaking of Commonwealth Bank, Fairfax’s Adele Ferguson astutely points out that the “relatively unknown” independent directors of Commonwealth Managed Investments, the board that looks after the CFS Retail Property Trust Group and Commonwealth Property Office Fund, are in the hot seat as the bank looks to exit the property funds management industry.

The Herald Sun’s Terry McCrann thinks it’s interesting that Seven Network managed to maintain an overall ratings lead over rival Nine Network in annual TV revenues thanks largely to its dominant performance in Perth.

Fairfax’s Elizabeth Knight writes that the figures could have been worse, with the main markets in Sydney and Melbourne rising 0.86 per cent and 0.04 per cent respectively. However, Knight adds that adjusted for inflation, that’s actually a decline.

Elsewhere, The Australian’s economics correspondent Adam Creighton delivers a vintage opening in his piece about Grattan Institute research indicating that almost 96 per cent of the $190 billion mining boom windfall has been squandered, by quoting a famous line from The Economist in the 1980s:

“If you look at history, Australia is one of the best managers of adversity the world has seen, and the worst managers of prosperity.”

And finally, Fairfax’s Tim Colebatch notices that the Coalition’s pledge to put all Commonwealth infrastructure projects above $100 million past Infrastructure Australia for analysis does not mean that projects that fail to win its blessing will be blocked. It’s a non-binding test.