The Global Demographic Tailwind

[DewDiligence]

Weak Euro Creates 2H10 Headwind for Consumer Multinationals

[Still, short-term currency swings are but a blip in the overall scheme of things. For investors with a LT horizon, The Global Demographic Tailwind will relentlessly drive profit growth of these companies.]

http://online.wsj.com/article/SB10001424052748704635204575242413649441730.html

›MAY 14, 2010
By ANJALI CORDEIRO

NEW YORK—U.S. consumer giants selling toothpaste, diapers and perfume in Europe could feel a pinch in their profits as the fallout from a weaker euro combines with higher commodity prices and slower spending.

"Historically commodities and currencies have offset each other. This time around you are also seeing [some] commodity moves," said Edward Jones analyst Jack Russo. "These companies will have to deal with both issues: rising commodity costs and the dollar strengthening."

Makers of household brands like Colgate-Palmolive Co. and Estee Lauder Cos. have benefited from a weaker dollar in recent months, but those gains may now fade as the greenback gains against the euro and other currencies. The latest pressure from a weaker euro comes at difficult time for consumer companies, which are already fighting slow consumer spending and a pickup in some raw material costs.

For their part, the companies willing to discuss this issue warned about over-analyzing the impact of specific currencies and commodities because the situation is complicated and constantly in flux.

"I can't look at [the] weaker euro and say definitively that creates a problem. It's much more complicated than that," said Jon Moeller, chief financial officer of Procter & Gamble Co. A Procter & Gamble spokeswoman said the company doesn't focus on the impact of individual currencies in isolation.

American multinationals do business overseas in local currencies and then translate those proceeds back into U.S. dollars. A weaker euro hurts sales as companies bring home fewer dollars from the euro-zone after foreign exchange conversion. Companies most exposed to the euro include Estee Lauder, Colgate and Procter & Gamble, said Sanford Bernstein analyst Ali Dibadj. Europe, on average, accounts for about 16% of companies' sales in the household products sector, he said.

The euro has fallen about 12% versus the dollar this year, reaching a rate of 1.26 dollars per euro due to concerns about the heavy debt burden of euro-zone countries.

Foreign exchange was generally a positive driver in the recent first quarter as the dollar had been weakening against many currencies. In the latest quarter, for instance, P&G saw favorable foreign exchange add three percentage points to sales. Estee Lauder currently expects currencies to help its sales by two percentage points. If the dollar continues to strengthen against the euro and a basket of currencies, it would start to reverse some of the recent foreign exchange translation benefits [duh].

"If the [currency] trend goes on, people are going to have to redo some math," Dibadj said.

Companies say that some of the biggest currency moves are near term. Investors "shouldn't get too nervous" about short-term currency swings, Philip Morris International Inc. Chief Financial Officer Hermann Waldemer said.

Tupperware Brands Corp., which does a chunk of its business in Europe, said the large basket of currencies it works with globally gives it a "natural hedge" against any one currency hurting it too negatively.

In recent weeks, currencies in other parts of the world have also weakened a little. Latin American currencies that gained against the dollar early this year have reversed and are down 2% to 3% in May, according to Goldman Sachs.

Because of currency fluctuations in Europe and Latin America, Goldman this week lowered its earnings projections for Tupperware by a dime to $3.72 a share for fiscal 2010 and reduced projections for Avon Products Inc., Colgate, Estee Lauder and cigarette-maker Philip Morris International.

The exact impact on profits remains unclear since companies hedge some of their exposure. Consumer manufacturers have previously used instruments like foreign-exchange options to limit exposure to a rising dollar. But while hedges have helped reduce the fallout, the volatility of currencies has made it hard to completely overcome the effects of foreign exchange.

Large makers of household goods have in recent months already felt a hit from one big currency change, with the devaluation of the Venezuelan bolivar hurting earnings.‹

[gym gravity]

CREE is my proxy for the rest of the market... it is up in the pre-market today, naz futures are down, market will climb today (or tomorrow).

[mouton29]

<<Do you know if LED’s emit a measurable amount of UV radiation>>

The spec sheet on the cree website for the LR6 does not say. However, a little internet reading sugests that this is an issue for CFL bulbs, at least those not encased on glass, but not for LEDs. The second of these two links is a website for the Xeroderma Pigmentosum Society, XP is a disease where exposure to UV light can be fatal, so this is a real issue for them.

http://www.toolbase.org/Technology-Inventory/Electrical-Electronics/white-LED-lighting

http://www.xps.org/uvnotes.htm

What about LED lamps?
The LED (Light Emitting Diode) is a solid-state device. The mechanism for producing visible light is different from incandescent lamps, where the light is produced by heating a filament to a white-hot temperature. The LED uses very low power and generally produces light at a single wavelength. The earliest LEDs emitted light only in the infrared portion of the spectrum (opposite UV). Remote control "clickers" are among the best known uses. Then red LEDs came into use (remember early digital displays on the first calculators?). Recent developments have enabled the economic production of larger (thus brighter) LEDs of various colors. In fact a common use is to replace traffic lights, because they are more efficient and last longer (even if more expensive than the 100 watt incandescents they replace). Today we see increasing availability of "white" LEDs. The LEDs I've described thus far are monochromatic, that is they produce light of a single color or wavelength. To produce white light, we need the mix of at least two colors (usually three or more, as in color TV or computer monitor). So white LED's use various "tricks" to create the appearance of white. One of the techniques is to coat a blue LED with a phosphor that emits yellow light, that combined with blue appears white to our eyes.
In any event, if you know the light source include LEDs only, then there will be no UV (A, B, or C) emitted. Your UVA+B meter should read zero. No UVC.
I qualified my statement saying "if you know the source is LED" because the blue-white light emitted from white LEDs appears the same as the tell-tale blue-white light I often caution as being a sign that an unknown light source might be high in UV. If in doubt, use a meter.

[DewDiligence]

Rain Forests Make Room for Mall Rats

[This is the cover story in Thursday’s WSJ. #msg-44716073 and #msg-48768778 are good companion reads.]

http://online.wsj.com/article/SB20001424052748704292004575230303750427956.html

›MAY 13, 2010
By JOHN LYONS

RIO BRANCO, Brazil—Until now, civilization's march into the Amazon forest has followed a predictable pattern. Loggers make way for cattle ranches that make way for farms. The next step: Shopping malls.

Only a few decades ago, many scientists believed that the Amazon was barely habitable. Today, at least five Brazilian Amazon cities have populations over 300,000, a key threshold for attracting national retail chains. By the end of next year, four of the five biggest cities will have large American-style malls. Developers are considering projects in three others.

The latest mall project broke ground in March in Rio Branco, a once-isolated outpost near the spot where rain forest activist Chico Mendes was killed in 1988. Builders were encouraged by a successful new mall about 340 miles away in Porto Velho. Folks from Rio Branco were making the six-hour drive there to shop.

The proliferation of Amazon shopping malls marks an economic turning point for one of the world's last frontiers. A modern consumer economy is taking root in a region that most people still imagine as dense jungle and piranha-infested rivers, checkered with deforested patches.

On Tuesday, Brazil's government reported that retail sales in the Amazon's Rondônia state, home of the Porto Velho mall, rose by 31.7% in the year ending in March, the second fastest rate in the country and twice the national average. In Acre state, where the Rio Branco mall is under way, sales rose 31.5%—the country's third fastest rate.

The rise of the Amazon consumer underscores the scope of Brazil's domestic economic boom. President Luiz Inácio Lula da Silva has showered the region with money in an effort to lift the standards of the poor and working classes. Poor families get cash subsidies. Businesses get subsidized loans from the federal Banco da Amazônia. Hydro-electric dam projects provide jobs and investments. City populations have grown as people move there to access jobs and government services.

The Amazon's development also alters the game for environmentalists. Amazon city dwellers now have more clout to demand that roads, power plants and other projects be built in the region. That helps explain why Brazil's ultra-green environmental minister was replaced in 2008 by one more open to development. Because the malls are being built on land that was deforested decades ago, environmentalists haven't opposed the projects. Local environmentalists say their goal is to channel inevitable economic growth into activities that don't require mowing down more trees.

"The arrival of shopping centers is part of a global trend," said Jorge Viana, a former governor and leading environmentalist from Rio Branco. "Our biggest challenge is creating a model of sustainable economic development that includes the people who live in the forest."

To be sure, the vast Amazon is still mostly forest and won't become a strip mall any time soon. Since 1991, the population in Brazil's Amazon forest biome rose 48% to 19.7 million, mostly in cities and towns, according to Conservation International, a Washington, D.C.-based environmental nonprofit. But that's still extremely sparse considering that Amazonians occupy territory around the size of Western Europe.

Still, there's enough spending power in the Amazon now to attract global investors. Canada's Ivanhoe Cambridge, among the world's biggest shopping mall builders, is a partner in the Porto Velho mall. U.S. pension funds invested in the Rio Branco project. In 2007, BRmalls, a Brazilian developer partly-owned by U.S. real-estate tycoon Sam Zell, bought a stake in the region's oldest mall, Amazonas Shopping, in the urban hub of Manaus.

