General Motors Co yesterday swung to a quarterly profit thanks to high-margin pickup trucks and crossovers in the US market plus cost cutting and maintained its full-year 2019 earnings forecast, lifting its shares 1.5% in early trading.
All of the No 1 US automaker’s profit came from North America, where those lucrative models helped overcome an overall drop in the number of vehicles it sold. The company’s operations in China and South America added nothing to the company’s bottom line in the quarter.
GM sold fewer vehicles in China in the fourth quarter and the company said that weak currencies in South America had also impacted its results.
“Our outlook for China overall is for the auto industry to be flat year over year,” Chief Financial Officer Dhivya Suryadevara told reporters. “If you take a look at some of these economic indicators coming out of China, there are early signs of stabilisation.”
Buckingham Research analyst Joseph Amaturo said in a research note he remains concerned longer-term about vehicle pricing in China and North America, as well as demand in China.
If China slumps, GM would be challenged to hit its financial targets, he said.
US new vehicle sales are expected to drop in 2019 due to rising interest rates and competition from a surfeit of cheaper, nearly-new used vehicles on the market.
GM reported fourth-quarter net income of $2.1bn, or $1.40 per share, versus a loss of $5.2bn, or $3.65 per share, a year earlier.
Excluding one-time items, it earned $1.43, above the $1.22 analysts polled by Refinitiv IBES had expected.
GM reported a fourth-quarter loss in 2017 to adjust for an overhaul of the US tax system. Excluding those charges, the automaker had reported net income of $2.4bn.
Spotify posted its first ever quarterly operating profit yesterday driven by a strong gross margin and slower-than-expected headcount growth, but it warned of a loss in 2019 and issued modest forecasts which disappointed investors.
The world’s most popular paid music streaming service, which has said it prioritises growth over profitability, posted fourth-quarter sales in line with expectations and said it had seen growth in most of its markets.
The company, which had a gross profit margin of 26.7% in the fourth quarter, said it expected this to deteriorate to 22.5-24.5 in the first quarter and to 22-25% in 2019, compared with analysts expectations of 26% for the year.
Its other guidance for 2019 was also cautious.
Spotify said it expected a loss of €200mn-360mn in 2019 and that sales would grow 21-29%. Some analysts have highlighted Spotify’s slowing rate of annual revenue growth after sales grew 29% in 2018, down from 39% in 2017 and 52% in 2016.
“Investors overall are worried about global growth and all companies which are growth-cases and give weak guidance tend to see falling share prices,” said Tomas Otterbeck, an analyst at research firm Redeye. Operating in nearly 80 countries, Spotify said its total number of users, including of its ad-supported service, grew to 207mn in 2018, up from 191mn at the end of September.
Biofuel producer and oil refiner Neste reported a bigger than expected fourth-quarter profit yesterday after seeing robust demand for its renewables fuels, which it expects will continue to grow.
The Finnish company, which produces diesel and other fuels from renewable materials at plants in Singapore and Rotterdam, said sales at its renewables business in the first quarter would likely surpass those of the fourth quarter of 2018, adding that utilisation rates would be high.
Chief executive Peter Vanacker said the company’s main growth drivers going forward would be rising jet fuel sales, and marine fuel sales as shipping companies prepare for new sulphur emissions rules coming into force in 2020.
“In 2018, we have already produced the first 5,000 tonnes of renewable jet fuel and we see a big market coming up in the aviation industry,” Vanacker told Reuters in a phone interview.
Neste’s cooperation with furniture giant Ikea on bio-based plastics, announced last June, would be another growth area, he said.
Neste, which also has two conventional oil refineries in Finland, said margins for its oil products business would be low in the first quarter due to a weak gasoline market, but would strengthen towards the end of that period.
Operating profit at its renewables operations rose to €281mn, beating analysts’ forecasts in the poll, which ranged from €198mn to €258mn.
Sales of shingles vaccines boosted GlaxoSmithKline’s profits in the final quarter of 2018, allaying investor concerns about Britain’s biggest drugmaker’s prospects beyond its blockbuster Advair asthma drug.
However, the drugmaker cautioned that full-year earnings for 2019 would decline between 5% and 9% because of fresh competition for Advair from Mylan NV’s generic treatment, which won approval from US regulators last month, and the impact of its $5.1bn Tesaro acquisition.
Sales of Shingrix, the company’s Shingles vaccine launched in 2017, more than doubled in the quarter to £221mn, while Advair sales fell 20% to £647mn, although that was still more than the £592mn expected by analysts.
GSK has been streamlining operations and spinning off or selling units, including its consumer health division, in order to focus on expanding its drug pipeline and developing vaccines.
The moves come as British companies face the many unknowns related to the UK’s impending exit the European Union.
