LONDON MARKET PRE-OPEN: BP to take Rosneft charge; Bunzl raises payout

(Alliance News) - Stock prices in London are seen opening sharply lower on Monday after world powers imposed the harshest sanctions ever on Russia for its invasion of Ukraine.

In early company news, BP said its decision to exit its stake in Russia's Rosneft will not harm its ability to increase payouts. Distribution firm Bunzl is confident in its 2022 prospects after robust annual results. Associated British Foods forecast higher first-half sales and adjusted operating profit. Ukraine-focused iron ore pellet producer Ferrexpo delayed its annual results due to the Russian invasion.

IG futures indicate the FTSE 100 index is to open 103.66 points lower at 7,385.60. The index closed up 282.08 points, or 3.9%, at 7,489.46 Friday.

Bunzl said it continued to perform strongly during the virus pandemic, with ongoing growth in 2021, prompting the distribution firm to raise its dividend.

For 2021, Bunzl posted a pretax profit of GBP568.7 million, up 2.3% from GBP555.7 million in 2020, on revenue of GBP10.29 billion, up 1.7% from GBP10.11 billion.

Bunzl declared a 57.0 pence annual dividend, up 5.4% from 54.1p paid out in 2020.

Looking ahead, Bunzl expects moderate revenue growth in 2022, driven by acquisitions completed in the past 12 months and supported by a slight increase in organic revenue. A continued recovery of the base business is expected to be offset by the further normalisation of sales of Covid-19 related personal protective equipment, albeit these are expected to remain ahead of 2019 levels, it noted.

Bunzl also expects its operating margin in 2022 to be slightly higher than historical levels, as the mix of sector and product sales continues to transition to more typical levels.

"Looking ahead, the group's longer term prospects remain attractive, with the last two years reinforcing the resilience and quality of the Bunzl model by demonstrating the agility that comes with our decentralised business model, the critical role we play in supply chains and for our customers," the company said.

Associated British Foods forecast higher first-half sales and adjusted operating profit.

For the six months ending March 5, AB Foods expects sales and adjusted operating profit to be strongly ahead of a year before. It also expects sales and adjusted operating profit to be ahead of the pre-Covid levels achieved in the half year to February 29, 2020.

At its Primark fashion shops, sales for the first half are expected to be over 60% ahead of last year at constant currency with an operating profit margin of around 11%. This, it explained, reflected the fact that all stores remained open and trading throughout the period except for short periods in Austria and the Netherlands

"We expect growth in adjusted operating profit for the group in the second half. As a result, our outlook for the full year is unchanged with significant progress expected in adjusted operating profit and adjusted earnings per share for the group," AB Foods said.

Ferrexpo said it has decided to delay the publication of its full year results, originally set for March 16, due to the Russian forces in Ukraine.

The iron ore pellet producer said the situation in Ukraine remains "complex and changeable" and is aware of reports of the Ukrainian railway network providing limited capacity to its freight customers. Ferrexpo confirmed that it has dispatched a proportion of its production to the western border of Ukraine to customers in Europe.

"It remains unclear as to the ongoing availability of railing capacity and, if available, the quantity of pellets that the group may be able to deliver to its European customers," Ferrexpo said.

In the US on Friday, Wall Street ended sharply higher, with the Dow Jones Industrial Average up 2.5%, S&P 500 up 2.2% and Nasdaq Composite up 1.6%.

In Asia on Monday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite was ended up 0.3%, but the Hang Seng index in Hong Kong was down 0.8%. The S&P/ASX 200 in Sydney closed up 0.7%.

Russian President Vladimir Putin's decision to send troops across the border last week has sent shivers through trading floors as investors worry about a protracted war in the resource-rich region.

Markets had rallied Friday as dealers assessed that the punishments imposed on Moscow were relatively light and didn't hit its oil exports - Russia is the world's third-biggest producer - at a time when supplies are thin and demand is surging.

But the picture was changed at the weekend, when the US and EU said they would exclude some Russian banks from the international bank payments system SWIFT, having already personally targeted Russian President Vladimir Putin and Foreign Minister Sergei Lavrov.

Adding to the unease, Putin on Sunday ordered Russia's nuclear forces onto high alert in response to what he called "unfriendly" steps by the West. Russia has the world's largest arsenal of nuclear weapons and a huge cache of ballistic missiles.

The UN General Assembly will hold a rare emergency session Monday to discuss the conflict, which has claimed dozens of lives and raised fears that it will displace millions of people.

"In a sign that Putin appears increasingly rattled by the way events have unfolded over the past few days, from the lack of progress on the part of the Russian military in subduing Ukraine, to the increasing polarisation of Russia itself, he took the extraordinary decision to put his nuclear armed forces on high alert. This comes across as a move that smacks of desperation, but it also puts the world, and Europe especially, into its most dangerous period since the 1980's at the height of the Cold War," said CMC Markets analyst Michael Hewson.

"Despite events over the weekend Asia markets have proved remarkably resilient; however markets here in Europe look set to get clobbered when they open later this morning," Hewson added.

Over the weekend, BP said it will sell its near 20% stake in Russian oil producer Rosneft, which it co-owns with the Kremlin, after facing pressure from the UK government.

The UK oil major's chief executive Bernard Looney is also resigning from the Rosneft board with "immediate effect", it said.

UK Business Secretary Kwasi Kwarteng held a virtual call with Looney for around 20 minutes on Friday to discuss the company's position.

BP on Monday said the exit from Rosneft shareholding does not change its distribution guidance and its financial frame guidance remains unchanged. The oil major said it still expects to have capacity for 4% annual increases in dividend through 2025.

BP said it will report a material non-cash charge in its first-quarter results in May, due to the required changed accounting treatment of the Rosneft stake.

The pound was quoted at USD1.3377 early Monday, down from USD1.3409 at the London equities close Friday.

The euro was priced at USD1.1193, down from USD1.1258. Against the safe-haven yen, the dollar was trading at JPY115.55 in London, lower against JPY115.61.

Brent oil was quoted at USD102.61 a barrel Monday morning, up sharply from USD97.16 at the London equities close Friday. Gold stood at USD1,896.90 an ounce, firm from USD1,887.00 late Friday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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