Costco bulks up to take sales from Coles and Woolies

Costco Wholesale Australia declared a net profit of $9.73 million for the 53 weeks to September last year.THE US discount retailer Costco has underscored its escalating competitive threat to Woolworths and Coles by posting its maiden annual profit in Australia since opening its warehouse stores here four years ago. It has also received a further $50 million from its American parent to bankroll an aggressive push in the region.
Shanghai night field

Operating out of three stores last year, in Melbourne, Sydney and Canberra, Costco managed to more than double its revenue to $609.5 million as shoppers warmed to its club membership model and bulk purchases of everything from whitegoods, fish and furniture, to hearing aids and French wine.

And with another three warehouse stores under construction or awaiting planning approval, Costco has sent a clear warning to the supermarket heavyweights, German discounter Aldi and the struggling convenience store sector that it is rushing towards $1 billion in annual sales in Australia as it fashions a new force in retailing.

The threat to the dominance of Woolworths and Coles comes as Aldi, which specialises in a limited range of deeply discounted private label groceries and merchandise, is set to open its 300th store in Australia next month. The German retailer is believed to have captured 5 per cent of the national market share since it arrived in 2001.

Fresh documents lodged with the Australian Securities and Investments Commission reveal that Costco Wholesale Australia reported a net profit of $9.73 million for the 53 weeks to September last year, its first profit in Australia and a turnaround from the $13.2 million loss it racked up in 2011. The period reflects a full year of operation for its three warehouse stores, with Melbourne and Sydney believed to generate the bulk of the nearly $610 million in sales and membership purchases. Melbourne and Sydney have more than 100,000 members each.

Since opening its first warehouse in Melbourne’s Docklands in 2009, Costco has racked up retained losses of just under $38 million, reflecting the start-up costs of building its large-format stores.

The maiden profit in Australia was driven by extra revenue generated from its two new stores and improved productivity. It received a tax credit of $13.4 million.

”I think there is a lot of opportunity for Costco here in Australia and we are thrilled and very satisfied to see that the business is growing,” said the company’s managing director for Australia, Patrick Noone.

Mr Noone said the fresh food category remained popular, as did the bakery, and household goods such as toilet paper and detergents. Hearing aids was a stand-out performer for Costco, while its range of premium wines was also in great demand.

”We sell a lot of beers and spirits, but we do a lot of imported wines from Europe, and that seems to be one of the big growth areas for us. We have a British buying office with Costco and we can piggyback on their buying of European wines.”

Meanwhile, Wesfarmers – the owner of Coles, Bunnings, Target and Kmart – reports its second-quarter sales performance on Wednesday. The market leader Woolworths, which also owns Big W, will unveil its sales numbers on Thursday. Coles is again expected to outgrow its larger rival Woolworths, notching up growth of about 4 per cent against 2.8 per cent for Woolies.

The original release of this article first appeared on the website of Shanghai Night Net.

Rinehart buys strategic stake in minnow Lakes Oil

AUSTRALIA’S unconventional oil and gas sector is a good place to invest so long as the location is right, according to one of the top executives at Gina Rinehart’s Hancock Prospecting.
Shanghai night field

The rare comments from Hancock’s chief development officer, John Klepec, came after one of Ms Rinehart’s private companies made a strategic investment in the sector through a small Melbourne company called Lakes Oil.

The deal saw Timeview Enterprises – a subsidiary of Hancock Prospecting – purchase $4.25 million worth of Lakes Oil convertible notes.

If fully converted into shares, Ms Rinehart would control 18.6 per cent of shares in Lakes Oil, which is seeking to develop unconventional forms of oil and gas in Victoria.

Unconventional forms include shale oil, shale gas, and tight gas and typically require the controversial hydraulic fracturing technique known as ”fracking”.

Ms Rinehart’s investment was made despite Victoria’s moratorium on fracking approvals, which will remain in place until a national framework can be developed later this year.

NSW has previously imposed – then removed – a similar moratorium and Mr Klepec said Victoria’s stance was not enough to deter the Rinehart camp. ”That has to run its course, but across Australia other state governments have done the same thing, which is fair enough. They have to run these things to ground and we think there will be a similar positive outcome,” he said.

