(Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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Royal Dutch Shell pledged additional returns to shareholders following the sale of its Permian Basin assets. The oil major swung to a loss in the third quarter against a backdrop of activist investor pressure. Shell on Wednesday said it held talks with Third Point, after the activist shareholder went as far as suggesting the oil major should be split up. For the three months to September 30, Shell posted adjusted earnings of USD4.1 billion, down from USD5.5 billion in the second quarter, but surging from USD955 million in the third quarter last year. Turning to shareholder returns, Shell declared a quarterly dividend of USD0.24, steady on the second quarter and up from USD0.1665 paid out for third quarter a year ago. Shell said USD1.0 billion in buybacks were completed in the third quarter out of USD2 billion planned for the second half. In addition, Shell said a USD7 billion return is in store for shareholders in 2022 following the sale of its Permian assets in the south west US to ConocoPhillips earlier this year.
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France's TotalEnergies said the surge in global oil and energy prices boosted its bottom line in third quarter, when it booked a net profit of USD4.6 billion. "The global economic recovery, notably in Asia, drove all energy prices sharply higher" in the period from July to September, said Chief Executive Patrick Pouyanne. In the same period a year earlier, when oil prices had been very low, TotalEnergies booked net profit of USD202 million. But compared with the third quarter of 2019, prior to the outbreak of the coronavirus pandemic, the 2021 figure represented an increase of 66%.
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South Korea's Samsung Electronics posted a 28% jump in operating profit on Thursday despite global supply chain challenges caused by the pandemic. The world's top chipmaker saw its operating profit reach KRW15.8 trillion, about USD13.5 billion, for the July-September period, it said in a regulatory filing. Its sales rose 10% on-year to a record KRW74 trillion on the back of strong performance from its memory chip division thanks to sustained global demand. "Favourable market conditions continued in the memory market" resulting in "robust sales", the company said in a statement. Operating profits generated from its semiconductor business accounted for over 60% of the total, illustrating the major role the division plays to the sprawling group.
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Sony upgraded its full-year sales and profit forecast, saying it expected strong performances in the music, movie and electronics sectors. The optimistic outlook came despite a lacklustre second quarter overall, with net profit down more than half compared with its extraordinary results in the same period last year. The Japanese conglomerate, which this year bought top online anime library Crunchyroll for USD1.2 billion, said it expected the purchase to boost sales and profit in its movie division. Several factors including sales via streaming services and "licence revenue in the anime business" are also projected to lift music profits, as Sony enjoys steady growth in its entertainment businesses. Sony Group is now projecting a net profit of JPY730 billion yen, about USD6.4 billion, for this fiscal year, up from its earlier estimate of JPY700 billion. It also raised its annual sales forecast from JPY9.7 trillion to JPY9.9 trillion.
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Lloyds Banking reported a rise in third-quarter earnings in Charlie Nunn's maiden results report at the helm of one of the UK's largest lenders. For the third quarter to September 30, net income was up 20% to GBP4.08 billion from GBP3.40 billion last year, and net interest income rose 8.8% to GBP2.85 billion from GBP2.62 million. Lloyds posted pretax profit of GBP2.03 billion, almost doubled from GBP1.04 billion last year, with net interest margin of 2.55%, up from 2.42%. Looking ahead for 2021 as a whole, Lloyds expects net interest margin to be modestly above 250 basis points and also continues to target a return on tangible equity in excess of its cost of equity in the medium term.
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UK advertising firm WPP reported third-quarter revenue of GBP3.24 billion, up 9.1% from a year before or 15% like-for-like. Revenue less pass-through costs was GBP2.64 billion, up 9.9% or 16% like-for-like. WPP raised its full-year 2021 guidance, expecting like-for-like growth in revenue less pass-through costs of 11.5% to 12%, with a headline operating margin slightly above 14%. "Clients across all sectors and geographies are making significant investments in marketing, particularly in digital media and ecommerce services," said CEO Mark Read. "We are now above 2019 levels in all of our business lines, and with the actions we have taken over the last three years, we are even better positioned for growth."
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Anheuser-Busch InBev reported a stronger performance in the third quarter of 2021, with a rise in profit and revenue leading to an improvement in annual guidance. For the three months ended September 30, the Leuven, Belgium-based brewer reported normalised earnings before interest, tax, depreciation and amortisation at USD5.12 billion, up 3.0% at USD4.89 billion the same period a year before. This was on revenue which grew 7.9% year-on-year to USD14.27 billion from USD12.82 billion, driven by a 3.4% increase in total volumes to 151.6 million hectolitres from 146.6 million hectolitres the prior year on growth from the EMEA, Middle Americas and South America regions. AB InBev said the combined revenue of its global brands - Budweiser, Stella Artois and Corona - increased 5.0% globally and 9.3% outside of their respective home markets in the third quarter.