In Porto Velho, the new shopping center has changed everything from the landscape to the economics and social habits of the frontier town. The capital of a heavily deforested state, the population of the hardscrabble cattle and soy hub swelled after new roads brought hundreds of thousands of settlers to the region in the 1980s. Now, it's booming. Construction workers and white collar engineers are pouring in to build two hydro-electric projects worth several billion dollars nearby.

A beige, boxy structure rising out of a neat black-top parking-lot, Porto Velho Shopping is a jarring contrast to the rest of town, still a chaotic jumble of shabby, cramped buildings and cracked pavement.

The mall is by far the largest well air-conditioned structure for hundreds of miles around, making it an oasis in the muggy heat. That's enough to make it the state's top entertainment destination.

"The mall is basically the only thing there is to do in the entire state," said Aira Queiroz, an 18-year-old student who'd made the 125-mile trip from Ariquemes, the ranch town where she lives, to enjoy an ice cream and shop at the mall on a Saturday in April. "There's definitely nothing to do in my town."

Around her, mall scenes typical of the U.S. suburbs unfolded. The food court buzzed with chatter. A glass elevator climbed the atrium to deposit moviegoers at a five-theater Cineplex boasting a 3D screen. There were even Amazon mall rats. Teens, some with dyed-black hair swept precociously over one eye, roamed the aisles looking for something to do. Uniformed security guards kept a watchful eye.

For all its scenes of Americana, there are reminders that the mall is on the Amazon frontier. McDonald's had no fries that day. The delivery truck was delayed somewhere on the 2,500-mile drive from São Paulo [LOL]. The mall's employee-of-the-month won for handling more responsibility after half her team contracted Dengue fever.

A pair of Indian girls on a mall excursion guided by missionaries stood still, pondering the escalator from a safe distance. The mall has the first escalator banks in the state, and many people were lining up to ride one for the first time. After a cautious approach, the girls clasped hands and went for it. One made it easily. The other was caught in a steadily widening split-stance before wobbling aboard.

The changes are not just social. The mall has put enormous competitive pressure on local retailers to improve service and lower prices, altering the way they do business. Some 50 national chains, such as department store Lojas Americanas (meaning "American Stores,") opened their first store in the state at the mall. The competition put some downtown shops out of business, and forced others to upgrade to survive.

Consider the case of Divas, a clothing boutique run by Vilmarque João, a one-time appliance executive, and his wife. The business sprang from Mrs. João's frustration at the lack of fashionable clothing shops in Porto Velho. She and her friends started pooling money a few years ago to fly designated shoppers to São Paulo to retrieve the latest styles.

Word got out. Soon, orders poured in from other women with the same complaints. The Joãos dropped appliances and opened a clothing store downtown where it thrived for six years. They moved to the mall when it opened, figuring business downtown would be sucked dry.

Suddenly, however, national clothing franchises with high-end jeans opened just steps away from Divas in the mall. To survive, the Joãos cut the price of Carmim brand jeans by 43% to 389 reais ($218). Competition for new styles meant paying to ship apparel overnight by air from São Paulo.

To keep up with national stores, Divas hired more sales people and spent more time training them. The Joãos' lower prices and higher costs shrank their profit margin to 12% from 50% at their downtown store. But overall profits are still higher: Thousands of people, rather than hundreds, now pass their store daily. Mr. João suspects the mall environment has given a jolt to local consumerism.

"The mall is the only place in Porto Velho where all social classes are mingling in an open space, on equal footing," said Mr. João. "The middle class gets a chance to see what the rich are wearing, and then wants to go out and buy it."

The idea of building shopping malls in the Amazon isn't new. Brazil's 1964-1985 military government envisioned a network of bustling Amazon cities. They built roads to the forest and subsidized pioneers who would settle it. It didn't work out as planned. Expanses of forest were torched, but the rain forest land wasn't as fertile as expected. Far flung towns like Porto Velho swelled with luckless settlers and became violent no-man's lands.

But Amazonian economics are changing. By experimenting with fertilizers, grass types and other technologies, Amazon farmers and ranchers have learned how to wring more profits from the land. New roads have tethered together Amazon cities once isolated from each other, creating local markets. Roads now extend into neighboring countries like Peru, increasing commerce.

The first shopping mall in the Brazilian Amazon opened in 1991 in Manaus, a city of 1.7 million that has thrived as a manufacturing center because of a special status as duty-free zone. In April 2009, the 227-store Shopping Manauara opened nearby with jungle trees in the food court. The project was funded in part by Developers Diversified Realty Corp., a publicly traded U.S. real estate investment trust. At least two developer groups are considering additional mall projects for the city.

Most significantly, shopping malls are spreading to secondary Amazon cities like Porto Velho and Rio Branco where such investments were unthinkable a decade ago. One mall project is under way in Macapá, a state capital on the Amazon's northern bank unreachable by road from the rest of the country. And a second group is considering a competing project. Mall developers have already acquired land in the river port city of Santarém, population 277,000, and in Marabá, a mining hub.

The Amazon's consumer market reached critical mass so fast that it surprised even the experts. Five years ago when Dorival Regini, chief executive of a Rio de Janeiro-based mall developer LGR, began looking into Rio Branco, he had doubts.

In his mind, Rio Branco was synonymous with Dodge City—a lawless outpost on the Amazon frontier. The state was notorious as the place where the son of a cattle rancher murdered the rubber tapper and environmentalist Chico Mendes. Until the late-1990s, Hildebrando Pascoal, a strongman police chief-turned congressman, ran the state. He earned the nickname "chainsaw" for the way one of his enemies perished.

But data showing rising population and incomes warranted a closer look. So Mr. Regini dispatched an analyst, who was initially skeptical. "After he got there, he called and said, 'I should stay a few more days; I think we can do this'," Mr. Regini said.

Rio Branco had been tamed. "Chainsaw" was in jail. A group of green technocrats, mostly disciples of Chico Mendes, had won elected office in 1998. They pushed laws barring clear-cutting in the state's remaining rain forest. In a bid to attract businesses to town as an economic alternative to ranching, they built parks, well-lit streets and a fancy pedestrian bridge over the river. Zoning laws went in, and much of the endemic corruption went out.

Another encouraging sign: a planned road from Rio Branco across the border into Peru and over the Andes to Pacific Coast ports. The road, now opened, may soon be an important transit point for import and export to China, locals hope.

LGR acquired a piece of land at the intersection of the new road to Peru and the highway that connects Rio Branco to the rest of Brazil. The 161-store Via Verde Shopping is slated to open in mid-2011.

The company is confident the project will work in a city where traffic jams now clog streets where there were few streetlights just a decade ago. LGR executives flying up to oversee the project had trouble finding enough rooms in local hotels. The company is now planning a hotel, too.

The mall is the state's biggest private investment. But other firms are also eyeing Rio Branco. The Dutch warehouse club Makro opened near the mall site recently, and its French rival, Carrefour, is planning a store.

Building a mall in an Amazon city like Rio Branco presents unique challenges. Heavy rains fall almost half the year. During the dry season, workers must race to build the frame and roof so that work on the inside can continue during the rains. Missing the deadline could mean losing an entire year.

Everything from cement to iron bars, glass and fixtures costs more because it must be trucked in from hundreds, and in some cases thousands, of miles away. The clay Amazon soil has no stones. That means that gravel to make cement must be trucked in—along with other construction materials.

One aspect has been easy: Finding tenants. Space in the Rio Branco mall was almost totally rented out before it broke ground.‹

[DewDiligence]

Thanks for the info. Do you know if LED’s emit a measurable amount of UV radiation?

[mouton29]

I'm pretty impressed with the Cree led bulbs I have bought. I have 2 LR6, which retrofit into a 6-in high hat fixture, and two bulbs that are made for a 6 inch fixture and just screw in light an ordinary incandescent bulb but can just squeeze into a 4-inch fixture if you remove the anti-reflective liner. The LR6 are a bit of a pain to install, you have to detach the edison socket and either cut it off and attach clips from the LR6 to the wires or screw the LED bulb in, depending on the model you buy. At least with my fixtures, I can see that after a little practice, it would take about 3 minutes to do the installation. The ones I bought seem to put out a fair amount of light, and they just came out with a new version of the LR6 that claims to put out 1000 lumens v. 650 on the old model. The website I bought them from charges about $95 a bulb, expensive but considering they last 50,000 hours and use 10 - 12 watts each, the price is not so unreasonable. I also like the fact that they generate very little heat, a consideration in my kitchen which can get hot in the summer.

[DewDiligence]

UNP Raises Dividend and 2010 Cap-Ex Guidance

[UNP has paid a dividend for 111 consecutive years!]

http://finance.yahoo.com/news/Union-Pacific-Announces-bw-1780718384.html?x=0&.v=1

›May 6, 2010, 12:25 pm EDT

OMAHA, Neb.--(BUSINESS WIRE)--Union Pacific Corporation (NYSE: UNP) announced that its Board of Directors voted today to increase the quarterly dividend on the company’s common shares by 22 percent to 33 cents per share. The increased dividend is payable July 1, 2010, to stockholders of record on May 28, 2010.