Lakes Oil is focusing on the Otway basin and the Gippsland basin – which is close to the traditional Bass Strait oilfields as well as the Latrobe Valley power stations – and Mr Klepec said the Rinehart camp had been impressed with the location of the tenements.

”This particular opportunity came to us late last year and we think it has got particularly good upside. It has a great location, with shale gas there is no point having it if it’s not close to the infrastructure where you can do something with it,” he said. ”For us it is not a massive investment, but it is a large stake and we think it is one of these things that is a long-dated option with huge upside and limited downside.”

Lakes Oil is not Ms Rinehart’s first exposure to unconventional oil and gas, with Mr Klepec saying the Hancock group also held prospective tenements in the Northern Territory. ”They are very early stage but highly prospective, and shale oil in particular is a good commodity to be in,” he said.

But when asked if unconventional oil and gas would ever rival iron ore as the Rinehart camp’s major focus, Mr Klepec said expectations were being kept in check.

”The expectations are not that large – iron ore is a major part of the group’s assets. If it ever eventuates like that everyone would be pretty happy, but no, the bar is set a lot lower than that,” he said.

Lakes Oil has been targeted by environmental campaigners and Friends of the Earth spokesman Cam Walker said the deal with the Rinehart camp ”must concern everyone who is worried about the prospect of an onshore gas industry” in Victoria.

But Lakes Oil chairman Robert Annells said the investment should be seen as a vote of confidence in Victoria’s resources sector.

”It’s a good result for the company and it’s a good result for Victoria too, because the mining boom has missed Victoria a little and there is no reason to believe resources end at state borders,” he said.

The deal will result in Professor Ian Plimer becoming a non-executive director of Lakes Oil.

The Lakes Oil share price rose from 0.4¢ to 0.6¢ on Tuesday.

Hancock Prospecting is a substantial shareholder in Fairfax Media, the owner of this publication.

The original release of this article first appeared on the website of Shanghai Night Net.

Wanted: powerful vision for derelict White Bay station

New vision … White Bay power station could be opened for public events. Visitors at the White Bay Power station open day in 2011.
Shanghai night field

IN GENTRIFIED Sydney, it is barely imaginable: a power station smack-bang in the city, firing coal, raising steam, as men worked in 70-degree heat then trudged home, blackened and sore, the clamour still ringing in their ears.

However, history turned and the White Bay power station fell silent for 30 years, home only to vandals, pigeons and the occasional film crew.

That is set to change. A state government taskforce has recommended the site be opened for public events and other uses ”in the short to medium term”.

It has fuelled debate on how best to awaken the derelict site, Sydney’s longest-serving power station and the only one still containing the machinery of its time.

The chief executive of the developer lobby group Urban Taskforce, Chris Johnson, has a few bold ideas.

”Looking at that site with views out over the water and [so] close to the city … the first use you’d have to think of is residential accommodation,” he said.

”It’s a big, robust building, and I think those buildings were always meant to be cut and quartered and adjusted and rebuilt and pipes put through the middle of it.”

As power stations shifted to the coalfields, most plants in Sydney were demolished or reused. The Star casino was built where the Pyrmont plant once sat; Ultimo’s became the Powerhouse Museum.

But White Bay sat idle and rotting. Heritage restrictions, such as retaining the rusty cladding where possible and a ban on new buildings that block views to the site, could mean ”it will sit unused for another 30 years”, Mr Johnson said.

A former power station worker, Bob Hughes, speaking in an oral history account, recalled ”working at heights, working in dangerous conditions … I’d be doing jobs working next to a boiler where it would be 70 or 75 degrees.”

The City of Sydney’s director of city planning, Graham Jahn, said White Bay and its surrounds were ”the last vestige of maritime and industrial activity for a port city” and any re-use should ”have a public purpose”.

”The majority of the harbour has been gentrified through residential conversions and redevelopment right through the harbour … executive living on the waterfront in every situation isn’t always appropriate,” Mr Jahn said.

The council has suggested film studios or a university campus, and says the huge turbine hall is ripe for conversion into an art gallery or museum.

