Annual Review 2006 - PwC
Annual Review 2006 - PwC
Annual Review 2006 - PwC
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Why?<br />
Our<br />
Clients.<br />
Resources<br />
The mining, oil, gas and utility sectors experienced a<br />
tumultuous – but in most cases spectacular – <strong>2006</strong>, as global<br />
commodity prices continued to surge. Emerging markets like<br />
China helped drive global demand, which has in turn boosted<br />
the Australian industry’s bottom line.<br />
However, executives have been<br />
dealing with challenges around<br />
their top-line growth, due to<br />
signifi cant talent, resource and<br />
capacity constraints.<br />
A possible medium-to-longterm<br />
fl attening of commodity<br />
prices is expected by some<br />
industry watchers, in which<br />
case we could be facing a<br />
squeeze on profi ts, driven by<br />
a ‘cost overhang’, as expenses<br />
are unlikely to drop off at the<br />
same rate.<br />
42<br />
PricewaterhouseCoopers<br />
In response, some industry<br />
players have been actively<br />
looking at operational<br />
effectiveness, particularly in the<br />
supply chain. However, not all<br />
companies have yet to fully<br />
grasp the cost issue, although<br />
we expect cost control to be<br />
higher up the agenda in 2007.<br />
Australia – driven in part by<br />
progressive thinking in the<br />
resources sector – has seen a<br />
step change on climate change.<br />
<strong>PwC</strong>’s recent survey of ASX 200<br />
businesses has found the topic<br />
is already having a signifi cant<br />
impact on corporate strategy.<br />
Over the next few years, there<br />
will be an even greater focus on<br />
climate change, sustainability<br />
and the risks/rewards especially<br />
if, as seems likely, a move to a<br />
formal carbon price signal<br />
occurs in Australia.<br />
As the utilities sector reform<br />
continues in Queensland,<br />
privatisation may yet make its<br />
way to New South Wales,<br />
driving further merger and<br />
acquisition activity.<br />
The ownership landscape of the<br />
utilities sector continues to<br />
change with the increased role<br />
of infrastructure funds – further<br />
blurring the lines between<br />
fi nancial services and<br />
resources. The arrival of private<br />
equity puts even more pressure<br />
on traditional utilities to grow<br />
and acquire assets, as well as<br />
driving up the price of these<br />
assets. No doubt the<br />
distinctive and innovative<br />
players in the industry will<br />
rise to this challenge.