“Two weeks ago Union Pacific reported record first quarter earnings, evidence that we are emerging from the challenge of last year’s recession as a stronger, more profitable company,” said Jim Young, Union Pacific chairman and chief executive officer. “With business volumes continuing to grow, we feel very positive about the long-term fundamentals of our business as well as UP’s strategy to make the most of these opportunities. As a result, we are generating solid free cash flows and have confidence going forward that we are taking the right steps to capitalize on our growth opportunities and reward our shareholders.”

The Board also approved a $100 million increase in growth capital spending in 2010, bringing the full year 2010 investment to $2.6 billion, primarily to acquire additional intermodal equipment and support our intermodal strategy.

“UP’s domestic intermodal business grew 8 percent last year during one of the worst recessions in decades, as our record service performance attracted new business to our railroad,” Young said.

In addition, Union Pacific plans to resume share repurchases on an opportunistic basis under its existing program, which authorizes purchases of up to 32.6 million shares by March 31, 2011. Timing and volume of share repurchases will be at the discretion of management. Any share repurchase under this program may be made in the open market, or otherwise.

Union Pacific has paid dividends on its common stock for 111 consecutive years.

About Union Pacific

Union Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country. Union Pacific serves many of the fastest-growing U.S. population centers and provides Americans with a fuel-efficient, environmentally responsible and safe mode of freight transportation. Union Pacific's diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad emphasizes excellent customer service and offers competitive routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada's rail systems and is the only railroad serving all six major gateways to Mexico, making it North America's premier rail franchise.‹

[gym gravity]

EVERY GOVERNMENT IS PRINTING!!!

http://www.businessinsider.com/david-rosenberg-with-every-government-printing-3000-could-be-conservative-for-gold-2010-5

[gym gravity]

I was stingy this morning in the premarket trying to get another 100 at $72 and look what I missed.

didn't have the money at the time to get it in the $60's.

I think this is a run to $100 or more.

[DewDiligence]

Intel Sees Double-Digit Growth for Several Years

[Moreover, the company’s new guidance for “normalized” gross margin is 55-65%, up from the prior guidance of 50-60%. Emerging middle classes in many countries will drive the growth of PC’s and myriad devices with embedded chips, which makes INTC a clear beneficiary of The Global Demographic Tailwind.]

http://online.wsj.com/article/SB10001424052748704250104575238330448773208.html

›MAY 12, 2010
By DON CLARK

Intel Corp. predicted its business will grow sharply over the next few years, driven by an expansion into new markets as well as surprising strength in the computer business.

Paul Otellini, Intel's chief executive, told analysts at a meeting in Santa Clara, Calif., Tuesday that its earnings per share and revenue should grow at an average annual rate in the "low double-digits" over the next few years—about double the chip maker's recent growth rate. "We are on top of a growth engine," Mr. Otellini said.

The Silicon Valley chip maker has experienced a solid rebound in sales of chips for personal computers over the last few quarters. But Intel has faced questions about its long-term prospects, in large part because of its limited participation in the cellphone business. Chip designs licensed by ARM Holdings PLC dominate those products.

Mr. Otellini argued that the chip maker will change that picture by exploiting its technological advantages—particularly a head start over rivals in introducing new manufacturing processes—to deliver new products with much higher performance and lower power consumption. That should help drive the company's chips into cellphones, digital TVs, automotive electronics and other new markets, he said.

"Intel has a unique set of attributes that no one can replicate," Mr. Otellini said. "This stuff gets harder to do and we are going to get better at it."

Meanwhile, the company's traditional business—delivering electronic brains for computers—is also defying predictions of an inevitable slowdown as new users and new uses for PCs emerge, Mr. Otellini said. While desktop PCs should grow at an average annual rate of 2.4% between 2010 and 2014, notebook PC shipments should grow at a 22% annual rate over that period, he said.

Thomas Kilroy, a senior vice president and general manager of Intel's sales and marketing group, said much of the growth will come outside the U.S., in countries such as China, India, Brazil and Indonesia. He predicted 125 million people will buy PCs for the first time over the next few years. Despite the long-term growth, Mr. Kilroy noted that Intel is not changing its financial forecast for the current quarter.

As Intel tries to extend its franchise, one of its biggest challenges is making sure there is software to take advantage of its chips. In computing it has long relied on compatibility with Microsoft Corp.'s Windows operating system, but that software faces tough competition in markets such as cellphones.

As a result, Intel is investing heavily to build its software ecosystem. Mr. Otellini estimated that software professionals now make up 22% of Intel's headcount. Besides hiring, it is helping to offer services and technology so that makers of cellphones and other products can set up "app" stores to work with its Atom microprocessor, akin to Apple Inc.'s popular software distribution system.

Renee James, the senior vice president in charge of Intel's software efforts, gave new details of Intel's plans to ensure that multiple operating systems work on hardware that use the Atom chip—including Android and Chrome OS from Google Inc. Besides cellphones, Intel is making sure software is ready for Atom-based tablet PCs, which will require development of "pinch and touch" capabilities to manipulate touchscreens on tablet devices, she said.

Intel executives also extensively discussed the state of what the industry calls Moore's Law, the cadence of shrinking features on semiconductors that is named after former Intel Chairman Gordon Moore. Bill Holt, senior vice president and general manager of Intel's technology and manufacturing group, said the company continues to get both cost and performance advantages each time it delivers a new chip-making process with smaller features—despite the fact that some industry executives have lately questioned the benefits of such innovation.

Intel began selling chips based on its latest production process last fall. Mr. Holt said it expects to introduce the next-generation process two years after that, right on its historic schedule. Though some industry experts question how long the industry pattern can continue, Mr. Holt said "we don't see an imminent end in our ability to continue to drive Moore's Law."‹

[gym gravity]

GOLD looking for new highs... if there is anything global and demographic going on right now it is debt contagion and currency collapse.

[gym gravity]

bought 56 shares a minute ago...

and another 100 a few seconds later.

[DewDiligence]

In Diapers, What’s Bad for P&G Is Good For KMB

[Whether or not there’s a real problem, online social networks can wreak havoc with a product’s market share (see bottommost paragraph).]

http://www.reuters.com/article/idAFN0518870820100505

›May 5, 2010 2:04pm EDT
By Jessica Wohl

* CPSC launched investigation on Monday

* Says in discussions with Procter & Gamble

* CPSC staff looking into parents' claims of rashes, burns

CHICAGO, May 5 (Reuters) - The U.S. Consumer Product Safety Commission has launched an investigation into Pampers diapers with Dry Max after some parents complained that the new Procter & Gamble Co <PG.N> diapers appear to be the cause of rashes and chemical burns on their children.

Pampers recently updated its Swaddlers and Cruisers diapers with a thinner, more absorbent technology in what the company has called its biggest diaper innovation in 25 years.

Several parents have said that their children developed diaper rashes and some claim to have seen chemical burns on their children after they started using the products, which P&G said went through extensive testing.

The staff of the CPSC is looking into complaints being made by parents and is in discussions with P&G about the product, said Scott Wolfson, the agency's director of public affairs.

P&G said it has shared its safety data with the agency and stands by its product.

"There's no evidence that a single baby has experienced a serious skin safety issue as a result of Dry Max," said Bryan McCleary, a spokesman for P&G's baby care division.

Every day, about 2.5 million babies in the United States have diaper rash. About 10 percent of those cases are severe, with deep red coloring, blisters and/or breaks in the skin, he said.

Many parents, including members of a Facebook group called "Pampers bring back the OLD CRUISERS/SWADDLERS," say they have seen similar issues with their children after using Pampers with Dry Max. They assert the problems started only when they used the new diapers and had not happened before with other diapers, including the old versions of Cruisers and Swaddlers.

AMONG PAMPERS' MOST SUCCESSFUL LAUNCHES

The updated, premium-priced diapers had their major debut in the United States in March, but Pampers also put some of the diapers into packages in 2009 without letting consumers know that the new products were included instead of the old versions.

McCleary said Pampers with Dry Max are among the most successful product introductions the brand has ever had and the company is seeing a level of complaints in line with what it had anticipated.

"It's one severe rash complaint for every 6 million diaper changes," McCleary said.

Pediatric dermatologists contacted by Pampers confirmed the company's findings that the product is as safe as the previous version. Among them are Dr. Loraine Stern, Clinical Professor of Pediatrics at the UCLA School of Medicine.

"I have seen absolutely no increase in rashes since the introduction of the newer model," Stern wrote in a statement provided to Reuters by Pampers. "The pictures on the Internet show what looks like classical rashes, not chemical burns. I have full confidence in recommending that my patients continue to use Pampers with Dry Max."

Still, many parents remain convinced that the new Pampers are the cause of their children's problems and have switched to other products, such as Kimberly-Clark Corp's <KMB> Huggies. The Facebook group, which had about 1,000 members in mid-April, had nearly 3,700 members as of Wednesday afternoon.‹

[DewDiligence]

KMB’s second most important executive, SVP & Chief Strategy Officer, Chris Brickman, recently bought 9K shares on the open market @$60-62/sh, about $550K in all:

http://sec.gov/Archives/edgar/data/55785/000122520810010919/xslF345X03/doc4.xml

[n4807g]

Probably one of the best management teams in the world.

[DewDiligence]

APD Raises Guidance While Investors Remain Focused on ARG Deal

[Despite APD’s posting very good numbers, its share price remains below where it was before the announcement of the hostile offer for ARG. Many shareholders continue to worry that APD will overpay for ARG, evidently.

