Toyota announces $1.8bn share buyback after strong Q2
November 07 2019 10:02 PM
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Toyota Motor Corp plans a $1.8bn share buyback, Japan’s biggest automaker said yesterday, after beating quarterly forecasts on higher global vehicle sales and an improved performance in North America.
Operating profit rose 14% to ¥662.3bn ($6.1bn) for the three months to September 30 as Toyota enjoyed its strongest second quarter since 2015.
The profit beat an average forecast of ¥592.3bn, based on estimates from nine analysts, Refinitiv data showed.
It sold 2.75mn vehicles globally, up from 2.18mn a year earlier.
Sales in North America, Toyota’s biggest market, rose 5.6%, while sales in Asia climbed 3.4%. Operating profit in North America, which has been a sore spot for Toyota over the past two years, more than doubled helped by less discounting.
“New models of the RAV4 and the Corolla, as well as last year’s Camry, have been well received in North America, so we’ve been able to lower incentives,” operating officer Kenta Kon told reporters at a briefing.
Toyota said it would buy back up to $1.8bn worth of its common stock, or 34mn shares, by end-March.
It maintained its forecast for operating profit in the year to March to fall 2.7%, after three years of gains, as it expects a strengthening yen to weigh.
It lowered its forecast for annual global car sales by 2.7% to 10.7mn units, weighed by weakening demand in India, Indonesia and Thailand.
Still, it expects record sales topping last year’s 10.6mn.
Toyota also said higher R&D investments and rising labour costs had made cost-cutting a challenge, but it managed an additional 45bn yen in cost savings during the quarter.
Executive Vice President Mitsuru Kawai told reporters that the company was looking at every possible way to cut production costs and improve efficiency at its factories, including scraping out “every last drop” of vehicle body paint from the can before opening a new one.
“(Each drop of paint) on its own would represent only a fraction of a yen in savings, but if we add up these efforts we can build a savings effect,” he said.


UniCredit 
UniCredit yesterday opened the door to its first share buyback in more than a decade after solid third-quarter earnings and a boost to the bank’s capital.
Italy’s biggest bank is beginning to reap the benefits of years of restructuring under chief executive Jean Pierre Mustier, who took over in mid-2016 and embarked on a balance-sheet clean up, cutting costs and shedding non-core assets.
As part of this strategy, UniCredit on Wednesday sold its 8.4% stake in Mediobanca, which had made it the biggest shareholder in the Milanese merchant bank.
Mustier said contacts with the European Central Bank showed the regulator was willing to authorise share buybacks if lenders had enough capital.
Core capital rose to 12.6% of assets in July-September helped by the sale of UniCredit’s remaining stake in online bank Fineco.
In the third quarter, strong trading gains, higher fees and falling loan losses offset a shrinking interest income to drive UniCredit’s net profit to €1.1bn.
Analysts had looked on average for a profit of €1.01bn on revenue of €4.57bn, based on a consensus compiled by the bank.
After shedding €4bn in impaired home mortgages, UniCredit said it had lowered the share of problem loans in its total lending to 5.7%, the best level among leading Italian banks.
As it works to reduce its domestic exposure, UniCredit also said it had cut its holdings of Italian government bonds by €3.6bn in the quarter.


Ralph Lauren
Strong demand for Ralph Lauren Corp’s Polo shirts and tweed jackets in China helped the high-end apparel retailer beat quarterly profit estimates yesterday, sending its shares up nearly 14%.
Ralph Lauren, like other high-end fashion companies from New York, Paris and Milan, has been expanding in China, where a weakening yuan currency has pushed more wealthy domestic consumers to splurge at home rather than while traveling abroad.
Apart from opening more stores in the world’s second-largest economy, the over 50-year-old company has also partnered with local e-commerce platforms such as Alibaba’s Tmall and WeChat to boost online sales.
Chief financial officer Jane Nielsen said on a post-earnings call that revenue from Asia, which rose 4%, was driven by the company’s online business expansion, store openings and marketing initiatives featuring local celebrities.
Revenue in constant currency terms rose 22% on the Chinese mainland in the second quarter.
However, revenue from Hong Kong fell 27% due to ongoing protests.
A marketing strategy focused on Instagram and new pop-culture-based apparel, including a collection celebrating the 25th anniversary of the hit TV show “Friends”, have also helped Ralph Lauren tap a new generation of customers and boost sales.
The company’s adjusted net income rose 6.5% to $198mn, or $2.55 per share, in the quarter ended September 28.
Analysts had expected a profit $2.39 per share, according to IBES data from Refinitiv.
Net revenue rose about 1% to $1.71bn, beating analysts’ average estimate of $1.69bn.