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German auto maker Volkswagen's operating profit and sales fell in the third quarter, the group said Thursday, as a global shortage in chips hampered production of its vehicles. "The global semiconductor bottlenecks particularly impacted on the business performance of the Volkswagen Group in the third quarter," the group said in a statement, after it was repeatedly made to pause production at some of its plants due to missing chips. The group's operating profit before special items plunged 12% in the third quarter compared with the same "weak" pandemic-blighted period last year to EUR2.8 billion, with its mass-market brands, including VW, suffering an overall operating loss. Deliveries of vehicles were down 24% between July and September compared with the previous year, while demand in key market China "could not be met", VW said.
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Ford Motor late Wednesday lifted its annual guidance, though it did see a slight annual earnings fall in the third quarter of 2021. The Michigan-based carmaker said revenue in the three months to September 30 slipped 4.8% year-on-year to USD35.68 billion from USD37.50 billion. Pretax profit was 32% lower at USD1.89 billion from USD2.76 billion. However, both figures improved quarter-on-quarter. Revenue was up 40% from the second quarter, while pretax profit jumped 74%. "This is the most exciting Ford line-up I've seen, but what matters is that customers love our new products and services – and we're just getting started," Chief Executive Officer Jim Farley said. The company also declared its first payout since the emergence of Covid-19. It will resume quarterly dividends with a 10 cents per share payout.
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eBay reported a slip in profit but flagged better-than-expected third quarter results. The online auction site reported revenue of USD2.50 billion for the three months to the end of September, up 11% from USD2.26 billion a year ago. However, net income slumped 60% to USD264 million from USD664 million and diluted earnings per share fell 57% to USD0.40 from USD0.94. eBay's operating margin decreased to 26.5% from 29.3% a year ago.Annual active buyers declined by 5%, for a total of 154 million, while active sellers were flat at 19 million.
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MARKETS
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European markets were mostly lower Thursday on a big day for company earnings announcements and ahead of a policy announcement by the European Central Bank at 1245 BST. This will be followed by a press conference with President Christine Lagarde at 1330 BST. Royal Dutch Shell was the biggest loser in the FTSE 100 in London, with A shares down 2.3% and B shares down 2.6%.
"There is a lot of mixed news and an uncertain appetite in the marketplace," commented Ipek Ozkardeskaya, senior analyst at Swissquote. "We saw the S&P 500 coming down from an all-time-high, and Nasdaq closing perfectly flat after having traded at a fresh record for the second day in a row. Most of the optimism is due to strong corporate earnings this week, because besides that there is not much of a good news on the wire. First, there is still no deal on Biden's spending plan, then there is news of rising Covid cases in China."
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CAC 40: up 0.3% at 6,769.97
DAX 40: down 0.1% at 15,682.98
FTSE 100: down 0.2% at 7,239.19
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Hang Seng: closed down 0.3% at 25,555.73
Nikkei 225: closed down 1.0% at 28,820.09
S&P/ASX 200: closed down 0.3% at 7,430.40
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DJIA: called up 0.1%
S&P 500: called up 0.1%
Nasdaq Composite: called up 0.3%
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EUR: down at USD1.1583 (USD1.1592)
GBP: up at USD1.3740 (USD1.3726)
USD: down at JPY113.70 (JPY113.80)
Gold: up at USD1,798.90 per ounce (USD1,792.13)
Oil (Brent): down at USD83.75 a barrel (USD85.32)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The Bank of Japan revised down its annual growth forecast and maintained its ultra-loose monetary policy as the pandemic continues to weigh on the world's third-largest economy. In a quarterly report on prices and the economy, the central bank predicted growth of 3.4% for the year to March 2022, down from its previous forecast of 3.8%. "Downward pressure stemming from Covid-19 is likely to remain on service consumption, and exports and production are expected to decelerate temporarily due to supply-side constraints," the report said. "Thereafter, however, with the impact of Covid-19 waning gradually, mainly due to widespread vaccination, the economy is likely to recover." Reflecting this more positive longer-term outlook, the bank revised up its growth forecast for the fiscal year to March 2023 to 2.9% from the previous estimate of 2.7%. The BoJ maintained its longstanding target of two-percent inflation, which remains far off despite years of efforts and prices surging globally. The unchanged policy decision had been widely expected by market-watchers.
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The White House and Democratic congressional leaders raced Wednesday to resolve lingering disputes on their giant social spending plan before President Joe Biden flies overseas – although several lawmakers signalled a deal by day's end looked impossible. House Speaker Nancy Pelosi wrote to colleagues that Biden's domestic agenda was moving "closer to passing," but a key centrist senator later dismissed a new tax on billionaires to help pay for the USD1.5 trillion to USD2 trillion package as a non-starter. Biden hopes to use passage of the Build Back Better Act as evidence of the US leading the world on global warming and other issues as he heads to a G20 summit in Rome and United Nations climate gathering in Glasgow. The mammoth package is crucial to another big win Biden had hoped to secure before jetting off to Rome – a USD1.2 trillion infrastructure bill to transform US roads, bridges and broadband access.