Please see #msg-46518659 for how APD ties in with TGDT.]

http://finance.yahoo.com/news/Air-Products-Beats-Zacks-zacks-2109236301.html?x=0&.v=1

›April 23, 2010, 9:34 am EDT

Atmospheric and industrial gas producer Air Products and Chemicals announced operating results for the second quarter of fiscal 2010. Earnings for the quarter were $1.23 per share, beating the Zacks Consensus Estimate of $1.20, helped by improving volumes and cost-cutting efforts. Earnings were up 38.2% year over year from 89 cents reported in the year-ago quarter. The results benefited from an improving global economy and a lower cost structure.

Second quarter revenues of $2.25 billion were up 15% year over year, primarily due to favorable contribution from the lower energy and raw material cost pass-throughs and a favorable currency impact as well as improved volumes in Tonnage Gases, and Electronics and Performance Materials. Sequentially, sales improved 3%.

Operating income of $364 million was up 40% from the previous year on improved volumes and lower costs. The company cut its research and development spending by 11%, which was partially offset by an increase of 4.4% in selling and administrative costs in the quarter. As a result, operating margin came in at 16.2% in the quarter.

Segment Performance

Merchant Gas sales of $922 million increased 6% owing to favorable currency movements. Operating income of $178 million reflected a 14% increase from the prior year, due to significantly improved cost performance and favorable currency impact coupled with higher volumes.

Tonnage Gas sales of $757 million increased 21% [this is the segment with the greatest tie-in with TGDT] as sales volumes were up due to rebounding chemical and steel production and new plants going on stream as well as favorable currency movements and higher raw material costs pass-through. Operating income of $107 million increased 9% from the prior year primarily on higher volumes and new plants going on stream.

Electronics and Performance Materials sales of $454 million increased 36% on higher volumes. Operating income of $57 million was up from the previous year on improved volumes and lower costs.

Equipment and Energy sales of $119 million were down 7% on declining ASU orders. Operating income of $18 million increased 12% from the prior year on higher LNG activity.

Balance Sheet

Air Products ended the quarter with $230.9 million in cash and equivalents and $3.47 billion in long-term debt.

Raised Guidance for 2010

Air Products expects fiscal 2010 earnings to grow over 20% as the global economy, led by Asia, experiences gradual recovery, coupled with the leverage in its existing capacity, new projects being commissioned and improving productivity. As a result, Air Products lifted its guidance for fiscal 2010 again to $4.90 to $5.00, from its previous guidance of $4.75 - $4.95 per share. This represents a 21% to 23% year-over-year EPS growth.

Air Products expects third quarter EPS from continuing operations to be between $1.25 and $1.29. Air Products has consistently improved margins, and is on track to meet the 17% goal in 2011.

Air Products and Chemicals, an industrial gas producer, is benefiting from long-term take-or-pay contracts, a consolidated industry structure, a diverse customer base and sustained pricing power. Air Products’ aggressive cost cutting and productivity initiatives, combined with portfolio realignment efforts, have helped mitigate fixed cost headwinds, which is very encouraging.‹

[DewDiligence]

UNP Profit Jumps on Increased Rail Volume

[What a difference a year makes! In 1Q09, the immense operating leverage inherent in running a railroad was killing UNP’s bottom line. In 1Q10, on the other hand, the operating leverage was a friend again as the sharp increase in volume required only a modest increase in operating costs. Revenue increased 16% year-over-year on a 13% increase in car loadings, while operating costs excluding fuel increased a mere 2%! Moreover, car loadings in April were up 19% year-over-year, portending an excellent 2Q10.

The gravy train can’t continue indefinitely, however. Another 10-15% increase in car loadings will stress the existing schedules, and anything more than that will require significant rehiring of furloughed personnel.]

http://finance.yahoo.com/news/Union-Pacific-profit-jumps-43-apf-255253613.html?x=0&.v=9

›By Josh Funk
April 22, 2010, 4:29 pm EDT

OMAHA, Neb. (AP) -- Union Pacific said Thursday that stronger shipping demand drove the railroad's first-quarter profit 43 percent higher and suggested the economy is improving.

The Omaha, Neb.-based railroad said it earned net income of $516 million, or $1.01 per share, in the quarter. That's up from the $362 million, or 72 cents per share, Union Pacific generated last year during the Great Recession.

Union Pacific and the other major freight railroads offer some insight into the overall economy because the volume of cars, chemicals, crops, lumber and containers of imported goods they carry hints at the health of those industries.

Union Pacific CEO Jim Young said he is feeling more optimistic about 2010, but he cautioned that it is still early in the recovery and he did not provide specific earnings guidance.

"It looks like the strength we saw in the first quarter is continuing, but you have to be careful," Young said.

Young said he won't feel confident about the economic rebound until he sees more companies start hiring more workers. But he said it was encouraging to see demand increase for industrial products like lumber for the first time in two years.

Overall, UP hauled 13 percent more carloads during the quarter, and demand was up in every sector except coal. But revenue improved in every one of Union Pacific's six divisions even though the number of coal carloads declined 1 percent.

Union Pacific said its revenue grew 16 percent to nearly $4 billion.

BMO Capital Markets analyst Randy Cousins said Union Pacific's earnings offered encouraging news about the economy.

"We're not back to 2008 levels, but we're certainly headed in the right direction," Cousins said.

The railroad's results beat Wall Street expectations even though the quarter included a one-time expense of $45 million related to a restructuring of a shipping contract between Union Pacific and CSX railroads. Analysts surveyed by Thomson Reuters expected Union Pacific to report quarterly earnings of 94 cents per share on $3.81 billion revenue.

Union Pacific is the nation's largest railroad with 32,400 miles of track crossing 23 states from the Midwest to the West and Gulf coasts. But UP is handling only about 170,000 carloads a week -- well below its capacity of about 200,000 carloadings a week -- because of the weak economy, and about 2,800 employees remain furloughed.

Young said he hopes to be able to rehire all those furloughed workers, but he doesn't know how quickly that might happen because the railroad won't start significant hiring until shipping volume improves more.

JPMorgan analyst Thomas Wadewitz praised Union Pacific during the company's conference call for the railroad's efforts to control costs.

"Great performance on the cost side. Very impressive," Wadewitz said.

Through furloughs and other measures, UP reduced its compensation expenses 1 percent during the quarter to $1.06 billion. Overall, the railroad's operating expenses grew 8 percent to $2.98 billion, but most of the increase was related to higher fuel prices.

Union Pacific's fuel costs jumped 51 percent to $583 million, as the average price per gallon of diesel climbed to $2.16 from last year's $1.51.‹

[DewDiligence]

3M Hits Trifecta in Electronics, Autos, and Healthcare

[MMM logged another great quarter as it continues to come up big in emerging markets. As an aside, in the sharp selloff of the broad market on Tuesday, MMM was one of the few stocks to finish in the green.]

http://www.forbes.com/2010/04/27/3M-earnings-healthcare-markets-equities-tape.html

›By Madalina Iacob
04.27.10, 02:01 PM EDT

A spike in demand for electronics, autos and health care-related products helped 3M post record first-quarter earnings. The company that sells everything from Scotch tape to roofing materials and adhesives, posted net income 79% higher than last year's, and the St. Paul, Minn., company boosted its outlook for the year.

Dow 30 component 3M (MMM) said it earned $930 million, or $1.29 a share, from $518 million, or 74 cents a share, a year earlier. This includes a charge of 11 cents per share resulting from the recently enacted health care law. Excluding this charge, first-quarter 2010 earnings were $1.40 per share, “a record for any first quarter in 3M's history,” the company reported.

Investors cheered the results, lifting 3M shares up $1.68, almost 2%, to $89.12.

Net income beat analyst’s expectations and came in at $1.014 billion, or $1.40 per share, versus $563 million, or $0.81 per share, in the first quarter of 2009, while operating income margins were 22.8 percent for the quarter. Each of the company's six business segments posted 20%-plus operating-income margins [!]. Analysts surveyed by Reuters expected earnings of $1.21 a share.

Revenue also increased, 24.7% to $6.3 billion, boosted by a 54.1% spike in sales in Asia Pacific region and a 25.9% jump in the Latin America/Canada regions and demand for electronics and automotive manufacturing.

"By any measure, we are off to a tremendous start in 2010," CEO George Buckley said.
Analysts at Sterne Agee raised their 3M rating from neutral to buy based on the earnings.

“Call it a surprise, call it amazing performance,” wrote Nicholas Heymann, analyst at Sterne Agee, who maintains a price target for the company at $105 for the next six to 12 months.

The company said it expects to report earnings in the range of $5.40 to $5.60 per share, up from previous estimates of $4.90 to $5.10 per share. Sales are forecast to grow at a clip of 10% to 12% this year, compared with a prior outlook of 5% to 7%.‹

[DewDiligence]

Philips Profit Up on LED, Healthcare Sales

http://online.wsj.com/article/SB10001424052748704671904575193241989363952.html

›APRIL 19, 2010, 7:22 A.M. ET
By ROBERTA B. COWAN

AMSTERDAM—Royal Philips Electronics NV said Monday it swung to a better-than-expected net profit in the first quarter on increased sales and cost cutting, but cautioned that the second half of the year remains uncertain.

