Recession doing its job

[winner69]

They say recessions and financial crisis is natures way of cleaning out the deadwood .... get rid of those who are by their use by date ... and let the new world begin

On the TEL thread I also rave about entropy and how many things end up self destructing

All came home to me this morning reading the NZ Herald

Here we have Gibbs still trying to convince punters that GPG is a fantastic business ... 15% pa over the last 17 years but forgets that the last 5 or 6 years has been terrinbly negative ... been around too long ... and as Balance would say too greedy (defends that as well) .......... past their use by date ... the reccession and GFC will do its job

Here we have a story about SCF with a lovely photo of Hubbard .... completely stuffed and beyond repair in its current state but punters will continue to give it money cause ' ...most investors trusted the business. They had a long relationship with it, were loyal and felt engaged with a business so much part of the community.' .... so much trust they don't even expect to be told how stuffed SCF is ....... how sad but they have destroyed themselves through greed ... and the recession and the GFC will do its job

Couldn't help notice photos of Norgate and Hirst as well .... about time that Hirst gave it away as his company got too big for him but he didn't recognise it ... and the recession and financial crisis dis its job ... and Norgate might need to learn that money doesn't grow on trees - the GFC will see to that

Not a very cheery or positive business section of The Herald today


The loser's gallery from this morning

[Lizard]

Good post, Winner. Denial is not a sound management strategy. Some seem to want to spin the proverbial half-full glass into a "significant and valuable water resource". :)

Perhaps the thin-skinned and sensitive don't last at the top very long, but when ego gets in the way of admitting to errors, then it is time to step down and let the more humble lead.

[winner69]

I didn't include Skellerup's Stewart in there ..... myabe he has seen the light and is doing what you suggest and let someone else lead the business (wouldn't suggest more humble in Stewarts case)

Skellerup also needs a new Chairman -- Cushing needs to go as well

How all these things work out in times of recession and financial crisis is an interesting study

[Dr_Who]

Skellerup also needs a new Chairman -- Cushing needs to go as well



Airnz blind foray into Ansett is a good example

[percy]

winner69
Hubbard could have walked as everone else did and put it into receivership.Saved himself millions.we should take our hat off to him for putting more assets in.
Hirst did an excellent job.I think what happened was financial officer (graham Storey from memory) thought they had the banks sweet and was caught out by Yank bank who demanded their $50mil back.If you remember EBO had just had a share issue and would have been caught out too. No one knew what to do and most companies around the world got caught.so to blame Hirst is wrong.As it was NPX raised about 3 times the money they needed and now balance sheet is too conservative.we must remember a banker is a person who lends you an umbella when the sun is shinning and wants it back when it starts raining!!1

[Hoop]

Good Post Winner. Thxz

When I look at a company to invest in, one key criteria is good management.

However I was amazed how my assessment of good management criteria has altered over the years when I read (and was reminded) this article today "Why Good People Skills Matter in a Recession" (http://blogs.hbr.org/corkindale/2010/02/why_good_people_skills_matter.html) written by Gill Corkindale in the Harvard Business Review. The conclusion from the article is nothing new as I can recall learing these basic management principles back in the late 70's early 80's at Uni...so why has my perception changed over the years to make me regard some (not all) of those NZ managers outlined above as good to so so.

OK.. the article is nothing new and it is easy, straight forward commonsense stuff....so why don't professional managers apply these basic principles to their businesses, as they are professionals and have been taught to apply these basic principles.... right??

After reading that article, and Winner's post identifying some of our prominent business managers.. I came to the conclusion ..no wonder these guys are failing (girls too? add Theresa Gattung? Ruth Richardson?) ....its so simple and easy for us layman to see in hindsight. The public have been screaming out for years to these people to get back on the right track and stop this overpaid/under-performance behaviour... but they are being ignored ..why? ..is it their egos getting in the way?...treating the public as idiots?.. don't want to rock the "overpaid club" perhaps.

How could those well educated managers not invoke their basic principles?...Maybe too many complicated distractions to handle and therefore less time spent on the basic essentials. Maybe a brickbat for the "in fashion" Autocratic leadership styles (lead from the top..make quick decisions) with little to no major decision input further down the chain of command?

I will remember Winners post when analysing companies from now on.....unless more complicated distractions pop up and/or make too much money in share investing.;)

[winner69]

Percy ... with regard ti the NPX finance man being blamed for the mess that the company fings itself in it was a bit toungue in cheek ... it seems pretty popular defence these days to blame the accountants (a la Feltex)

NPX for decades has been Fred and John's company. Between them they did a great job in running NPX even though it was a boring old chemical company

However it all started going downhill for NPX when they acquired the Akzo resins assets ... (an acquisition they are still to deliver the 'promised' returns by the way) .... mainly because John continued to run NPX as his company .... never going to work when you have operations in Europe, Asia. America as well as the local operations.

