The Tel Aviv Stock Exchange (TASE) fell today. The Tel Aviv 25 index was down 1.60% at 642.37 points, the Tel Aviv 100 index fell 1.94% to 662.44 points, and the Tel-Tech 15 index fell 1.67% to 409.94 points. Turnover totaled NIS 777 million.
Although the US Federal Reserve Board’s announcement of an interest rate hike was no surprise, all capital markets worldwide responded to it negatively. As expected, US Federal Reserve Board chairman Alan Greenspan raised the interest rate by 0.25% to 2.75%.
Most of the hardest hit shares today were in the financial sector banks and insurance companies. The Tel Aviv Finance-15 index, which includes the large bank and insurance company shares, fell by a relatively steep 2.4%.
While bank shares all over the world were falling, it was no surprise that the trend in Tel Aviv was similar. That was probably the reason why Bank Hapoalim lost 3.2%, Bank Leumi 2%, Israel Discount Bank 1.3%, and United Mizrahi Bank 3.4%.
The insurance company shares also lost ground today, in the wake of the decline in TASE prices, since a significant proportion of insurance companies’ profits are linked to share price fluctuations, whether through the nostro portfolio, or through returns on participating policies, from which management fees are derived.
The falls in insurance companies’ shares took place when the two largest companies in the sector, Clal Insurance Holdings and Migdal Insurance, have reported excellent results. The two companies reported profits of over NIS 500 million in 2004 (Clal Insurance published its report on Tuesday, and Migdal published its report this morning). Both companies are distributing huge dividends to their shareholders (Clal Insurance NIS 250 million, Migdal NIS 300 million). Nevertheless, Clal Insurance dropped 2.6% today, and Migdal 0.8%.
Has Agmon’s Mazda run out of gas?
In recent years, the capital market has gotten used to Gil Agmon’s domination of the auto market. Agmon is president of Delek Automotive Systems subsidiary Delek Motors, which imports Mazda and Ford cars to Israel. Every year, Delek Motors imports one quarter of the cars put on the road.
In the fourth quarter, Delek Motors delivered only 8,236 new cars, 1,375 less than in the fourth quarter of 2003. The main reason for the fall in car sales was ostensibly positive Mazda car agencies are now telling customers wishing to order cars that new deliveries will only be made in a few months, because the company has already sold all the cars allotted to it by the Japanese manufacturer. In other words, demand for Mazda cars is much higher than the supply.
The drop in car deliveries in the fourth quarter is also effectively reflected in Delek Motors’ financial report. The company’s fourth quarter revenue fell by 7.7% to NIS 943.3 million, its pre-tax profit plummeted 42.2% to NIS 68.4 million, and its after-tax profit slid 30% to NIS 55.9 million.
The capital market responded sharply to the disappointing report. The Delek Automotive Systems share, which had recovered slightly from the company’s preceding report in November 2004, tumbled 4% on a high volume.
Record profit for Ormat
In contrast to the disappointment over Delek Motors, Ormat Industries stood out today with an excellent report. Over the past year, the company has carried out a number of significant measures. These began with the acquisitions of the assets of Covanta Energy in late 2003, and continued with the floating of two subsidiaries: OPTI Canada and Ormat Technologies. The consolidation of new activity, together with capital gains from the issues, boosted Ormat Industries’ 2004 profit to a record $94 million, compared with only $15 million in 2003. Most of Ormat Industries’ profit derived from capital gains on the issues. The OPTI Canada issue netted a $13 million capital gain plus $3 million in royalties paid by the subsidiary to the parent company. The real bonanza was the issue of Ormat Technologies, which yielded a $60 million capital gain. Ormat Industries’ core activity of geothermal energy generated a $17 million net profit in 2004. The company’s share rose by 1.6%.
Published by Globes [online] - www.globes.co.il - on March 23, 2005