The maker of medical scanners, televisions and shavers posted net profit of €200 million ($270.2 million) in the three months to March 31, compared with a net loss of €59 million a year earlier. Analysts had forecast net profit of €82.3 million.

The better-than-expected results were supported by a 12% rise in sales to €5.68 billion from €5.1 billion.

However, the company still gave a cautious outlook for the rest of the year. "Economic uncertainty remains high and consumer confidence low," said Chief Executive Gerard Kleisterlee. "At the same time, some key markets, such as the construction sector, have yet to recover."

Despite the cautious outlook, Philips shares opened 4.3% higher and were recently trading up 2.7% at €24.72 in a broadly lower Amsterdam market.

"The results are very strong, much better-than-expected," said Kepler analyst Peter Olofsen. "Clearly the sales beat all expectations with each of the three divisions—health care, consumer and lighting—contributing."

Improved sales were driven by 22% growth in emerging markets, particularly India and China, but Philips also reported 8% growth in mature markets, especially Japan, Chief Financial Officer Pierre-Jean Sivignon said.

Mr. Sivignon maintained the company's target of reducing its fixed-cost base by €700 million in 2010 compared with 2008, and said he was "increasingly confident" the company would hit its target of a 10% margin in earnings before interest, taxes and amortization, or Ebita, in 2010 due to a 20% increase in health-care orders, strong cost control and first-quarter sales momentum continuing into the second quarter.

Some analysts said that now looks conservative, as the margin is already 9.8%. Ebita— analysts' preferred measure of operating performance—stood at €504 million in the first quarter, compared with a loss of €74 million a year earlier.

Health-care sales rose 7% in the quarter, while sales at Philips's consumer-lifestyle division increased 8%. Its lighting business grew 18%, boosted by the LED, automotive and lamp businesses.

The company also reported a 20% increase in health-care-equipment orders, with orders in North America rising 7%. That contrasts with U.S. rival General Electric Co., which on Friday reported a fall in U.S. health-care-equipment orders. Fortis analyst Rene Verhoef said Philips's smaller exposure to U.S. hospitals helped it outperform GE.

The company also announced the departure of Andrea Ragnetti, CEO of the consumer-lifestyle sector. She will leave Sept. 1.‹

[DewDiligence]

UTX Profit Jumps on Cost Cuts

http://online.wsj.com/article/SB10001424052748704133804575197670338152614.html

›APRIL 21, 2010, 10:27 A.M. ET
By BOB TITA

United Technologies Corp.'s first-quarter profit rose 20% as cost reductions helped to offset lower revenue.

The multi-industry company—whose holdings include Otis elevators, Carrier heating and air conditioning systems, and Pratt & Whitney air craft engines—described conditions in its markets as "difficult but improving," according to Chief Financial Officer Greg Hayes.

New equipment orders rose 9% in the first quarter, but the company expects that most of its revenue growth will occur later in the year. First-quarter revenue slipped 1% from a year ago to $12.1 billion, slightly below Wall Street analysts' consensus estimate of $12.2 billion.

"Order trends are improving, and that's all in line with organic [revenue] growth resuming in the second half of 2010," Hayes said on a conference call with analysts. "We're confident in our improved outlook."

United Technologies tightened its 2010 profit outlook to $4.50 to $4.65 a share from $4.40 to $4.65 a share forecast in December, but left its revenue prediction for 2010 unchanged at $54 billion to $55 billion.

Hayes said he doesn't expect airlines to scale back their engine maintenance and replacement plans in response to lost revenue from disrupted air travel in recent days caused by ash from a volcano eruption in Iceland.

The company expects low single-digit revenue growth and a $75 million to $100 million increase in operating profit from its Pratt & Whitney engine unit. In the first quarter, revenue from the unit declined 9% from a year ago, while operating income fell 7.6%

"As the airlines have more cash, they're going to be able to afford more big repair bills," Hayes said.

The company's Otis elevator unit reported a 2.5% increase in revenue for the quarter. Carrier's operating profit soared despite falling sales, while the fire and security segment posted a 32% earnings increase as sales jumped 10%.

United Technologies eliminated 18,000 positions last year, helping the Connecticut-based company lower its overhead costs. The company's gross margin in the first quarter rose to 27.8% from 25.7%.

For the first quarter, the company's profit rose to $866 million, or 93 cents a share, from $722 million, or 78 cents a share, a year earlier. Restructuring costs accounted for 5 cents a share in the latest quarter and 9 cents a share a year ago. Analysts polled by Thomson Reuters expected earnings of 90 cents a share.

The company recently said it plans to buy back $1.5 billion worth of its shares. It bought back $500 million during the quarter.‹

[DewDiligence]

Deere Opens Russian Tractor/Combine Plant

[See the prologue of #msg-40771945 for DE’s tie-in with TGDT.]

http://www.reuters.com/article/idAFLDE63P1V820100427

›Tue Apr 27, 2010 4:39am EDT

DOMODEDOVO, Russia, April 27 (Reuters) - Deere & Co <DE>, the world's largest farm equipment maker, opened a manufacturing and parts distribution plant near Moscow on Tuesday, saying it was prepared to increase investment in the country.

The plant -- Deere's single largest investment in Russia -- will make farm equipment including large tractors and combine harvesters as well as other equipment for use in construction and forestry.

"We are prepared to significantly expand our investment and operations here consistent with economic and market conditions," Deere Chairman and Chief Executive Samuel Allen said at the opening ceremony.

Deere said last July it had planned to invest over $500 million in new Russia projects.

"Most of the world's available arable land is already being farmed, clean water is becoming increasingly scarce and infrastructure is needed in many parts of the world to bring crops and forestry materials to market," Allen said.

"Russia has great advantages in all these areas and the potential to become one of the world's major food-producing areas, or bread baskets."

Russia has nearly 9 percent of the world's arable land, 20 percent of forestry and 8 percent of fresh water, Allen said.

The new plant will supply customers in Russia, the CIS and other nearby markets.

"Our plans are to work closely with our Russian customers and dealers and with the Russian government to help your country realise its aspirations to greater food security and food exports," Allen said.

Deere made its first major sale in Russia 100 years ago, supplying 900 ploughs to the Pacific city of Vladivostok.‹

[gym gravity]

yeah, maybe next time. I have been so badly burned by options that I forgot about conservative hedging strategies.

[DewDiligence]

1Q10 Numbers Are Blowing Away the Street’s Estimates

http://online.wsj.com/article/SB20001424052748703441404575206333510147168.html

›APRIL 26, 2010
By LIAM DENNING

Wall Street's sell-side analysts are a famously Panglossian tribe. But it turns out that they are actually too pessimistic when it comes to predicting company earnings, particularly in the wake of recession.

With 172 of the S&P 500's members having so far reported quarterly earnings [as of last Thursday], 143 have beaten their consensus forecast, according to data collated by Thomson Reuters. On average, their numbers came in 21% above the Street's collective wisdom.

Less than 40% of the index's members have reported, so the current score of 83% having beaten forecasts—easily the highest for any quarter since at least 1999—may not stand. But having a high percentage of companies beat the Street isn't unusual. Thomson's data show that, on average, 64% of companies have done so in any given quarter since the start of 1999, compared with 18% that miss. The average earnings "surprise" is 2%, although these data swing erratically.

This is less surprising than it appears. Corporate management, for better or worse, go to great lengths to guide analysts toward the right numbers. After all, the last thing you want to do is deliver a nasty surprise. Just ask Ingersoll Rand, which missed the consensus forecast by 11% on Friday and saw its shares plunge 8.5% at one point. [Ditto for BAX.]

Analysts are also prone to the same greed and fear that fuel the financial markets' gyrations. The most optimistic quarter since 1999, in which only 52% of S&P 500 companies beat the consensus forecast, was the last three months of 2000, just as the tech bubble was turning to bust.

With that in mind, it is little wonder that pessimism has really taken hold recently, with the percentage of companies beating earnings forecasts well above average since the second quarter of 2009. But there could be more to this than mere psychology. So far this quarter, for example, 69% of S&P 500 companies that have reported have beaten revenue estimates, according to Thomson. The implication is that final demand is stronger than anticipated [duh].

Tobias Levkovich of Citigroup points to the importance of labor. Corporate America cut costs rapidly as recession took hold. That helped offset some of the damage inflicted on earnings by falling sales. But the ranks of the unemployed weigh heavily on expectations for a recovery in sales. That leaves scope for surprisingly good revenue numbers, relative to estimates, which in turn provides great operating leverage at the profit line, given earlier cost cutting.

So there is reason to suspect analysts' expectations will continue to be trumped by better results as the current reporting season progresses. But at some point, that unemployment rate has to fall if optimism is to be restored on a sustainable basis.‹

[marthambles]

Cree

Why not sell some puts and get paid for waiting for a pullback?

[n4807g]

I generally ignore employment data unless there is a substantial confirmation of a trend change. It's hard to imagine a large gain in employment with the public sector (just now) forced to deal with budget deficits and private industry benefiting from much leaner employment rolls. I'll be a believer that the worst is over for employment if the balance of 2010 shows steady growth in employment. I also ignore "experts" predicting.....almost anything related to the economy.