Because NPX had been Freds and Johns company for so long the next tier of management was relatively weak ,,, but worse still John thought he knew best ... like not really appreciating that the worlds economy were heading south even before the GFC and then not accepting untill too late there was a GFC .... he might have been badly advised ... and the other question was what was the board and in particular the new chairman up to.

Thats all history but the point of my original thread was that recessions and financial crisis brings the shortcomings in companies to the surface ... often a painful experience ... as NPX found out .... the recession and financial crisis forced those changes

Hopefully NPX will go forward and get stronger and stronger .... they have a new CEO from next week and a new CFO (but no board casulaties yet?) so hopfully the fresh thinking will allow NPX to successfully face the new way of doing things .... but many will say that no way can they be as successful as Fred and John eh. .... but the Dr as plenty of monetary incentive to make things happen .... and get closer to his vineyard in the Baroosa Valley

So the recession and the financial crisis did force changes in the way NPX operate .... long term shareholders have taken a massive hit in the process .... and I have a feeling that there is more to this story to be told

[percy]

winner69.If they had not brought Akzo they would have gone down hill very quickly.They lacked the technology to go forward.Akzo gave them this.Yes they were caught with their pants down.(50 mil us loan).No one saw the markets head south.NPX had properties in Sydney and Auckland they were looking to sell.Their business just stopped.My point was EBO had just had a cash issue and so were ok.Had NPX done the same they too would have been ok.Their growth and business model was and is sound. The Akzo buy was correct.the 50mil that brought them down just proves to me never trust a Yank banker.the 50mil cost shareholders dearly.crazy.Going forward the new guy has a great platform built by fred and john to build on.we will see growth in growth markets such as asia and india.they have the balance sheet to buy whatever they want where ever they want.They have the technology thanks to Akzo to compete with any one .

[Lizard]

My point was EBO had just had a cash issue and so were ok.Had NPX done the same they too would have been ok.
Exactly. NPX allowed existing shareholders to have their holdings decimated (if they didn't have spare cash to invest at the rights issue), because they underestimated the risk of a death spiral and didn't act sooner to prevent it happening. Okay, I can accept that they were complicated times, but compare the relative price decline and dilution for other companies caught with high debt and it is hard to find one in which existing shareholdings lost as much value. There has to be some management culpability.

[Lizard]

Having said that, I'd add that I don't support charging the NPX directors - their actions (or lack of) seem so far down the list compared to others we've seen in the past. Would rather have seen actions against directors in say BIO or RPL or one of the other weird situations that have occurred. Taking action against well-meaning directors who perhaps could have done better (in what were difficult times) seems like just another barrier to keeping good companies listed on the NZX - don't see ASIC chasing NPX in regards to disclosure to the ASX.

[tobo]

Blast from the past.
I had no idea Sandy Maier had ended up at South Canterbury Finance. He was my boss at Citibank (Auckland) in late 80's-90.
Each morning he would dish out tasks to the managers. He would have dozens of printed-out emails ('citimails', they were called) neatly lined up on his desk.
Basically, if it didn't have strategic impact he expected to spend VERY litle time on an issue, and once handed to you, well, the monkey was on YOUR back. You had the sense that not completing it was not an option.

[peat]

I don't support charging the NPX directors - their actions (or lack of) seem so far down the list compared to others we've seen in the past.
gaynor agrees in the herald this weekend saying its like a referee who has lost control of a match so needs to use the red-card unnecessarily to regain control of the game.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10638909

[percy]

Exactly. NPX allowed existing shareholders to have their holdings decimated (if they didn't have spare cash to invest at the rights issue), because they underestimated the risk of a death spiral and didn't act sooner to prevent it happening. Okay, I can accept that they were complicated times, but compare the relative price decline and dilution for other companies caught with high debt and it is hard to find one in which existing shareholdings lost as much value. There has to be some management culpability.

Yes you are right,but I think it is totally unfair to lay the blame with john hurst.The board,yes,the financial lack of controler,yes.hurst no.A right issue right at the first sign of trouble or even earlier as EBO did would only needed to raise very little compared with what was needed later.But they would have sort advice, and that advice was wrong.

[ENP]

http://www.theaustralian.com.au/business/shares-tipped-to-fall-after-wall-st-plunge/story-e6frg8zx-1225855217993

http://www.stuff.co.nz/business/market-data/3596475/Shares-on-the-slide

News from today doesn't look too good.