GSK, which is heavily dependant on international markets, said that there was “considerable uncertainty” about Brexit and warned that leaving the bloc without a exit deal would be a bad outcome. Britain is due to leave the EU on March 29, and with Prime Minister Theresa May still battling to get parliamentary approval for her exit plan, businesses are spending millions of pounds to prepare for a “no-deal” exit.
BNP Paribas yesterday reduced its profit target for 2020 and said it planned to cut €350mn in costs from its corporate and investment bank after weak financial markets hit revenues in the final quarter of 2018.
France’s largest listed bank now expects a return on equity of 9.5% in 2020, down from a prior target of above 10%. The bank also cut its revenue growth target to 1.5% per year between 2016 and 2020, from 2.5% previously.
The downgrades came after revenue fell 1.5% in 2018 to €42.52bn ($48.5bn), dragged down by a 40% plunge in revenues at the bank’s global markets business.
This business made a loss of €225mn, marking its first quarterly loss since the 2008 financial crisis.
Yann Gerardin, BNP Paribas’ head of corporate and investment banking, said the fourth quarter was a low point for the division, but the business would remain under pressure.
“Our conclusion is that this is a structural evolution to which we have to respond through the acceleration of our transformation,” he said.
The bank’s plans for €350mn in cost cuts comes on top of €500mn in cuts already announced three years ago.
BNP Paribas will also sell or close unprofitable or subscale businesses, as it has already done with proprietary trading and US commodities.
US engine maker Cummins Inc posted lower-than-expected quarterly profit and forecast full-year sales below analysts’ estimates yesterday, raising concerns of a slowdown in truck sales this year.
Shares of the company, whose major customers include PACCAR Inc, Daimler AG and Navistar International Corp, fell 2.6% to $145.99 in pre-market trading.
An expanding US economy has fuelled freight demand, driving heavy truck sales to hit a 10-year high at 189,000 units in North America in 2018, according to ACT Research, the industry body tracking commercial vehicle market.
However, slowing manufacturing and construction sector in the US could lead to lower capital spending by companies, translating into plateauing of freight growth in 2019, which could hurt Cummins’ revenues.
The company forecast 2019 sales growth to be flat to up 4%, which was largely below analysts’ expectations of an increase of 2.7%, according to IBES data from Refinitiv.
Excluding items, the company earned $3.48 per share in the quarter ended December 31, missing the Wall Street’s estimate of $3.81 per share.
Vodafone Idea reported yesterday its second quarterly loss since Vodafone merged its Indian operations with Idea Cellular in August last year, though the figure was smaller than expected.
The loss after tax was Rs50.05bn ($699.49mn) in the quarter ended December 31, the company said in a statement.
Competition in India’s telecoms industry has ramped up since Reliance Jio Infocomm, owned by Asia’s richest man Mukesh Ambani, entered the market in 2016, leading to huge price cuts across the industry.
That resulted in lower average revenue per user (ARPU) and rising debt. While Jio reported a 65% jump in quarterly profit, rival Bharti Airtel posted a 72% profit decline.
The shake-up led to consolidation, with London-based Vodafone Plc merging its Indian operations with Idea Cellular last year in a deal worth $23bn.
Revenue from operations in the third quarter was Rs117.65bn, while its average revenue per user (ARPU) came in at Rs89.
The Mumbai-based company said its total expenses for the quarter were Rs182.26bn, offset in part by a Rs20.01bn tax gain.
German food delivery firm Delivery Hero beat 2018 revenue forecasts despite raising them twice during the year, sending its shares as much as 7% higher yesterday.
The market for on-demand food delivery has exploded in the last few years, and Delivery Hero — the biggest company in the sector — believes there is €500bn ($569bn) of untapped potential globally.
The company, whose competitors include Takeaway.com, Deliveroo, and UberEATS, said revenue jumped 56% to €792mn last year, beating its latest guidance of 780-785mn and helped by a doubling in revenue in its Middle East and North African region.
The company, which operates in more than 40 countries, in December sold its delivery operations in Germany to Takeaway.com, settling a struggle for supremacy in that market.
Delivery Hero, which does not expect to be profitable at the core earnings (EBITDA) level in 2019 as it focuses on expansion and investment, reiterated on Wednesday the financial targets announced with that deal. Delivery Hero expects revenues to reach €1.08bn-1.15bn this year, despite the sale of the German business.
Vinci struck a confident note over 2019 despite anti-government “yellow vests” protests in France that hit traffic on its motorways in the final quarter of 2018. Europe’s biggest construction and concessions group predicted a further rise in net profit and revenue after posting 2018 earnings that met market forecasts.
The French group, which bought a majority stake in Britain’s Gatwick airport in December, also said it was interested in investing in Toulouse Blagnac airport, but “not at any price”. Net income rose 8.6% to €2.983bn ($3.40bn) in 2018, while operating profit grew 8.5% to 4.997bn.