[DewDiligence]

KMB sold off modestly Thursday and Friday because the company said
2010 non-GAAP EPS will come in at the low end of the $4.80-5.00 prior
guidance range. If we assume the 2010 EPS will be 4.80, the share price
represents a P/E of 12.7x, which is cheap for a fine company like KMB
that’s a major beneficiary of The Global Demographic Tailwind.

Why did KMB say 2010 EPS will come in at the low end of the prior
guidance range? Because pulp prices have skyrocketed to $1,000/ton,
and pulp is the main raw material in KMB’s tissue and personal-care
products. However, KMB forecasts that pulp prices will fall about 10%
by year-end as more mothballed manufacturing plants come back online,
so the margin squeeze ought to peak in 2Q10 and be lower in the second half.

KMB has a thriving healthcare segment where 1Q10 sales rose 23% YoY;
however, the healthcare segment accounts for only 8% of KMB’s sales, so
this stellar growth does not yet move the needle much.

You want a good dividend? You got it! At the recently increased annual
payout rate of $2.64/sh, the stock is yielding 4.3%.

http://finance.yahoo.com/news/KimberlyClark-sees-cost-rb-2007227124.html?x=0&.v=3

›Kimberly-Clark Sees Cost Pressures in 2010

Thursday April 22, 2010, 2:56 pm EDT
By Jessica Wohl

CHICAGO (Reuters) - Kimberly-Clark Corp (NYSE: KMB) said higher pulp costs and increased marketing spending to promote new products will weigh on profit this year as it posted lower first-quarter earnings.

The company, known for Kleenex tissues and Huggies diapers, said this year's profit is more likely to come in toward the low end of its forecast that it reconfirmed just a month ago. Some analysts had already said that Kimberly-Clark's outlook for a profit of $4.80 to $5 per share was too high.

The company is seeing much higher costs for pulp and other materials than it had previously anticipated. It plans to offset some of that pressure with $50 million more in savings from cost cuts and fresh price increases on paper goods.

At the same time, Kimberly-Clark is seeing some improvement in its core consumers' buying habits as the economy perks up.

"CEO Mom is pretty stable at this point; she hasn't gotten a lot more confident but it is not getting worse," Chairman and Chief Executive Thomas Falk said during a conference call.

First-quarter profit fell to $384 million, or 92 cents per share, from $407 million, or 98 cents per share. Excluding a currency-related charge [for the devaluation in Venezuela], the company earned $1.14 per share versus analysts' average forecast of $1.16 per share.

Sales rose 7.6 percent to $4.84 billion, but much of that lift came from foreign currency exchange rates. The volume of goods sold rose just 1 percent.

Analysts, on average, expected Kimberly-Clark to post $4.9 billion in revenue, according to Thomson Reuters I/B/E/S.

"I don't think there were an awful lot of surprises," said Edward Jones analyst Jack Russo, who noted that Kimberly-Clark is more exposed to commodity costs than rivals with broader lineups, such as Procter & Gamble Co (NYSE:PG).

FEWER KLEENEX SOLD

In the North American consumer business, the volume of Kleenex tissues sold fell 3 percent, due in part to a mild cold and flu season, while paper towel sales continued to be hit by consumers opting for cheaper private label goods.

Businesses that showed growth included international operations and the health care division, where demand for face masks increased due to the H1N1 flu virus.

"For the most part their products are holding up really well," said Derek Maupin, research analyst at Hodges Capital Management, based in Kimberly-Clark's hometown of Dallas.

The company, which competes against powerhouse P&G in categories such as diapers, tissues and tampons, must prove it can sell higher-end products while facing pressure from branded rivals and a variety of heavily-marketed store-branded goods.

P&G and other major household products makers are also ramping up their marketing behind a bevy of new goods this year, hoping to gain the attention of shoppers ready to buy.

Kimberly-Clark is spending more to market products such as U by Kotex tampons and Kleenex hand towels. It also plans improvements to its premium and main lines of Huggies diapers later this year after P&G replaced its higher-end Swaddlers and Cruisers lines with thinner, more absorbent diapers.

While U by Kotex just hit the U.S. market, sales have been good so far, Chief Financial Officer Mark Buthman said in an interview.

For 2010, Kimberly-Clark expects sales to rise 4 percent to 6 percent, instead of 5 percent to 6 percent, as it sees a lower benefit from currency as the euro and the British pound have weakened relative to the dollar. On a more positive note, it expects higher prices and a better mix of products to add 1 point to sales growth after predicting those factors would not be beneficial.

Kimberly-Clark previously expected to pay $300 million to $400 million more for pulp, oil-based materials and other raw materials this year and now sees such costs up $600 million to $700 million. Most of the increase stems from pricier pulp.

The company already cut the number of sheets in rolls of Cottonelle toilet paper and is looking at more ways to raise prices on paper goods, Buthman said.‹

[DewDiligence]

CREE:

Hope I get a pullback.

You got one, but it didn’t last very long :- ) :- (

http://www.fooxl.com/investing/general/2010/04/21/cree-lights-up-with-profits.aspx

›Cree Lights Up With Profits

By Anders Bylund
April 21, 2010

The Cree (Nasdaq: CREE) dream is on hold for a while. Share prices for the LED lighting guru have tripled over the last year, but last night's third-quarter earnings report turned out the lights. Cree is down by more than 7% today after issuing strong revenue guidance but disappointing earnings projections.

That brings the stock back to levels not seen since all of three weeks ago. In other words, today's slack is not a terrible calamity for Cree shareholders.

The sell-off seems to come from somewhat disappointing forward guidance, because there was absolutely nothing wrong with the third quarter. Sales gained 78% year over year to land at $234 million, while non-GAAP earnings more than tripled to $0.47 per share. For those of you keeping score at home, $51.3 million in net income works out to a very impressive net margin of 22%. It's been four years since the company coasted at this level with any regularity. All of that happened with Cree's revenue being less than half of what it is now, so the company has never enjoyed profits of this magnitude.

Cree easily beat its own guidance and Wall Street estimates, and fourth-quarter sales will balloon again as Cree has more orders than it can fill, and it is working feverishly to expand manufacturing capacity. The company will triple its production of power LED components from last New Year's to the next, and keeps beating revenue estimates because the fresh facilities are ramping up ahead of schedule.

It's no surprise that demand for Cree's LED lights is strong. Incandescent light bulbs are terribly inefficient and outdated, and LED is a front-runner in the race to replace them all. We're talking about a lighting product market of more than $20 billion annually -- plus at least another $20 for the fixtures in which you mount them. Cree participates in both of these markets -- and unlike competitors like Siemens (NYSE: SI), Philips (NYSE: PHG), and General Electric (NYSE: GE), Cree won't cannibalize an existing light bulb business as LED sales hit the mainstream: LED is all this company does. LED lighting is further ahead in its commercialization than the OLED variety espoused by Universal Display (Nasdaq: PANL) and others, and a first-mover advantage is always valuable.

Given the massive opportunity ahead of Cree, I would not be surprised to see its stock chart resume the steady climb we've seen lately. Did I miss anything important in this deferred growth story? Let me know in the comments below.‹

[gym gravity]

jobless claims fell the other day and the talking heads on cnbc were arguing about wages not recovering yet despite spending increasing. one talking head argued convincingly that wage data is extrapolated and is a few months old and lags when there are turns.

[n4807g]

perhaps, but coincidentally, it's poorly timed with the problems facing state and local governments (many are cutting jobs). I'm also not convinced that hiring outside of the fortune 1000 will be significant. But only time and further economic developments will tell.

[gym gravity]

right now may be at the start of a tailwind of jobs growth as companies reporting earnings are starting to make hiring announcements...Intel and JPMorgan did.



Related to US employment, I wonder who wins with Toyota. Say they lose a bunch of market share... Which US automaker will benefit most? I know a lot of Toyotas are made in the USA, I wonder how Toyota jobs + taxes on sales benefits the US compared to Ford or GM.

[n4807g]

Chanos was humble enough to admit he doesn't know when it will colapse.

Does anyone? We usually get blind sided!

I forget who said it, but recently someone said the Chinese real estate market is on a treadmill to hell.

I wonder what the pundits will be writing in 12 months? Just saw the unemployment #. When will they stop making excuses and just admit this economy won't create many jobs and may lose more?

[gym gravity]

I'm sure it will be re-aired soon and you will be able to catch it. My interest was piqued enough that I want to watch the whole thing. The link I gave you was just the first thing I found this morning. Chanos was humble enough to admit he doesn't know when it will colapse.

[n4807g]

thanks for the link.

[DewDiligence]

I believe much of our recent uptick in business activity is related to external demand.

Indeed! For companies that produce iron ore and metallurgical coal (e.g. BHP, VALE, CLF) and are enjoying 100% price increases relative to 2009, demand from China has been the story.

p.s. There are numerous posts about this on #board-15427.

[n4807g]

Thanks, see my response to gym.

[n4807g]

Thanks for the link....I've been hearing/reading about the prospect of a real estate bubble in China for some time and have become concerned as more individuals begin to expose the risk. Having recently watched the many (and varied) governance mistakes and miscalculations unfold around the globe my faith in governments and their ability to predict and control economic excess, has been "shaken", to say the least.