HeidelbergCement
HeidelbergCement, the world’s No 2 cement maker after LafargeHolcim, warned yesterday of a weak end to the year, sending its shares to the bottom of Germany’s benchmark DAX index.
“We’re observing a weakening of the global economy in our business,” said chief executive Bernd Scheifele, who will step down in February after 15 years at the helm of the company, adding there had not been a recovery in October.
HeidelbergCement’s third-quarter profit from current operations was still up 3% at €835mn, helped by cost cuts, including the slashing of up to 500 administrative jobs around the world.


Commerzbank
Germany’s second-largest lender Commerzbank yesterday said it was mulling charging wealthy private customers for their deposits, as it seeks to pass on the hurt from the European Central Bank’s negative interest rates.
Like all eurozone banks, Commerzbank is smarting from the ECB’s record-low interest rates which aim to encourage spending and investment, but have also badly dented banks’ profits.
Adding to their woes, the ECB in September pushed the deposit rate deeper into negative territory, from -0.4% to -0.5%.
That means the ECB now charges lenders more than ever before for parking their excess cash with the central bank, although it also introduced exemptions to ease the burden on some banks.
Commerzbank, in which the German government took a 15% stake during the financial crisis, was one of the first German lenders to start charging corporate clients for keeping their deposits.
Switzerland’s largest bank UBS announced in July that it would start charging a rate of -0.75% for deposits of more than two million Swiss francs (€1.8mn). 
Commerzbank yesterday reported a net profit of €294mn in the third quarter of 2019, up 35% year-on-year and in line with preliminary results announced in October.
But the group expects net profit for the year to fall below 2018’s level as it grapples with the ECB’s ultra-low interest rates, higher tax rates and “worsening global trade conflicts”. Last year, Commerzbank booked a net profit of €865mn.


Lufthansa
Lufthansa yesterday said it was slashing 700 to 800 jobs at its Austrian Airlines subsidiary, more than a tenth of the workforce there, to cut costs in the face of “brutal competition” from rival carriers.
Lufthansa CEO Carsten Spohr said the cull would help Austrian Airlines, which could end the year in the red, achieve “savings of €90mn ($100mn) per year” from the end of 2021.
The small carrier was locked “in the mother of all battles” in Vienna with low-cost rivals Ryanair and Wizz Air, Spohr told reporters in a conference call after announcing a rise in the group’s third-quarter revenues.
The planned job cuts amount to a loss of 700 to 800 full-time jobs by the end of 2021, out of a total workforce of 7,000 people, the statement added.
Most of the job losses will come from not replacing departing workers.
The carrier booked a net profit of €1.15bn ($1.27bn) between July and September, up 4% year-on-year.
But the jump was mainly thanks to accounting effects, with the group’s operating profit adjusted for some one-off items, actually falling eight% to €1.3bn.
Lufthansa said it had faced higher than expected fuel costs that were only partially offset by cost-cutting efforts. And like rival airlines it was grappling with “a general slowdown in the global economy”, it said in a statement.
Revenues for the period were up 2% to €10.2bn.


Deutsche Telekom
German communications giant Deutsche Telekom reported a jump in quarterly profits yesterday but cut its dividend for 2019, partly blaming “unexpectedly high” costs in the rollout of Germany’s 5G network.
The Bonn-based network operator said net profit from July to September jumped 23% to €1.37bn ($1.5bn) compared with a year earlier.
Quarterly revenues were up 4.8%, allowing the group to breach to 20-billion-euro mark “for the first time in the company’s history”.
“Earnings increased in all areas of the group in the first nine months of this year — with some of that growth in the double digits,” CEO Tim Hoettges said in a statement.
Nevertheless, the group announced it would lower its dividend payouts this year to €0.60 per share, down from €0.70 last year.
T-Mobile once again drove growth at Deutsche Telekom in the third quarter, gaining 1.7mn new customers to top 84mn and generating revenues of $11.1bn.
Looking ahead, the group raised its 2019 outlook saying it now expected underlying, or operating profits adjusted for special items, of €24.1bn — up from 23.9bn previously.