Revenues rose 8.1% to 43.519bn. All those results were in line with forecasts. Vinci raised its dividend to €2.67 from €2.45 in 2017, and its shares were flat in early session trading.
Vinci has been expanding into faster-growing and more profitable concessions such as airports and motorways, as well as in energy engineering.
The company, which already runs 45 airports in 12 countries, bought a majority stake in Britain’s Gatwick airport in December for £2.9bn. Gatwick will become part of the group in the second quarter of 2019.
Swedish industrial technology group Hexagon said it was confident about growth prospects in China despite signs of its economy slowing as it reported solid quarterly earnings, sending its shares higher yesterday.
Investors have been concerned about Hexagon’s exposure to an economically weaker China, which accounts for around a sixth of group sales, as well as slumping car sales and a slowdown in the electronics industry.
Speaking about the whole group, Hexagon chief executive Rollen said: “Despite the uncertainties surrounding the world economy, we are confident in our ability to continue to grow and strengthen our profitability”. Rollen told a conference call that the electronics industry had weighed on growth in China in the fourth quarter, but said it had seen continued strong development in areas such as automotive, aerospace and manufacturing.
Organic sales for the group rose 5%, in line with analysts’ expectations.
Organic growth in China was 5 %. The maker of measurement and positioning systems and software reported operating earnings at the group of €271mn ($308mn) in the fourth quarter, up from €246mn a year earlier, and in line with the mean forecast in a poll of analysts.
Austrian oil and gas group OMV said yesterday it more than doubled profits last year and would hike its dividend on the back of higher sales volumes in Russia and the United Arab Emirates.
OMV said in a statement that its bottom-line net profit soared by 134% to €1.993bn ($2.3bn) in 2018.
Underlying profit, or clean current cost of supplies earnings, climbed by 23% to €3.646bn, the statement said.
In the fourth quarter alone, underlying profit jumped by 53% to €1.053bn.
“This was largely attributable to higher sales volumes from Russia, increased production from Libya and the production start-up in the United Arab Emirates,” OMV said.
Full-year sales grew by 13% to €22.93bn and were up 35% at €6.64bn in the fourth quarter, “primarily driven by higher oil, gas and product prices, as well as higher sales volumes.”
In view of the group’s better-than-expected performance, management said it would propose raising the dividend for 2018 to €1.75 per share from €1.50.
Nordea, the Nordic region’s biggest bank, reported a 6% drop in fourth-quarter revenue yesterday, dashing analysts’ hopes of an improvement and overshadowing a smaller-than-expected fall in operating profit thanks to cost cutting.
Interest income, the bank’s most important income line, has been under pressure over the past year due to fierce competition in mortgages and household loans across the region, while Nordea has been preoccupied with bringing down spending.
“The results for 2018 are not where we want them to be, we have seen a challenging revenue development,” CEO Casper von Koskull said in a conference call. “We have been inwardly focused.”
Operating profit at Nordea, the Nordic region’s biggest mortgage lender, fell 13% from a year earlier to €689mn ($785mn), beating the mean forecast of €656mn in a Reuters poll of analysts.
However, the result was helped by a one-off correction of regulation fees. “The P&L was a bit mixed, but overall fairly neutral vs expectations as we see it.
But expectations were set low ahead of the quarter, so with that in mind it’s hard to get very excited by the small earnings beat today,” Arctic Securities analyst Roy Tilley said.
Daimler cut its dividend as fourth-quarter operating profit fell 22% as trade wars and rising costs for developing electric and self-driving cars hit profits at Mercedes-Benz cars, the company said yesterday.
Daimler said the return on sales at Mercedes-Benz cars fell to 7.3% in the fourth quarter from 9.5% in the year-earlier period.
This, combined with a cut in the dividend from €3.65 a share to €3.25, disappointed analysts and sent shares 2% lower to €52.02, underperforming Germany’s blue-chip DAX index which was trading 0.22% lower.
“Daimler urgently needs efficiency measures,” Evercore ISI analyst Arndt Ellinghorst said on Wednesday.”At the moment the profitability of both Mercedes-Benz passenger cars and trucks lags behind peers.” Daimler said it was working on “countermeasures” to increase profits but could not mention details about possible cost cuts because these were still being worked out. For 2019 Mercedes-Benz Cars expects to achieve a return on sales of between 6% and 8% and a return on sales of between 5% and 7% for Mercedes Vans, Daimler said.
German reinsurance giant Munich Re reported yesterday net profits six times higher in 2018 than the year before, offering shareholders a higher dividend despite a year marked by natural disasters. The Munich-based group, whose main business is cushioning other insurers against risk, booked net profits of €2.3bn ($2.6bn) last year — up from just 375mn in a catastrophe-plagued 2017.