If there is a "bubble" developing the consequence to our economy would be as devastating as our real estate fiasco. UPS earnings were up on international business, not domestic, and I believe much of our recent uptick in business activity is related to external demand.

It certainly bears watching..

[DewDiligence]

China Posts 12% GDP Growth—Rebound Brings Risks

http://online.wsj.com/article/SB20001424052702303348504575184821917609494.html

›APRIL 15, 2010
By ANDREW BATSON And ESTHER FUNG

China's economy expanded 11.9% from a year earlier in the first quarter of 2010, the government said Thursday, a strong result that highlighted both the strength of the recovery in the world's third-largest economy and the increasing risks of overheating.

In a statement issued before the latest data were published, China's State Council said the nation's economic recovery has been further consolidated in recent months, but there are still prominent problems and risks to deal with. Top of the list is an increasingly frothy real-estate market: property prices in China grew at the fastest pace in nearly five years in March, according to official figures issued Wednesday.

The national property-price index rose 11.7% in March from a year earlier, accelerating from February's 10.7% rise, the National Bureau of Statistics said. The increase was the largest since July 2005, when the bureau switched to an index based on data in 70 cities, rather than 35.

The State Council repeated its promise to "resolutely curb" excessive property price rises by restricting speculative purchases while increasing the supply of land for housing and government supports for low-income housing. But analysts said the measures taken so far appear to be insufficient, and the latest economic data will likely reinforce official resolve to take further measures to cool down growth, economists said.

The real-estate sector has become an increasingly important driver of China's economy as the government seeks to promote home ownership, and was given a huge boost by the flood of bank lending unleashed by the leadership's stimulus program. The surge prices in major cities also threatens to make property unaffordable for many, and Beijing has for several months sought to contain prices and ward off an asset bubble.

The growth in the first quarter's gross domestic product accelerated from the 10.7% gain reported in the fourth quarter of 2009, and was faster than the 11.5% median forecast of economists surveyed by Dow Jones Newswires. But the State Council cautioned against excessive optimism, noting that the fast rate of growth in the first quarter is largely due to the low base of comparison a year earlier, when the impact of the global financial crisis led to China's slowest quarterly expansion in nearly two decades.

"A number of factors driving up prices are appearing, strengthening expectations of inflation. The problem of excessive increases in housing prices in some cities is particularly acute," the State Council said in its statement issued after a quarterly meeting on the economy, headed by Premier Wen Jiabao.

The fastest housing-price increases in March were in the southern island province of Hainan, a popular tourist destination. Prices in the provincial capital Haikou rose an average 64.8% from a year earlier, while those in the resort city of Sanya jumped 57.5% during the period. Prices in Guangzhou, the capital of the southern province of Guangdong, rose 20.3%.

Broader inflation risks have been subdued so far [but you have to wonder about the validity of the official government data] with the consumer price index rising 2.4% in March from a year earlier, down from February's 2.7% rise which was boosted by seasonal factors. Still, inflation is close to Beijing's 3% target, so additional measures may yet be needed to keep price rises in an acceptable range.

To cope with those issues, China's government has in recent months been moving to dial back the amount of new lending the banking system delivers to the economy, though officials still want to make sure financing remains supportive. Economists expect the central bank will soon start raising interest rates for the first time in two years to combat rising inflationary pressures.

Banks started to shrink their new lending significantly in February and March of this year, after the government set a smaller target for new loans this year. Fixed-asset investment in urban areas, an important measure of capital spending, has also been slowing from over 30% growth last year. Investment was up 26.4% in the January-March period, down from 26.6% in the January-February period.‹

[gym gravity]

I watched Jim Chanos on this the other day:

http://www.dailymarkets.com/housing/2010/04/14/jim-chanos-discusses-chinese-real-estate-bubble-on-charlie-rose/

[n4807g]

I wonder if China's economy is creating a speculative real estate market, similar to the problems we faced? Hard to predict, but the consequence to the global economy would be significant if it is happening.

[gym gravity]

I put a tiny bit into a freakishly risky little BB stock that makes tetrapod quantum dots that cure cancer and mitigate world peace.

QTMM.OB used to be HGUE.OB

[DewDiligence]

Micrel Launches Multi-Channel WLED Driver for Backlighting Applications With Flicker-Free Dimming

http://finance.yahoo.com/news/Micrel-Launches-MultiChannel-iw-3123260315.html?x=0&.v=1

›Monday April 12, 2010, 7:04 am EDT

SAN JOSE, CA--(Marketwire - 04/12/10) - Micrel, Inc. (NASDAQ: MCRL ), an industry leader in analog, high bandwidth communications and Ethernet IC solutions, today rolled out the MIC3263, a six channel WLED Driver for Backlighting Applications. This device is the first in a new series of WLED Drivers targeting small LCD Panels with a highly versatile dimming control scheme for LED brightness. The flicker-free dimming control scheme eliminates the need for an external PLL for noise filtering of the PWM signal required to dim the LED current. The MIC3263 is currently available in volume quantities, with pricing starting at $2.22 for 1K quantities. Samples can be ordered at: http://www.micrel.com/ProductList.do

"Micrel's MIC3263 provides the performance, flexibility and ease-of-use required by LED lighting system designers to meet backlighting challenges," noted Doyle Slack, senior marketing director of Analog Power, Linear and RF at Micrel. "In addition, the part features 16 logarithmic dimming steps, mimicking the way the human eye perceives brightness levels. This allows users to minimize programming steps when compared to industry standard products which offer linear steps."

The MIC3263 is capable of driving up to ten WLEDs in series per channel with +/-3 percent current accuracy from input voltages of 6V to 40V. With its boost current mode control architecture and integrated power switch delivering 90 percent and above efficiency, the MIC3263 is well positioned to provide constant current with changes in input voltage and output load. The solution's operating frequency is programmable from 400kHz to 1.8MHz which allows flexibility in the design. The LED channel current is programmable from 15 mA to 30 mA and includes a dedicated PWM dimming pin to adjust the brightness of the LEDs. The device features multiple LED dimming options and its 16-logarithmic dimming levels allow the dimming ratio down to 1 percent. The MIC3263 also features an enable pin for micro power shutdown, over temperature protection and an under voltage lockout. The IC has a wide range of protection features including open and short LED protection, programmable over voltage protection and an over temperature protection. In addition to enhanced power driving capability/reliability, the MIC3263 comes in a 4mm x 4mm MLF®-24L package.

About Micrel, Inc.

Micrel, Inc. is a leading global manufacturer of IC solutions for the worldwide analog, Ethernet and high bandwidth markets. The Company's products include advanced mixed-signal, analog and power semiconductors; high performance communication, clock management, Ethernet switch and physical layer transceiver ICs. Company customers include leading manufacturers of enterprise, consumer, industrial, mobile, telecommunications, automotive, and computer products. Corporation headquarters and state-of-the-art wafer fabrication facilities are located in San Jose, CA, with regional sales and support offices and advanced technology design centers situated throughout the Americas, Europe and Asia. In addition, the Company maintains an extensive network of distributors and reps worldwide. Web: http://www.micrel.com.‹

[DewDiligence]

I just sold my last 90 shares of CREE.

Then it’s time to prospect for shares in your next LED play :- ) Perhaps MCRL fits the bill (see next post).

[gym gravity]

discipline? other short-term opportunities?

[north40000]

With one, latest target at $90+, why sell now?

[gym gravity]

I just sold my last 90 shares of CREE.

Great company, solid growth, I have traded around a core for 2.5 years.

Hope I get a pullback.

[gym gravity]

GOLD. Two things happened at the same time the first week of September and this first week of April.

GLD, the trading device backed with bullion, increased physical holdings by the biggest one day increment, and at the same time, the gold chart broke out of large trianglular consolidations:

[DewDiligence]

Multinationals Bet on Indonesia

[Indonesia has the fourth-largest population of any country in the world (#msg-48556402). The article in #msg-44716073 makes a good companion read.]

http://online.wsj.com/article/SB10001424052702303591204575169704072987766.html

›By PATRICK BARTA
April 7, 2010

SAMARINDA, Indonesia—International companies are betting Indonesia will become Asia's next big consumer market after China and India—in part because of booming jungle outposts like this one.

Here in Samarinda, a coal-mining center on the far eastern edge of Borneo, the population has more than tripled since 2000, and incomes are rising rapidly. Ford Motor Co. has added its first dealership and Honda motorcycle salesmen say they can't get motorbikes fast enough to keep up with demand.

Variations of that pattern are being repeated across this vast archipelago nation. With sales of cars and motorbikes set to rise 15% or more this year, Ford dealers are adding a new showroom nearly every six weeks. In January, European private equity group CVC Partners agreed to pay more than $770 million for a controlling stake in one of country's largest retailers, PT Matahari Department Store, which plans to add 150 new outlets, including one just opened in Samarinda.

H.J. Heinz Co. said in February that Indonesia played a major role in pushing Asia sales, including chili sauces, up 41% last year. It also recently predicted a 23.1% increase in packaged food spending in Indonesia between 2009 and 2011—a faster rate of growth than India and China, which were expected to grow 20.0% and 14.3%, respectively.

