screaming buy, page-6

re: screaming buy - not consencus recommendation << It's not that towage has suddenly become a dynamic industry - volumes are flat at best - its about unlocking value by cost cutting and efficiency gains and better use of the company's strong cash flow" >>

Arthur,
I just read the attached article about import/export.

SALOMON SMITH BARNEY are right that volumes are flat at best, but that begs the question about "strong cash flow"
My reading of the attached is that volumes must go down and revenue must then follow.
Any comments ???

Regards Henrik
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Australian imports fall in May
18/06/03 By: Geoff Kendrick

May merch. Imports AUD10.4bn (WBC s/a est AUD10.6bn)

In original terms merchandise imports fell by 5.1% in May. Once the data is seasonally adjusted – by Westpac – imports fell 7.6%.

The drought is restricting rural export volumes and lower AUD commodity prices in May will affect export value. However, the May trade deficit is expected to fall from AUD31.bn to AUD2.4bn.

The SARS virus is expected to be positive for the services balance in May. On the export side we believe that the large falls in March and April have fully captured the SARS related downturn, whereas services imports have yet to decline.

We estimate that imports of goods fell 7.6% in May in seasonally adjusted terms. The fall, which occurred mainly in consumption and capital goods, may be explained by a correction to the April spike in car imports. We forecast that total imports of goods and services will fall by 7.0% in May, with the impact of SARS to finally appear in the data for services imports (primarily overseas travel). This is expected to show up as a revision to April’s data or as a fall in May. In either case the May result for services imports is expected to be lower than the current estimate for April.

Due to lower commodity prices and a continuation of weak rural exports we expect total exports to fall around 2.5% in the month. This will see the trade deficit decline from AUD3.1bn to around AUD2.4bn.

The risk to our forecast lies on the export side. Non-rural exports fell 9.0% in April. The 1.3% fall in the RBA’s non-rural commodity price series in that month implies that most of this decline was in vo9lumes. Our research suggests that part of this volume decline was simply a timing issue with some shipments pushed into May. Therefore, our May trade balance forecast includes a slight improvement in non-rural export volumes, but when combined with a 4.2% fall in the AUD RBA non-rural price series, non-rural exports will still fall in value terms.

In addition, we anticipate a flattening out of rural export volumes following substantial decline over the last six months. This will see rural exports fall in value terms as the RBA AUD rural price series fell 11.0% in the month. The risk is that a further fall in grain exports and weaker meat exports could see total exports fall by more than our forecast 2.5%.