(Alliance News) - UK oil major BP said Tuesday it will start share buybacks after reducing net debt below USD35 billion.
BP reported a replacement cost profit for the first quarter of 2021 of USD3.33 billion, swinging from a loss of USD628 million a year ago, while underlying RC profit jumped to USD2.63 billion from USD791 million.
"This result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins," the company said.
Brent oil was trading at USD66.09 a barrel early Tuesday, higher than USD65.50 late Monday and triple its value compared to a year ago.
BP ended the period with net debt of USD33.31 billion, well down on the USD51.40 billion reported at the same date a year ago. BP's net debt stood at USD38.9 billion at the end of 2020.
"We generated around USD11 billion of cash inflow in the first quarter, enabling us to reach our USD35 billion net debt target significantly ahead of plan and move to the second phase of our financial frame. We are starting buybacks in the second quarter with the intent to offset the full-year dilution from employee share schemes. In addition, we intend to distribute 60% of surplus cash flow for 2021 through share buybacks, with the remaining 40% being used to further strengthen our balance sheet," said Chief Financial Officer Murray Auchincloss.
BP plans to buyback USD500 million of shares in the second quarter. It will provide an update on third-quarter buyback plans at the time of its second-quarter results, it said.
Chief Executive Bernard Looney said: "With the acceleration of divestment proceeds, together with strong business performance and the recovery in the price environment, we generated strong cash flow and delivered on our net debt target around a year early. We are commencing share buybacks in the second quarter which, alongside our resilient dividend, support the growth in distributions to shareholders."
BP's dividend was held steady at 5.25 cents for the first quarter of 2021 with that paid out for the fourth quarter of 2020 - though half of the 10.50 cents dividend paid for the first quarter of 2020.
Looking ahead, the energy producer expects oil demand will recover this year due to strong growth in US and China and the rollout of vaccines.
BP shares were up 2.7% early Tuesday.
Peer Royal Dutch Shell reports on Thursday. It's A shares were up 0.2%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 6,969.11
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Hang Seng: down 0.2% at 28,910.70
Nikkei 225: closed down 0.5% at 28,991.89
DJIA: closed down 61.92 points, or 0.2%, at 33,981.57
S&P 500: closed up 7.45 points, or 0.2%, at 4,187.62
Nasdaq Composite: closed up 121.97 points, or 0.9% to 14,138.78
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EUR: flat at USD1.2070 (USD1.2075)
GBP: unchanged at USD1.3885
USD: firm at JPY108.28 (JPY108.18)
Gold: up at USD1,779.96 per ounce (USD1,777.60)
Oil (Brent): up at USD66.13 a barrel (USD65.50)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 BST UK CBI distributive trades survey
0855 EDT US Johnson Redbook retail sales index
0900 EDT US monthly house price index
1000 EDT US consumer confidence index
1630 EDT US API weekly statistical bulletin
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The first emergency medical supplies trickled into Covid-stricken India on Tuesday as part of a global campaign to staunch a catastrophic wave in the latest pandemic hotspot, with the US also pledging to export millions of AstraZeneca vaccines. India's infection and death rates are growing exponentially, overwhelming hospitals, in contrast to some wealthier Western nations that are starting to ease restrictions. The virus has now killed over 3.1 million people worldwide, with India driving the latest surge in global case numbers, recording more than 2,800 deaths on Monday. Crates of ventilators and oxygen concentrators from the UK were unloaded at a Delhi airport early Tuesday, the first emergency medical supplies to arrive in the country.
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Nearly GBP150 billion worth of home sales took place across the UK in the first 15 weeks of this year, according to a property website. The GBP149 billion total of sales recorded represents nearly double the value of homes sold subject to contract in the same period in 2020 and 2019, Zoopla said. The research also found that strong activity is eroding the supply of homes available. It said the total number of homes on the market and not yet under offer was around 30% down in early April compared with average levels during more "normal" times between 2017 and 2019. Three and four bedroom houses have recorded a particularly sharp fall in supply.
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Japan's central bank raised its growth forecasts for the world's third-largest economy, citing expected stronger demand, and left its ultra-loose monetary policy in place. But it acknowledged that the outlook remains "highly unclear" and could change depending on how the still-raging coronavirus pandemic evolves and affects the domestic and international economy. Still, it revised up its forecast for the 2020-2021 fiscal year that ended on March 31, projecting the economy would shrink 4.9%, compared with the 5.6% contraction it predicted in January. For the current fiscal year, it now expects 4.0% growth, against its January forecast of 3.9%, while it lifted its expectations for the fiscal year ending in March 2023 to 2.4%, from 1.8% previously.
