(Alliance News) - Royal Dutch Shell swung to a second-quarter loss as the oil major took a hefty USD16.8 billion impairment charge, it said Thursday.
Adjusted earnings - previously referred to as CCS earnings attributable to shareholders excluding identified items - slumped to just USD638 million in the second quarter from USD3.46 billion a year ago.
Including the USD16.8 billion impairment charge - taken "as a result of revised medium- and long-term price and refining margin outlook assumptions in response to the Covid-19 pandemic and macroeconomic conditions as well as energy market demand and supply fundamentals" - Shell posted a loss attributable to shareholders of USD18.13 billion versus income of USD3.00 billion a year ago.
"Second quarter 2020 results reflected lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses," said Shell.
For the first half, its attributable loss was USD18.16 billion against a profit of USD9.00 a year prior.
Shell's dividend for the half totalled USD0.32, in line with its decision in April to slash its first quarter payout to USD0.16 cents. For the first half of 2019, Shell paid out USD0.94.
Second quarter oil and gas production was 3.4 million barrels of oil equivalent per day, a decrease of 6% compared with a year ago.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 17.84 points, 0.3% at 6,149.30
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Hang Seng: down 0.4% at 24,778.80
Nikkei 225: closed down 0.3% at 22,339.23
DJIA: closed up 160.29 points, or 0.6%, at 26,539.57
S&P 500: closed up 1.2% at 3,258.44
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GBP: down at USD1.2950 (USD1.2968)
EUR: down at USD1.1753 (USD1.1767)
Gold: unchanged at USD1,955.22 per ounce
Oil (Brent): firm at USD43.53 a barrel (USD43.42)
(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
0955 CEST Germany labour market statistics
1100 CEST EU business & consumer surveys
1100 CEST EU unemployment
1400 CEST Germany provisional consumer price index
0830 EDT US advance estimate GDP
0830 EDT US initial jobless claims
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The number of cars built in the UK over the past six months has slumped to the lowest since 1954, when food rationing ended. A total of 381,357 cars were built in the six months to June, a decline of 42% on the same period last year, said the Society of Motor Manufacturers & Traders. The virus crisis led to widespread closures and job losses, and the SMMT warned more were at stake amid fears of a "double whammy" of Brexit tariffs. The trade body estimated that 11,349 jobs were axed in the past six months at carmakers and companies which supply them with parts and services. Car production fell by 48% in June compared to the same month a year ago, with 56,594 units made, as social distancing measures and weak demand across global markets continued to restrict output.
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BROKER RATING CHANGES
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BERENBERG CUTS TULLOW OIL TO 'HOLD' ('BUY') - TARGET 40 (55) PENCE
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COMPANIES - FTSE 100
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Lloyds Banking reported a pretax loss of GBP602 million for the half-year to June 30, swinging from a profit of GBP2.90 billion a year ago. Net income was down 16% to GBP7.41 billion, with net interest income down 11%. The lender took a GBP3.82 billion impairment in the half - including GBP2.4 billion in the second quarter - up from GBP579 a year ago, and said it expects its impairments for the full-year to be between GBP4.5 billion to GBP5.5 billion. The impairments taken in the half reflected "a significant deterioration in forward looking economic outlook". Looking to the remainder of the year, Lloyds said: "There have been early signs of recovery in the group's core markets, mainly in consumer spending and the housing market, but the outlook remains highly uncertain and the impact of lower rates and economic fragility will continue for at least the rest of the year."
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Standard Chartered said it is feeling the "acute impact" of the coronavirus pandemic, forcing the lender to increase its impairments and resulting in a fall in profit in the first half. In the six months to June 30, the Asia-focused lender recorded pretax profit of USD1.63 billion, down 33% on the USD2.41 billion reported a year before. Greater China & North Asia saw underlying pretax profit slip 15% year-on-year to USD1.13 billion. ASEAN & South Asia profit plunged 40% to USD456 million. In Europe & Americas, however, StanChart saw profit jump to USD356 million from just USD13 million a year before. Credit impairments were raised dramatically, curtailing profit. The lender upped its impairments to USD1.58 billion from USD254 million a year before. It is hopeful its credit impairments in the second half will be lower than in the first half, assuming the economic conditions in its markets "do not materially deteriorate in the coming months".
