(Correcting that Unilever said the Dutch exit tax bill, not its unification plans, would infringe tax treaties.)
(Alliance News) - Consumer goods firm Unilever warned Thursday that its planned unification under a single UK entity is still threatened by a Dutch bill that would impose an exit tax.
The caution came as Unilever posted underlying sales growth of 4.4% in the third quarter, though total revenue slipped 2.4% annually to EUR12.9 billion. For the first nine months of 2019, revenue was 1.8% lower at EUR38.6 billion.
Unilever continued to see "elevated levels" of sales of hand and home hygiene products, as well as of foods consumed at home. Its ice cream business - which houses the Ben & Jerry's brand - continued to struggle, though its decline eased in third quarter.
The company's unification earlier in October received the thumbs up from its UK shareholders, but Unilever warned Thursday the deal remains threatened by a proposed Dutch exit tax.
Referring to an exit tax bill tabled in the Dutch Parliament earlier this month, Unilever noted changes had been made compared to the initial proposal in July, but risks remained for its unification plans.
Unilever argued the Dutch bill in its current form will "infringe" several tax treaties.
"Despite the amendments made, Unilever has received legal advice that, if the bill were enacted in its current form with retroactive effect and were applied to unification, it should infringe the Dutch UK tax treaty, other tax treaties which the Netherlands has concluded with states in which shareholders of Unilever PLC or Unilever NV reside, primary and secondary EU law and the First Protocol to the European Convention on Human Rights," Unilever cautioned.
"It is not clear when, or indeed if at all, the bill will be enacted, or in what form," it added.
However the company insisted its unification "remains in the best interests of Unilever, its shareholders and other stakeholders as a whole".
Unilever shares were up 1.1% early Thursday in London.
Here is what you need to know at the market open:
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MARKETS
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FTSE 100: down 0.2% at 5,767.07
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Hang Seng: up 0.1% at 24,769.03
Nikkei 225: closed down 0.7% at 23,474.27
DJIA: closed down 97.97 points, 0.4%, at 28,210.82
S&P 500: closed down 0.2% at 3,435.56
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GBP: flat at USD1.3142 (USD1.3145)
EUR: soft at USD1.1856 (USD1.1868)
Gold: down at USD1,916.77 per ounce (USD1,922.40)
Oil (Brent): down at USD41.70 a barrel (USD41.95)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1030 BST UK BoE Governor Bailey speaks at Waterline Summit
1100 BST UK CBI industrial trends survey
1100 BST Ireland wholesale price index
1100 CEST EU general government deficit and debt
1600 CEST EU flash consumer confidence indicator
0830 EDT US initial jobless claims
1000 EDT US existing home sales
1030 EDT US EIA weekly natural gas storage report
2100 EDT US presidential election debate between Trump and Biden
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UK and EU Brexit negotiators will embark on an "intensified phase of talks" on Thursday after Brussels said both sides needed to compromise on trade issues. The EU chief negotiator Michel Barnier made conciliatory signals to his UK counterpart David Frost as the deadline for a deal looms. Number 10 acknowledged that "significant gaps" remain between the two sides and it was "entirely possible that negotiations will not succeed". But there were some upbeat reports that a deal could be done within two weeks, with the Daily Telegraph reporting that Frost believed Brussels was applying a "fundamental" change of approach to the talks.
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UK Chancellor of the Exchequer Rishi Sunak is set to announce a new support package for businesses affected by Tier 2 restrictions, according to reports. Sunak will unveil a new plan to help firms, particularly pubs and restaurants, who have seen their trade drop as a result of the social restrictions in the "high" Covid-19 category. Currently businesses in Tier 2 areas such as London and Birmingham do not benefit from the same Government aid as those in Tier 3, including business grants and higher wage subsidies, because they can remain open. Sunak will make a statement to the Commons on Thursday morning and the Telegraph reported he will unveil financial measures to help Tier 2 firms following complaints from industry leaders and MPs that thousands of jobs were at risk ahead of Christmas.
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A White House official on Wednesday said the next two days of talks over a new US stimulus package will be critical, as Washington policymakers touted only incremental progress in negotiations. After months of dialogue and increasing signs of progress in recent days, both Democrats and Republicans say differences remain but they are nonetheless starting to put elements in writing that could become a legislative package costing trillions of dollars. Congressional Democrats have been holding out for a broad bill with a number of support measures while Republicans have tried to hold down the price tag and narrow the focus, but both sides say they want to win approval before the November 3 election. "I don't think our chances get better after election. I do think the next 24 to 48 hours will tell us a whole lot," White House chief of staff Mark Meadows said on Fox News. Democratic House Speaker Nancy Pelosi spoke again late Wednesday with Treasury Secretary Steven Mnuchin, and the session "brings us closer to being able to put pen to paper to write legislation," Pelosi spokesman Drew Hammill said on Twitter.
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BROKER RATING CHANGES
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BERENBERG CUTS ABCAM TO 'HOLD' ('BUY') - TARGET 1180 (1450) PENCE
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RBC RAISES POLYMETAL PRICE TARGET TO 2225 (2150) PENCE - 'OUTPERFORM
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COMPANIES - FTSE 100
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British Airways-parent International Consolidated Airlines Group warned of another capacity cut as Covid-19 infections rise. IAG said "recent overall bookings have not developed as previously expected" as Europe as imposed additional curbs in response to the second wave of the virus. Local lockdowns, extensions of quarantine requirements and a lack of pre-departure testing or air corridors have not been adopted as "quickly as anticipated" either. "In response to the high uncertainty of the current environment, IAG now plans for capacity in fourth quarter 2020 to be no more than 30% compared to 2019. As a result, the group no longer expects to reach breakeven in terms of net cash flows from operating activities during fourth quarter 2020," IAG cautioned. IAG back in September said it expected fourth-quarter capacity to decline by 60% compared to 2019, so Thursday's announcement puts that at 70%. Total revenue in the third quarter ended September 30 fell 83% annually to EUR1.2 billion, and IAG swung to an operating loss of EUR1.3 billion from EUR1.4 billion profit a year earlier, figures showed on Thursday. IAG will report detailed third-quarter results on October 30.
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Pest control and hygiene firm Rentokil Initial said annual results will be in-line with expectations. Rentokil posted a 4.3% revenue hike for the third quarter of 2020, or 8.5% in constant currency. Revenue came in at GBP758.1 million during the period, with "all core categories delivering performance improvements". It also reported a "return to M&A" action, sealing six acquisitions during the quarter, five in pest control. Rentokil reiterated its plan to pay a dividend for 2020 and said annual results will be at least "in line with expectations".
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COMPANIES - GLOBAL
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Schneider Electric posted a year-on-year fall in revenue for its third quarter but noted a return to growth following the easing of lockdowns implemented during the second quarter. The French electrical equipment and software firm said revenue for the three months ended September 2020 was EUR6.46 billion, down 2.8% from EUR6.65 billion recorded the year prior. On an organic basis, revenue was 1.3% higher. Energy Management revenue was down 2.0% year-on-year but up 2.5% on an organic basis. Industrial automation revenue was down 5.6% and on an organic basis, also showed a 2.5% decline.
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Thursday's Shareholder Meetings
Hargreaves Services PLC - AGM
FRP Advisory Group PLC - AGM
Superdry PLC - AGM
Reach PLC - GM re bonus issue
MobilityOne Ltd - AGM
City of London Investment Trust PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