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BROKER RATING CHANGES
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MORGAN STANLEY CUTS BUNZL TO 'UNDERWEIGHT'('EQUAL-WEIGHT'); TARGET 2,220 (2,350) PENCE
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CITIGROUP RAISES LEGAL & GENERAL TO 'BUY' (NEUTRAL) - PRICE TARGET 301 (281) PENCE
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BARCLAYS RAISES BABCOCK TO 'EQUAL WEIGHT'('UNDERWEIGHT') TARGET 315 (145) PENCE
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COMPANIES - FTSE 100
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HSBC Holdings said it kicked off 2021 with with a sharp jump in pretax profit - boosted by credit releases - and is confident its new direction and focus will lead to revenue growth. The Asia-focused lender said it is not planning quarterly dividends in 2021 but said it may consider an interim dividend. HSBC paid a USD0.15 per share dividend for 2020, declared as an interim payout with its full year results in February. Pretax profit in the three months to March 31 improved 79% to USD5.78 billion from USD3.23 billion the year before. In the first quarter, HSBC's expected credit losses came out as a net release of USD400 million compared to the mammoth USD3.0 billion charge seen a year before. The net release in provisions primarily reflected an improvement in the economic outlook from 2020, the bank explained.
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Premier Inn hotel chain owner Whitbread said its full-year performance reflected the virus restrictions that were in place for the bulk of the period. Revenue for the financial year that ended February 25 sank 72% to GBP589.4 million from GBP2.07 billion the year before, sending Whitbread to a pretax loss of GBP1.01 billion from a profit of GBP280.0 million. The loss included an impairment charge of GBP348.0 million relating to goodwill in Germany, property, plant and equipment and right-of-use assets, as a result of impairment reviews triggered by the Covid-19 situation and its impact on current and future growth rates. No payout was recommended for the recently ended year, after a total dividend of 32.7p paid for the 2020 financial year. Whitbread said dividends will not be paid during its current revolving credit facility covenant waiver period, which lasts until March 2023, as a condition agreed with lenders and pension trustees, or until the original covenant tests are passed. "The board hopes to return to paying dividends again following the normalisation of the group's financial position and performance," Whitbread said.
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COMPANIES - FTSE 250
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Personal care products maker PZ Cussons said revenue rose by 4.7% a constant currency from a year before to GBP145.3 million in financial third quarter ended February 27. At actual foreign exchange rates, revenue growth was just 0.1%. The difference between the two was mostly in Africa, where sales grew by 3.2% at constant currency but fell by 7.0% at actual rates. In Europe & Americas, revenue grew by 8.7% and 8.1%, respectively, and in Asia Pacific by 2.6% and 1.4%, respectively. "Despite continued market volatility, we remain on track to perform in line with the current range of market expectations for full year FY21," PZ Cussons said.
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COMPANIES - MAIN MARKET AND AIM
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Jet2 guided to a loss for its recently ended financial year, though said the rollout of vaccines is encouraging. The airline and package holiday operator expects to report a loss before foreign exchange revaluation and tax from continuing operations for the financial year ended March 31 between GBP375 million to GBP385 million, swinging from a profit of GBP264.2 million the year before. The UK's vaccine rollout and increasing momentum in Europe are both encouraging for the financial year ahead, Jet2 said, though it highlighted uncertainty over the UK government's proposed Covid-19 travel restrictions for the 2021 summer season. "Unsurprisingly given the short-term uncertainty, customers are booking significantly closer to departure for Summer 21. However, we continue to be encouraged by the volume of customer bookings for both Winter 21/22 and for Summer 22, for which package holiday bookings are displaying a materially higher mix of the total," it said.
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COMPANIES - GLOBAL
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UBS was able to shake a big hit to its prime brokerage unit to post profit growth in the first quarter. In the three months to March 31, the Swiss bank recorded net profit of USD1.82 billion, up from USD1.60 billion the year before. Operating income rose to USD8.71 billion from USD7.93 billion. UBS said it took a USD774 million hit from the default by a "US-based client of our prime brokerage business". Peer Credit Suisse last week reported an "unacceptable" loss for the first quarter as it took a CHF4.4 billion charge related to a US-based hedge fund. Credit Suisse racked up more than USD20 billion in exposure to Archegos-related investments, the Wall Street Journal reported, and the Swiss bank's executives were only told days before the US hedge fund's implosion. "We are all clearly disappointed and are taking this very seriously," said UBS Chief Executive Ralph Hamers. "A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future. "
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Japanese financial group Nomura Holdings confirmed losses of USD2.3 billion for financial 2021 linked to the sudden liquidation of holdings by Archegos. The bank had earlier warned of losses estimated at around USD2 billion over the debacle, which also hit firms including Credit Suisse, Morgan Stanley and several leading Japanese banks. Without naming Archegos, Nomura also announced that it expected a further USD570 million in losses for the current fiscal year linked to "transactions with a US client".
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Novartis said the non-repeat of Covid-19 related stockpiling kept a lid on first-quarter sales growth. In the first three months of 2021, the pharmaceutical firm's net sales rose 1.0% to USD12.41 billion from USD12.28 billion a year earlier. The Basel-based firm noted though that, on a constant currency basis, sales fell 2% year-on-year. Pretax profit fell 6.5% to USD2.45 billion from USD2.62 billion a year earlier. Research and development costs rose 14% to USD2.35 billion, while selling, general and administration expenses came in 1.2% higher at USD3.53 billion. Commenting on its sales figures, Novartis explained that the first quarter of last year was boosted by roughly USD400 million worth of "Covid-19 related forward purchasing".
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Tuesday's Shareholder Meetings
Aquis Exchange PLC - AGM
Diversified Gas & Oil PLC - AGM
Synectics PLC - AGM
Tribal Group PLC - AGM
Travis Perkins PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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