With 240 million people, the world's fourth-largest population behind China, India and the U.S., Indonesia has long promised to be one of the world's biggest consumer markets. But it has lagged behind other developing nations because of political instability and disappointing growth after the Asian financial crisis of 1997-98.

That has started to change in the past several years, as Indonesia stabilizes, with a democratically elected government and surging sales of commodities such as coal, natural gas and palm oil to China.

Last year, Indonesia posted the second-highest personal spending growth in Asia, behind China but ahead of India. Private consumption climbed 5.1% compared with 0.4% growth in Asia excluding China. On Wednesday, Jakarta's stock market hit an all-time high, supported by confidence in the economy.

Unilever's Indonesian arm, which sells soaps, ice cream and other consumer goods, said in March that 2009 sales shot up 17%—well above previous years and among the fastest rates in the world for Unilever. Maurits Lalisang, president director of PT Unilever Indonesia, says he is adding new distribution depots and plans to double his business in the next four years. "Indonesia is going to get richer," he says, and "if people get richer, I have a lot of opportunity."

Indonesia's resurgence as a consumer market is the latest evidence that developing Asia, which for years relied primarily on exports for growth, is becoming more self-reliant as it develops a bigger middle class and its own domestic demand.

Indonesia still rates poorly in international indexes measuring corruption and ease of doing business, and many foreign companies remain wary of expanding there. Income levels are low compared to other emerging markets, with GDP per capita of just $4,000, less than half the level of Brazil—though more than India.

The country also isn't industrializing as rapidly as China and other emerging markets, which could limit its growth in future years, says HSBC economist Frederic Neumann in Hong Kong.

Even so, "it's a very strong market" for consumer-spending gains, he says.

Powering the rebound, analysts say, is surprising strength in once-ignored second-tier cities like Samarinda, which in some cases are posting growth rates approaching 10% a year, on par with China, analysts say.

The better-known capital of Jakarta, a city of more than 8 million people, used to dominate Indonesia's political and economic landscape. But farther-flung areas, including the islands of Sumatra, Sulawesi and Indonesian Borneo, also known as Kalimantan, have a far greater share of the natural resources desired by China.

These areas are also benefiting from political reforms after the fall of former dictator Suharto in the late 1990s aimed at decentralizing the country. Such "regional autonomy" reforms, which return more tax revenue to local governments and give them more authority, mean some $33 billion in federal money will be transferred from Jakarta to outer provinces this year, compared to $6.5 billion in 2001. "There's a lot more cash circulating in the provinces now," says Nick Cashmore, an analyst at CLSA, an investment bank. "The Wild West is where this country is going to have its future, not Jakarta."

Carved out of the forest along the eastern edge of Borneo, Samarinda had just four cars in the 1960s, according to Masroen Rusli, a 71-year-old local entrepreneur whose investments include one of the city's first hotels. Population has swelled to 750,000 from about 200,000 in 2000, and new mansions are sprouting within a stone's throw of operating coal mines.

Disbursements from the central government and revenue from mining have pushed the city government's budget to 2.3 trillion Indonesian rupiah ($250 million), from about 300 billion rupiah at the beginning of the last decade.

"We have excess money," says Muhammad Faisal, a spokesman for the city. He says it recently began paying local teachers a bonus of 1 million rupiah, or about $110, every month.

The city has added a new sports stadium, a massive new bridge spanning the milky-brown Mahakam River, and a $55 million mosque—with space for 70,000 people—that city leaders tout as the largest in Southeast Asia. A new airport and container port are under development.

Ford opened its first dealership in 2007 and now sells some 60 vehicles a month, a 30% increase from two years ago. Honda has added five new dealers in the past three years. The manager of the local Lembuswana mall, Deny Tombatu, says the global financial crisis had "zero impact" on mall traffic last year, as spending kept rising.

Arman Usman, 26, says he spends about 5 million rupiah ($550) a month on discretionary items, including 3 million rupiah on clothes. One recent night he was wearing black pin-striped trousers and a giant belt buckle with an image of a U.S. $100 dollar bill on the front. To finance his spending, he sells about 100 million rupiah worth of electronic foot and body massagers each month from a shop in a newly built mall with outlets for Adidas, Pizza Hut and Giordano, a Hong Kong-based clothing retailer. "I'm a gadget freak," he says, with a Bluetooth headset in his ear and two mobile phones clipped to his belt. "I love shopping."

At a large Honda dealership nearby, meanwhile, staff say roughly a third of the customers pay in cash, including Paijin, a 41-year-old university administrator, who like many Indonesians goes by one name.

He was buying his third motorbike in as many years recently—a green and white Honda—and says he might buy a fourth one next year so that everyone in his family, including his wife and two children, can have one. He earns roughly 5 million rupiah per month and paid 16 million rupiah for the newest bike, he says.

"I consider this a big-spending area," he says, referring to Samarinda. He can't afford a car yet, he adds, but "I hope to someday."‹

[DewDiligence]

Have an Innovation? Contact 3M!

http://www.thestreet.com/_yahoo/story/10718916/1/3m-casts-net-for-new-post-it-note.html

›by Carmen Nobel
04/07/10

BOSTON (TheStreet) -- There's a scene in the 1997 film Romy and Michele's High School Reunion, in which one of the title characters claims she invented 3M's(MMM) Post-It notes.

It's meant to garner laughs but, as it turns out, 3M accepts product pitches from real-life inventors.

3M sells 55,000 products across 45 technology platforms and 35 business units, covering areas including health care (Steri-Strip adhesive-skin closures); office products (Post-Its); manufacturing and industry (lots of kinds of tape); and transportation (conspicuity markings for school buses).

The company racked up $1.3 billion in research-and-development expenditures in 2009, bringing the five-year total to $6.9 billion. That includes the salaries of 6,700 3M researchers worldwide.

To foster internal innovation, 3M has adopted a corporate "bootlegging" policy, in which technical staff are permitted to spend up to 15% of their time on pet projects. The 1974 invention of Post-It notes was borne of a bootlegging effort: Frustrated that a bookmark kept falling out of his hymnal, 3M scientist Arthur Fry found a practical use for the adhesive formula invented by another 3M scientist, Spencer Silver. Scotch Tape, invented by Richard Drew in 1930, was also the result of a bootlegging project.

3M welcomes input from outsiders, too, via a strict Web-based submission process. The company is adamant that submissions go through the Web form (i.e., it discourages cold calls). Every pitch is reviewed by a human, an external coordinator, who vets them for basic prerequisites before sending them on to the appropriate department. That person handles about 800 submissions annually.

Entrepreneurs should note that the company won't consider a new product unless it has been granted a patent but, otherwise, the initial vetting requirements are pretty broad.

"I screen them at a very high level," says the external coordinator, who asked to remain anonymous to avoid unsolicited phone calls from impatient inventors. "If I were to reject an idea, it would be something that would be way, way out of our product base."

She notes, however, that the company also accepts submissions for updates and line extensions for existing 3M products, and that those submissions don't require a patent.

Ideas aren't kept confidential, but that shouldn't be a concern for submissions already protected by a patent. Entrepreneurs should expect to wait two to six weeks to receive an e-mail response from a 3M business unit.

On the flip side, 3M works with inventors who want to use the company's technology to develop products outside the company. 3M owns more than 20,000 patents, but it doesn't use them all, so it makes sense to license them to inventors who will. The Strategic Intellectual Asset Management business oversees the 3M technology-transfer office, which maintains an online catalog of technology available for license.

The cost of a license varies, and the company will consider donating technologies to nonprofit organizations.

"In many cases, placing the technology at the right university can be the best way to continue the development of an important technology that no longer fits in 3M's business strategy," according to 3M's Web site.‹

[gym gravity]

Cree Inc (CREE): Noting competitors are taking longer to achieve acceptable yields, UBS raises its rating on Cree Inc to Buy from Neutral with its price objective increased an impressive $32 to $92.

[DewDiligence]

Population/Growth/Density of Most Populous Countries*

The six BRIC-MT countries (Brazil, Russia, India, China, Mexico,
Turkey) are sometimes used as a proxy for “emerging markets.”
These six countries comprise 45% of the world’s population.

 
               People Annual  Area  People 
               (mlns) Change (km^2) per km^2 
  1 China       1343   0.7%   9.60    140 
  2 India       1174   1.6%   3.29    357

3 USA 309 1.0% 9.83 31
4 Indonesia 242 1.1% 1.92 126
5 Brazil 200 1.2% 8.51 24
6 Pakistan 178 2.0% 0.80 222
7 Bangladesh 157 1.3% 0.14 1090
8 Nigeria 151 2.0% 0.92 163
9 Russia 140 (0.5%) 17.08 8
10 Japan 127 (0.2%) 0.38 336
11 Mexico 112 1.1% 1.97 57
12 Philippines 99 2.0% 0.30 329
13 Vietnam 87 1.0% 0.33 265
14 Ethiopia 86 3.2% 1.13 77
15 Egypt 84 1.6% 1.00 84
16 Germany 82 0.1% 0.36 231
17 Turkey 77 1.3% 0.78 99
=========== ==== ==== ====== ====
World 6826 1.2% 510.10 13
*CIA estimates as of Dec 2009.
Source: http://www.b2i.us/External.asp?L=I&from=du&ID=54566&B=1278