Its result was slightly lower than forecast by analysts surveyed by Factset. “We increased our profit and achieved our result target — despite the volatile capital markets and high losses from natural catastrophes in the fourth quarter,” chief financial officer Christoph Jurecka said in a statement.
Munich Re paid out around €440mn for losses in the devastating wildfires that struck California in the autumn, and 430mn after Typhoon Jebi struck Japan in September.
In total, the group paid out almost €1.3bn for natural disaster damage in 2018, with 2.2bn overall reimbursements compared to 4.3bn the previous year.
Dutch bank ING posted yesterday a slight fall in profits for 2018 following a multi-million-euro settlement with Netherlands authorities in a money laundering investigation.
Earnings fell by 4.1% to €4.7bn ($5.4bn) last year despite growth in its client base, the Amsterdam-based lender said in a statement.
In September ING paid a huge €775mn to settle a criminal investigation into money laundering which found that ING had failed to take adequate measures to prevent money laundering.
“This past year has been filled with both achievements to be proud of and challenges to overcome and learn from,” said ING chief executive officer Ralph Hamers. He said the bank was pushing ahead with a “know your customer” programme to ensure similar lapses did not happen in future.
Despite the scandal, ING said it had expanded its client base by 1mn customers in 2018 to reach 38.4mn worldwide ING posted a 2.2% rise in turnover for 2018 to €18bn.
The money-laundering row saw ING axe its chief financial officer Koos Timmermans after a two-year probe by Dutch authorities that found many white-collar crime suspects held accounts at the bank.
Norwegian oil company Aker BP posted a smaller-than-expected increase in fourth-quarter earnings due to higher production costs and lower oil prices, but raised its dividend.
The company said yesterday earnings before interest and taxes rose to $403mn from $305mn in the same quarter a year earlier, lagging the $491mn expected by analysts in a Reuters poll.
“Revenues were impacted by low oil prices at the end of the quarter,” Aker BP said in a statement.
The company said production costs rose to $13 a barrel in the last quarter, partly due to its increased stakes in the Valhall and Hod fields and higher maintenance during the year.
Full-year production costs were $12.1 a barrel, in line with previous guidance.
Aker BP forecast these expenses would rise slightly in 2019 due to maintenance and modifications, especially at the Valhall and Ula fields. The company, 30% owned by BP, also said it would pay a quarterly dividend of $0.5207 per share amid strong cash generation from output growth.
This was more than the $0.38 anticipated by analysts.
Norwegian oil and gas firm Equinor raised its quarterly dividend and plans to boost capital spending in 2019 as it develops new fields in Brazil, the company said yesterday.
Equinor’s adjusted operating earnings before interest and tax rose to $4.39bn in the fourth quarter from $3.96bn during the same period of 2018, lagging a forecast of $4.8bn in a Reuters poll of analysts.
For the full year 2018, adjusted earnings rose 42% year-on-year to $18bn.
Equinor reported lower-than-expected results as higher operational and exploration costs dragged down its operating profit in Norway, Biraj Borkhataria at RBC Capital Markets said.
“We suspect the market may react negatively initially to the earnings miss, with performance thereafter relying on Equinor’s ability to provide the market with confidence in its financial framework over the medium term, with implications for higher shareholder returns over time,” he added.
Equinor said it planned to pay a dividend of $0.26 per share for the fourth quarter, an increase from the $0.23 paid in recent quarters.
Toyota Motor Corp’s quarterly profit edged up as demand for its bread-and-butter car models from cost-conscious Chinese buyers helped offset bleak North American sales, although the firm’s shares slipped as it cut its annual net income outlook.
Japan’s biggest automaker attributed the smaller forecast to unrealised losses from equity investments, but, in an indication that business was still strong, it kept its full-year operating profit view unchanged at ¥2.4tn ($22bn). The automaker posted Asian sales of 464,000 units in the third quarter, up 15% from a year earlier, as strong demand in China for its cheap-and-cheerful Corolla and Levin sedans continued into the end of 2018.
Popularity of its luxury Lexus brand also helped it buck a broader slowdown in the world’s biggest auto market.
Toyota’s global sales rose 2.8% to 2.71mn units with Asia making up for the slack in North America, where its sales slid 7.5% to 680,000 units.
“When one region is underperforming, other regions can compensate for that weakness.
Likewise, when some vehicle models are underperforming, other models can compensate,” Executive Vice President Shigeki Tomoyama told reporters at a briefing.
“It’s a work in process, but as we diversify our markets and our models, little by little we’re starting to see this happen.”
Toyota shares dropped as much as 1.5% yesterday, but recovered slightly to end down 0.7% in a broader market that was mostly steady. Auto sales in China last year contracted for the first time since the 1990s, hurt by the phasing out of purchase tax cuts on smaller cars and the trade war.
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