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AstraZeneca reported a 12% rise in total revenue in the first half of the year to USD12.63 billion, while core earnings per share rose 24% to USD2.01. The pharmaceutical firm said its 2020 full-year guidance was unchanged at high single-digit to low double-digit percentage growth in revenue and mid- to high-teens growth in core EPS. Astra held its first interim dividend steady at USD0.90 per share. It promised a "broad and equitable" supply of any Covid-19 vaccine that it develops during the pandemic at no profit.
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Contract caterer Compass reported a 44% slump in organic revenue for the third quarter, bringing its year-to-date slide to 14%. The third quarter decline was led by Europe, down 54%. North America was down 45% and Rest of World down 20%. The group's operating margin for the quarter was minus 6.3%. "The pace at which our volumes will recover is still unclear, especially given a possible increase in local lockdowns. We are encouraged by the relative improvement in performance in June, as well as the early signs of an acceleration in first time outsourcing opportunities. In the meantime, we continue to work with our clients to help them reopen safely. We are proactively managing the business, reducing our costs, rebuilding our margins and investing to strengthen our competitive advantages," said Compass.
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COMPANIES - GLOBAL
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French aircraft manufacturer Airbus made an adjusted loss before interest and tax of EUR1.2 billion in the second quarter of 2020. The figure represents a big deterioration from a EUR1.98 billion profit for the same period last year, as the aircraft manufacturer suffers the knock-on effects of the coronavirus on the aviation industry. The company's net loss was EUR1.4 billion, compared to EUR1.2 billion profit in the second quarter of 2019. With its airline customers suffering massively reduced activity and income, Airbus last month announced plans to cut 15,000 jobs worldwide and reduce production by 40% for two years.
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Chinese telecommunications giant Huawei Technologies overtook Samsung Electronics as the world's biggest smartphone player for the first time in the second quarter of 2020, according to a report by research firm Canalys. It is the first time a company other than Apple or Samsung has dominated the market in nine years, Canalys said. The company still faces trade sanctions from the US and saw its overseas shipments fall 27% in Q2, according to Canalys. But its dominance of the Chinese market led to a boost in local shipments by 8%. Owing to China's relatively fast recovery from Covid-19, Huawei now sells over 70% of its phones in its home market. Although the Shenzhen-based firm posted a 5% dip in sales from the same quarter last year, South Korean competitor Samsung saw a more dramatic drop of over 30%, due to disruptions in key markets such as the US, Europe, and Brazil.
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Following a grilling by lawmakers in the Bundestag on Wednesday, German Finance Minister Olaf Scholz vowed that he is keen to tackle reforms in the wake of the recent Wirecard collapse. Wirecard went bankrupt after admitting in June that EUR1.9 billion in assets were likely non-existent, causing the company's share price to nosedive, former executives to be arrested, and prompting doubts over the efficacy of financial oversight authorities in Europe's biggest economy. Scholz said he was worried that "once the current excitement has subsided" people would no longer have the "strength and courage that is needed" to tackle reforms. Scholz is pushing a reform agenda that would give financial watchdog BaFin greater enforcement powers.
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The owners of Volkswagen cars that were fitted with so-called defeat devices designed to cheat environmental testing are to find out whether they are entitled to damages, in key rulings for German consumers expected on Thursday. The Federal Court of Justice already delivered a landmark ruling on May 25, finding that the German auto giant had knowingly tricked customers in the emissions-rigging scandal, which has dogged the company since September 2015. However, that ruling left many details unclear, including whether customers are entitled to compensation even if they bought the vehicle after the scandal broke, or if they have racked up significant mileage on the vehicles.
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Thursday's Shareholder Meetings
TMT Investments
Iofina
Angling Direct
Card Factory
Highland Gold Mining
BMO Global Smaller Companies
Hutchison China MediTech
Ukrproduct Group
Stobart Group
London & Associated Properties
Volex
OnTheMarket
Norcros
CMC Markets
Gabelli Value Plus+ Trust
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