Submissions to the Glebe Island temporary exhibition centre reveal that the Bays Precinct Taskforce, commissioned by the state government to consider the future of land around Glebe Island and Rozelle, called for the power station site to be opened to the public, at least temporarily. The site is undergoing decontamination and conservation work. The report was handed to the Planning Minister, Brad Hazzard, in the middle of last year.

The original release of this article first appeared on the website of Shanghai Night Net.

Street sees double as school year beckons

THE residents of a cul-de-sac in Engadine say locals are afraid to move into their quaint 22-house street in Sydney’s south.
Shanghai night field

”They are scared they’ll have twins,” jokes Renae Kidd, the mother of identical eight-year-olds, Zane and Taj.

The street is home to six sets of twins, five of whom are school aged and are returning to school on Wednesday, along with most of the state’s 750,000 public school students.

”Everyone always asks what’s in the water,” said Deb Kimber, who is the mother of seven-year-old girls Diaz and Brinley. ”We make jokes about being close to the reactor.”

Ms Kimber, whose daughters attend Engadine West Public School, said what excited her about the girls going back to school was finding out who their teacher was going to be.

One year she put in a special request because one of her children had a health condition, and there was a particular teacher she knew to be understanding.

And she knows of other parents who have approached the school with concerns.

”I think quite a lot of people write letters,” she said. ”But I think we are pretty lucky at our school.”

For students and parents hoping for their favourite teacher, there is the occasional disappointment.

”There’s always that teacher you really hope that your child gets,” said a spokeswoman for the Federation of Parents and Citizens’ Associations of NSW, Rachael Sowden. ”That’s not to say one teacher is better than another teacher but sometimes a particular type of teacher might work better with a particular type of child.”

If a parent was uncomfortable, she said, it was important they communicated their concerns to the school.

”We say, to both schools and parents, transparency is best.”

The original release of this article first appeared on the website of Shanghai Night Net.

Algal bloom suspected after marine deaths

Water tests … dead fish in Sir Joseph Banks Park.MASSES of dead fish, including carp, mullet and eels, washed up dead in pools next to Botany Bay on Tuesday, possibly because of a blue-green algal bloom.
Shanghai night field

The cause is yet to be determined though, and the recent downpour has not been ruled out as a factor, with millions of litres of rainwater flowing down storm drains towards the ocean.

Ponds in Sir Joseph Banks Park, adjacent to Sydney Airport, were littered with hundreds of dead fish.

”The EPA is investigating this fish kill in conjunction with Botany Bay Council,” a spokeswoman for the NSW Environment Protection Authority said.

”The dead fish have been removed and water and fish samples have been taken by council for further analysis.”

The council said it was made aware of potential algae problems in the wetland system last year, and agreed in November to spend $137,000 cleaning up the waterway.

”[The] council is now undertaking further sampling which will test water up to 1.5 metres deep,” the Botany Bay mayor, Ben Keneally, said. ”This will determine if the cause of the fish kill is blue-green algae as originally thought, or another factor.”

Most mass fish kills take place because of low dissolved oxygen levels in water, which stops fish from breathing properly.

This can be caused by floods of muddy water entering rivers or lakes, or algal blooms that soak up oxygen.

According to the Department of Primary Industries, direct water pollution by chemicals or other substances caused about 8 per cent of reported fish kills in NSW in the past 30 years, but it says that proportion seems to be higher in Sydney.

The number of reported fish kills seems to have risen sharply since 2000. In the past month, large-scale kills have been recorded near Menindee in western NSW and at Jervis Bay.

It is unclear how aquatic life around Sydney will fare after the recent heatwave followed by heavy rain.

A senior environmental assessments engineer with the Department of Primary Industries, Marcel Green, said the city’s fish might even benefit from the rain.

”The nature of fish kills is almost impossible to predict because they occur at all sorts of times and conditions,” Mr Green said. ”It is usually a sudden change in conditions that can bring them on, but in the Sydney region I’m hoping it will bring a lot of fresh water in and flush through the system.”

The original release of this article first appeared on the website of Shanghai Night Net.