Wall Street's inability to hold its gains on Wednesday and another turbulent day on international markets yesterday meant that the Irish market took another dive with the usual group of leading financial and industrials feeling the brunt of the selling pressure. Dealers expect more of the same for some time to come at least until Wall Street begins to show signs of settling down.
But a falling market does present opportunities for companies with cash at their disposal and market sources expect any sustained weakness to lead to share buy-backs. Fyffes took the plunge into the market yesterday and is understood to have bought back between five and seven million shares at 127p through Davy and ABN-Amro.
With the best part of £90 million cash in its balance sheet, the £9 million spent in the market by Fyffes yesterday will be no problem to the group. Bar earnings-enhancing acquisitions, buy-backs are seen as the best use of surplus cash especially when share prices are at low levels. The fewer shares in issue means that earnings get a boost, while liquidity in the shares is tightened up. Fyffes closed up 3p from the buy-back price at 130p.
Smurfit, Greencore and Independent have all bought back shares in the recent past and may be tempted to do so again. But market sources believe that even after hitting a new five-year low of 115p, Smurfit may be too preoccupied with having to pay $250 million (£172 million) to buy the Morgan Stanley stake in JS Corp to countenance a buyback. At 115p, Smurfit was 10p lower on the day and may be in for further falls with the group ADRs trading $2 lower in New York last night at just over $17 while JS Corp was trading $3/8 lower on $11 3/4.
Among the leaders, it was a topsy-turvy day. AIB fell as low as 850p before rebounding in late trading to close down 15p on the day on 865p. Bank of Ireland hit an early low of £10.40 before also recovering slightly and ending down 15p on £10.55.
CRH drifted back 5p to 830p despite its excellent interim results and a generally good results season in the British building materials and construction sectors. Waterford Wedgwood was 3p easier on 59p after its interims and after brokers downgraded full-year forecasts. Goodbody has cut its 1998 earnings forecast from 6p to 5.6p and the 1999 forecast from 7.5p to 7.1p.
Grafton's good results are likely to result in upgrades of forecasts, but the shares did not trade from the overnight £15.50. Housebuilder Abbey went against the trend and gained 20p to 290p, but elsewhere among second-liners it was almost all red ink, with Clondalkin down 20p on 530p, DCC 25p lower on 435p, Independent off 7p on 255p, Jurys 20p lower on 450p and Kerry off 20p on 740p.
Ryanair was another exception and regained 38p to 433p as it announced a massive seat sale in Britain, a sale that is expected to be followed by similar price cuts on its routes out of Dublin.
