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NZX First Half Profit Leaps On Asset Sales, Derivatives Eyed

Fuseworks Media
Fuseworks Media

Wellington, Aug 7 NZPA - Sharemarket operator NZX is confident there will be demand for its proposed dairy futures contracts.

NZX today said net profit for the six months to the end of June 30 was $60.76 million, up from $4.97 million a year earlier.

The result was boosted by the sale of investments in TZ1 Registry and Bond Exchange of South Africa.

The market operator has been expanding into new areas of business and one area is the trading of commodity futures contracts.

NZX chief executive Mark Weldon said a key investment in the first half was the establishment and staffing of an NZX office in Auckland, focused on the introduction of new futures and commodities products.

The Auckland team was working effectively with local and international customers on the launch of dairy derivatives.

The timing of the launch has yet to be finalised but NZX believed the prospects for a commodities market were very strong.

Fiona Mackenzie, head of trading and liquidity, said milkpowder futures contracts were an interesting product because there was no such tool now.

"This product is designed to capture demand for global risk management," she said.

"It is the number one focus of the Auckland team," she said.

There were liquid milk and a physically settled skim milkpowder contract in the US. A US-listed liquid milk product was suitable for a domestic focused US dairy industry but did not help global dairy traders.

New Zealand was well-placed to launch a global risk management tool for the dairy industry.

The exchange expected to list milkpowder contracts for 24 months settled in cash. A decision has not been made yet on the reference price.

The exchange was in the process of consulting customers to help define contract specifications.

Some commentators have suggested one possible choice would be to base it on the regular Fonterra internet auctions of whole milkpowder, which over the past 14 months have sold about $1 billion worth of full cream milkpowder.

Fonterra plans to double commodity sales on its internet platform, introducing new products, to sell about 20 percent of its NZ-sourced product. It has also been talking to other international dairy companies about them joining the auctions in a drive for more open and transparent commodity markets.

Ms Mackenzie said likely futures customers include brokers of physical dairy product and firms that specialised in trading futures contracts in a wide range of commodities.

Producers of dairy products in both New Zealand and other countries were also interested.

"It is a very broad group of possible participants," she said. "It has been very positive feedback."

In the six month result total revenues from ordinary activities during the period lifted 17 percent to $18.63m.

Market data revenues rose 18 percent to $6.1m, with three key factors affecting data revenues -- terminal numbers, exchange rates and pricing.

Listings revenue was up 15 percent to $5.17m, with debt and secondary equity issuance at record levels, NZX said.

Mr Weldon said an ebitdaf (earnings before interest, tax, depreciation, amortisation and financial instruments) line had been added to the results as an indicator of underlying performance.

Ebitdaf of $9.08m in the first half of 2009 was up 3 percent on the same period last year. Excluding one-off items ebitdaf would be $10.19m, up 16 percent on last year.

NZX said it had made a provision for impairment of the investment in its joint venture trading operation in Australia, AXE ECN, given the ongoing reluctance of the Australian government to address the granting of an Australian markets licence to AXE.

The provision for impairment of the AXE investment in the accounts at June 30 was $3.6m in the parent and $1.82m in the group given previous equity accounted losses.

There were no services revenues from AXE to NZX in the first half of 2009.

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