IC June 2008 business news

05 March 2009

By the end of May IC's Share Index for crane companies was back above the 600 point mark for the first time since November last year. It enjoyed an impressive 9.74% rise between weeks 17 and 21 to finish at 603.37 points.

All the companies that make up the share index saw their prices rise over the four-week period, although the range of gains was wide. At the top end were the three Japanese manufacturers, led by Hitachi with its 18.78% rise. Konecranes also did well with a 16.61% rise, outpacing fellow European Palfinger's 7.82% increase.

The two US manufacturers had a notably lacklustre month, with Terex's shares rising just 2.72% and Manitowoc's only 1.75%.

At the time of writing in late May Manitowoc was involved in a bidding war to acquire UK cooking equipment manufacturer Enodis as a strategic bolt on to its ice making machine business. Having first bid in April, its offer was subsequently trumped by Illinois Tool Works. However, Manitowoc returned in May with a UK£2.96 per share bid (up 14% on its original £2.60 offer) valuing Enodis at UK£1.08 billion (US$2.14 billion).

This did not provoke a big swing in Manitowoc's share price, indicating that investors are broadly behind the deal. However, they cannot have been happy about the company having to raise the offer price at what is still a shaky time for the markets.

Although share price gains for both Manitowoc and Terex were weak compared to their global peers in the crane industry, they were strong in the context of US markets. Over the same four-week period that the two eked out small gains, the Dow moved the other way, falling 1.74%.

This was at odds with the other major international benchmarks, which held their ground between weeks 17 and 21. The Nikkei 225 managed a marginal 1.07% rise, and the FTSE performed similarly with a 1.32% increase.

Currencies

It was a relatively quiet week for the currency markets, with the Dollar seeing marginal losses against the Euro, Pound and Yen. Of course, compared to a year ago, the Dollar is down a long way on the Euro and Yen - 13.23% and 12.96%, respectively, but remains flat against the Pound.

Concerns

While May was a generally positive month for stock markets, an old issue reared its head. Oil prices hit new records towards the end of the month, surpassing US$135 a barrel at one point. This plus other inflationary pressures on pretty much every major global commodity - including food - is a major cause for concern.

In recent periods of economic growth, inflation has been kept in check by central banks pushing up interest rates. This, however, is a distasteful option in today's climate of slowing economic growth, particularly in countries like the US and UK that have been hit hardest, and could do with interest rate cuts to stimulate growth.

The potential problem of ‘stagflation' - high inflation in a period of weak growth - is a difficult problem to solve. Conventional thinking is that tax cuts, combined with interest rate rises are the best way to combat stagflation, but again, this would see both the UK and US increase their deficits, causing the Pound and Dollar to sink further.

The other more intractable problem is that the current economic climate is the product of a worldwide system - we clearly live in a more internationally interdependent environment than was the case in the 1970s, and it is, therefore, questionable how much impact a single government or central bank can have.

June IC Share Index

Stock Currency Price at start Price at end Change % Change 12 months ago 12 month % change

IC Share Index* 549.82 603.37 53.55 9.74 604.04 -0.11

Dow Jones Industrial Average 12849 12626 -223 -1.74 13121 -3.78

FTSE 100 6077 6157 81 1.32 6435 -4.32

Nikkei 225 13863 14012 149 1.07 17400 -19.47

Hitachi Construction Machinery YEN 2955 3510 555 18.78 3770 -6.90

Konecranes € 25.47 29.70 4.23 16.61 25.90 14.67

Kobe Steel YEN 315 353 38 12.06 425 -16.94

Manitowoc US$ 38.82 39.50 0.68 1.75 70.00 12.86

Palfinger € 23.52 25.36 1.84 7.82 136.50 -25.68

Tadano YEN 998 1106 108 10.82 1586 -30.26

Terex US$ 69.53 71.42 1.89 2.72 79.44 -10.10

*IC Share Index, end April 2002 (week 17) = 100

Exchange rates - value of US$

Currency Value at start Value at end Change % Change Value 12 months ago 12 month % change

YEN 104.20 104.03 -0.17 -0.16 119.52 -12.96

0.6382 0.6368 -0.0014 -0.22 0.7339 -13.23

UK£ 0.5072 0.5054 -0.0018 -0.35 0.5017 0.74

Period: Week 17 - 21

Palfinger 4 for 1 stock split in week 27 2007

Manitowoc 2 for 1 stock split in week 37 2007

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