(Alliance News) - Royal Dutch Shell on Thursday announced its first dividend cut since World War Two, capitulating to the plunge in oil prices and a dire global economic outlook.
Shell's first quarter current cost of supplies earnings attributable to shareholders, excluding items, were USD2.9 billion, down 46% on a year ago due to a drop in oil, gas and liquefied natural gas prices as well as lower sales volumes.
The oil major produced 3.7 million barrels of oil equivalent per day, down 1% on a year before.
Turning to the dividend, Shell said: "Shareholder returns are a fundamental part of Shell's financial framework. However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the board believes that maintaining the current level of shareholder distributions is not prudent. Following the announcement not to continue with the next tranche of the share buyback programme, the board has also decided to reduce the first quarter 2020 dividend and reset to 16 US cents per share."
Shell has not cut it since World War Two, but there has not been a hike since 2014. It paid out 47 cents each quarter in 2019.
Peer BP on Tuesday declared a first-quarter dividend of 10.5 US cents, up 2.4% from 10.25 cents in the fourth quarter and first quarter of 2019.
Shell 'A' shares were down 2.7% early Thursday in London.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 6,142.43
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Hang Seng: Hong Kong market closed for Birthday of the Buddha.
Nikkei 225: closed up 2.1% at 20,193.69
DJIA: closed up 532.31 points, 2.2%, at 24,633.86
S&P 500: closed up 2.7% at 2,939.51
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GBP: up at USD1.2459 (USD1.2434)
EUR: up at USD1.0866 (USD1.0855)
Gold: up at USD1,718.65 per ounce (USD1,702.03)
Oil (Brent): up at USD23.88 a barrel (USD22.90)
(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 unemployment
1100 CEST EU unemployment
1100 CEST EU preliminary flash estimate GDP
1100 CEST EU flash estimate euro area inflation
1345 CEST EU European Central Bank interest rate decision
1430 CEST EU press conference with ECB President Christine Lagarde
0830 EDT US personal income & outlays
0830 EDT US employment cost index
0830 EDT US unemployment insurance weekly claims report
1030 EDT US EIA weekly natural gas storage report
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UK Prime Minister Boris Johnson will front his first daily press conference since recovering from Covid-19 on Thursday amid mounting pressure on him to set out a path out of the lockdown. But with the UK's coronavirus death toll now the third highest in the world after the US and Italy, Downing Street is playing down any expectations of an easing of restrictions. Number 10 said a Cabinet meeting earlier in the day would look at the "response in general" but not make any decisions on lockdown measures. That response was facing further criticism as Health Secretary Matt Hancock's deadline arrived for carrying out 100,000 Covid-19 tests a day. With just over 52,000 tests carried out on Tuesday, the deadline looks set to be missed although that will not become clear until Friday.
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Another 31 people have died due to coronavirus in Ireland, numbers on Wednesday showed. A total of 376 more cases of the related infection Covid-19 have been diagnosed, Chief Medical Officer Tony Holohan said. One of the deaths reported on Wednesday involved a person in the 15-24 age group, the second in this category. Holohan warned the number in intensive care units was too high as the prospect of a rapid easing of movement restrictions dwindles.
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France saw gross domestic product slump at its fastest rate since the economic data series began in 1949, figures from the National Institute of Statistics & Economic Studies showed. France's economy contracted 5.8% sequentially in the first quarter due to Covid-19 lockdowns, in place since mid-March - the outturn worse than both the 1.6% drop recorded in the first quarter of 2009 and the 5.3% fall seen in the same quarter of 1968. INSEE cautioned that this first estimate is "fragile" and is likely to be revised in future releases. With France recording a 0.1% fall in GDP for the fourth quarter of 2019, the country has now entered a technical recession.