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A decision by the US to ban China Telecom from operating in the country on national security concerns is "malicious suppression", Beijing said, warning it would damage a tentative thaw in relations. Tensions are high between the world's two biggest economies on a plethora of fronts, including trade, human rights, Taiwan and the Covid-19 pandemic. Earlier this week Washington ordered China Telecom Americas to discontinue its services within 60 days – ending nearly two decades of operations in the country and piling further strain on relations between the superpowers. The US Federal Communications Commission said China Telecom's "ownership and control by the Chinese government raise significant national security and law enforcement risks".
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China placed a third city under lockdown to tackle Covid-19 numbers, with around six million people now under orders to stay home as Beijing chases zero cases before the upcoming Winter Olympics. The country has taken a zero tolerance approach to the virus since it first emerged in central China in 2019, stamping out emerging flare-ups with border closures, targeted lockdowns and strict quarantines. The resurgence prompted officials this week to lock down Lanzhou city – with a population of over four million – and Ejin in the Inner Mongolia region. After confirming one new case, authorities in Heihe in Heilongjiang province followed suit Thursday, ordering people to stay at home and forbidding residents from leaving the far northern city except in emergencies, according to a local government statement.
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Australia's conservative government proposed laws requiring voters to prove their identity when casting a ballot, a move slammed by the opposition as an attempt at voter suppression and to mimic the policies of former US president Donald Trump. Ahead of upcoming national elections due by May next year, the government introduced the "voter integrity" bill to the House of Representatives, saying it would prevent potential fraud and multiple voting. The legislation would require voters to show a proof of identity document – such as a photo ID, birth certificate, credit card or bank statement – at polling booths on election day. Voting is compulsory for Australians aged over-18. Voters simply provide their name and address to a polling station worker before casting their ballot. Opposition leader Anthony Albanese of the centre-left Labor Party said the government was trying to "channel the US far right" by attempting to introduce voter suppression measures before the upcoming election.
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The impact of Brexit on the UK economy will be worse than that caused by the pandemic, according to the chairman of the UK fiscal watchdog. Richard Hughes said the Office for Budget Responsibility had assumed leaving the EU would "reduce our long run GDP by around 4%", adding in comments to the BBC: "We think that the effect of the pandemic will reduce that (GDP) output by a further 2%." Gross domestic product – or GDP – is a measure of the size of the economy. "In the long term it is the case that Brexit has a bigger impact than the pandemic", Hughes told the broadcaster hours after the OBR responded to Chancellor Rishi Sunak's latest budget by saying it expected inflation to reach 4.4% while warning it could hit "the highest rate seen in the UK for three decades".
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Spanish consumer prices rose at their fastest pace since 1992 in October on the back of higher energy prices, official data showed. Inflation climbed year on year by 5.5%, accelerating from a 4.0% increase in September, national statistics institute INE said. That is its fastest pace in 29 years, since September 1992, when the rate was 5.8%. The surge in inflation in the eurozone's fourth-largest economy was due largely to a spike in the price of electricity, and to a lesser extent to higher gas prices, it added.
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Sunak was criticised for delivering a government budget light on environmental measures, and with a cut to taxes for domestic flights, just days before the UK hosts key Cop26 climate talks. Sunak announced a 50% cut in air passenger duty for flights within the UK, along with an increase in the tax for those flying more than 5,500 miles, and a continued freeze on fuel duty for motorists in the face of rising prices. He told members of Parliament that the net zero strategy announced last week to eliminate UK climate emissions was investing GBP30 billion to create the new green industries of the future, championed London as a centre for green finance, and confirmed he would be hosting finance ministers at Cop26. But the lack of environmental focus in the speech, given four days before the UK plays host to the crucial UN summit aimed at driving greater climate ambition to avoid dangerous global warming, sparked immediate anger.
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The Group of 20 large industrialized nations wants to call for "immediate action" to limit global warming to 1.5 degrees at this weekend's summit in Rome. But delegations preparing the summit have not yet agreed whether the G20 will also commit to a common goal of net zero emissions of greenhouse gases or carbon dioxide neutrality by 2050, according a draft of summit's final declaration seen by dpa. The G20 countries together are responsible for more than 75% of all greenhouse gas emissions.
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The White House has responded sceptically after Iran's chief negotiator announced that Tehran was ready to return to nuclear negotiations in Vienna by the end of next month. Ali Bagheri, Iran's deputy foreign minister and chief negotiator for the talks, in a Twitter posting said Iran has agreed to restart negotiations by the end of November and a date for a resumption of talks "would be announced in the course of the next week". White House press secretary, Jen Psaki, said administration officials were aware of Bagheri's comments but were waiting for European officials to confirm that Iran is indeed ready to resume talks.
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By Tom Waite; thomaslwaite@alliancenews.com
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