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BROKER RATING CHANGES
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ODDO BHF CUTS IAG TO 'NEUTRAL' (BUY) - PRICE TARGET 2.80 (3.50) EUR
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HSBC CUTS BRITISH LAND CO TO 'HOLD' ('BUY') - TARGET 385 (643) PENCE
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SOCGEN CUTS NEXT PLC TO 'SELL' ('HOLD') - TARGET 3522 (3998) PENCE
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PEEL HUNT CUTS GENUS TO 'HOLD' ('BUY')
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COMPANIES - FTSE 100
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Lloyds Banking Group's profit almost disappeared in the first quarter on an impairment charge. Pretax profit was GBP74 million for the quarter versus GBP1.60 billion a year before, hit by a "significantly increased" impairment charge of GBP1.43 billion, versus GBP275 million, due to the economic outlook. The impairment charge was a result of to changes to the group's IFRS 9 assumptions, given an expected deterioration in the UK economy as a result of Covid-19. Net income was down 11% to GBP3.95 billion amid lower interest rates, competitive asset markets and a slowdown in retail and commercial markets in March. Lloyds said: "The longer-term financial impact of coronavirus is not yet clear and given the significant change in the operating environment and economic expectations, the group's previous guidance is no longer appropriate. The impact of lower rates and lower levels of activity on the group's business will continue into the second quarter, but remains difficult to quantify given the significant uncertainty. We expect the group will also experience further impairments, both in existing and new lending books, particularly if economic expectations deteriorate further from the base case."
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Supermarket chain J Sainsbury saw profit rise in its recently ended financial year, though warned it could incur costs of GBP500 million due to Covid-19. Revenue edged down to GBP28.99 billion for the year to March 7 from GBP29.01 billion the year before, but pretax profit jumped to GBP255 million from GBP202 million. Post year-end, the supermarket said it saw a surge in demand, with one week in March seeing a 47% rise in total retail sales, excluding fuel. However, sales since mid-March have been mixed, with some weeks seeing high single-digit percentage rises and some declines. Looking to the financial year recently commenced, Sainsbury's said underlying pretax profit will be broadly unchanged year-on-year. This includes a hit of GBP500 million due to "significant costs" associated with protecting customers and employees from Covid-19, weaker fuel, general merchandise and clothing sales, and lower financial services profitability, offset by stronger grocery sales and business rates relief. The grocer has decided to defer dividend payment decisions to later in the financial year.
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COMPANIES - FTSE 250
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Pub chain JD Wetherspoon completed a share placing announced late Wednesday. It raised GBP141 million by issuing 15.7 million shares at 900p, a 6.0% discount to the stock's closing price on Wednesday. Founder Tim Martin and other executives subscribed for 33,330 of the shares in total. The bookbuild was run by Investec Bank. The new cash will be used for additional liquidity amid the period of disruption caused by Covid-19, with the assumption that the company's pubs will remain closed until late June.
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COMPANIES - INTERNATIONAL
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Japan's SoftBank Group is likely to post a net loss of JPY900 billion, about USD8.4 billion, for the latest financial year, larger than a net loss of JPY750 billion estimated earlier this month, it said. The latest downward revision is due to larger-than-expected investment losses, SoftBank said in a statement. The Japanese technology investor kept its forecast of a record operating loss of JPY1.35 trillion for the year ending March 31, compared with an operating profit of JPY2.3 trillion for fiscal 2018. SoftBank also maintained its forecast of sales of JPY6.15 trillion for fiscal 2019, it said. SoftBank said in mid-April that its Saudi Arabia-backed Vision Fund, which focusses on tech start-ups, suffered a JPY1.8 trillion investment loss for fiscal 2019 amid the coronavirus pandemic. The latest loss came after its investment debacle at US office-space start-up WeWork.
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Thursday's Shareholder Meetings
Schroders
Devro
Rockrose Energy
Greencoat UK Wind
KAZ Minerals
Hikma Pharmaceuticals
Greencoat UK Wind
James Fisher & Sons
Billing Services Group (re delisting from AIM)
BlackRock World Mining
Symphony International Holdings
Network International Holdings
Smurfit Kappa
British American Tobacco
Admiral Group
RPS Group
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By Tom Waite; thomaslwaite@alliancenews.com
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