Banco do Brasil
Banco do Brasil yesterday posted a 33.5% rise in third-quarter profit helped by higher consumer lending and fee income.
Recurring net income, which excludes one-time items, rose to 4.543bn reais ($1.11bn) from 3.402bn reais and topped the 4.356bn expected by analysts, Refinitiv estimates showed.
As its profit gained momentum, the bank decided to set a new higher target for 2019 recurring net income.
Banco do Brasil estimates it will grow between 16.5% and 18.5% this year, above a previous 14.5%-17.5% target range.
Amid absent loan book growth, Banco do Brasil’s management decided to tighten its belt to improve efficiency and maintain profitability.
The bank has also moved towards higher-margin credit lines, such as consumer loans.
So far, the bank seems to be on the right track.
Its return on equity reached 18%, up 0.4 percentage points from the previous quarter.
The bank’s loan book remained stable in the quarter, despite growth in consumer lending, as corporate loans declined for an fourth straight quarter, reflecting the effort to shift resources to higher-margin consumer lending.
This strategy led its third-quarter net interest income to rise 4.9% from a year earlier.
Loans in arrears for over 90 days stood at 3.47%, slightly up from the previous quarter.
Profit was also helped by fee income, which went up 8.7% from a year earlier.


Munich Re
German reinsurance giant Munich Re yesterday lifted its full-year goals after a surge in third-quarter profits despite costly payouts for hurricane Dorian and typhoon Faxai.
Between July and September the group booked a net profit of €865mn ($958mn), compared with €483mn a year earlier.
Premium takings for the period, which are equivalent to revenues in the insurance sector, reached €13.7bn, up more than seven% year-on-year.
The group — which covers insurance firms against their risks — said it had paid out €981mn in claims, slightly more than last year and mainly because of large natural catastrophes.
The most expensive disasters were typhoon Faxai, which hit Tokyo in September and cost Munich Re €380mn, followed by hurricane Dorian, which battered the Bahamas that same month and cost the firm €360mn.
The damage done by typhoon Hagibis in Japan last month is expected to prove even more costly, Munich Re warned as it looked ahead to the final quarter of the year.
Given its “positive performance through the first nine months”, the group said it now expected annual net profits “exceeding” its earlier target of €2.5bn.
Revenues, meanwhile, are expected to come in at “more than” the €49bn goal it had previously set.


ArcelorMittal
ArcelorMittal, the world’s largest steelmaker, cut its forecasts for demand in its main US and European markets but reported a higher-than-expected core profit.
The Luxembourg-based company said yesterday its third-quarter core profit (EBITDA), the figure most watched by the market, was $1.06bn, compared with the average forecast in a company poll of $930mn.
ArcelorMittal said global steel consumption, including the impact of inventory changes, would grow in 2019 by 0.5-1.0%, towards the lower end of its previous guidance of 0.5-1.5%. Reporting a net loss of $539mn for the third quarter — a second straight quarter in the red — it said it now expected a reduction in US steel demand due to a weak auto sector and a slowdown in demand for machinery.
Non-residential construction was healthy, however.
It also said the contraction in steel demand in Europe would be worse than expected due to a sluggish auto sector and slowing construction.
ArcelorMittal has already idled a series of steel plants in Europe.
The company did upgrade its forecasts for the former Soviet Union and China, the world’s largest producer and consumer of steel.
But ArcelorMittal ships almost half its steel to European customers, around a quarter to the United States and has negligible business in China.
The company, which produces around 5% of global steel, said it now expected its own shipments to be stable this year, having previously forecast a year-on-year increase.
Chief executive Lakshmi Mittal said in a statement that ArcelorMittal had anticipated a tough market as low prices and high raw materials costs squeezed margins.
The company’s net debt, a key metric for markets, increased by $0.5bn to $10.7bn.
It has a target to pull it below $7bn.
The company said it would release at least $1.4bn of working capital in the fourth quarter to enable it to reduce net debt further.
Cash needs and capital expenditure would be lower than previously expected.


Baidu
Baidu Inc reported better-than-expected third-quarter profit and revenue as more people signed up with the company’s video streaming platform iQIYI, sending the Chinese search engine company’s shares up 5% after market.
Baidu has been trying to cut its dependence on its core search business, which accounts for three-quarters of the company’s revenue.
The company has had limited success so far with its cloud services and artificial intelligence businesses, but its listed subsidiary iQIYI, a Netflix-like video service, is popular with young people.
Third-quarter revenue from iQIYI, which competes with Alibaba-backed Youku and Tencent Holdings’ Tencent Video, rose nearly 7% from a year earlier to 7.4bn yuan ($1.06bn), as the service crossed 105.8mn subscribers in September.
IQIYI’s shares rose 4% in extended trading.
A relatively new bet — offering mini-programmes within the Baidu App to boost traffic — is gathering steam as well.
Traffic to the app surged 25% in the third quarter, the company said in a statement. “The changes we initiated this year are paying off,” Baidu chief executive Robin Li said in an internal letter reviewed by Reuters.
But revenue from Baidu’s core business fell 3% in the quarter ended September 30, weighing on overall sales that were flat from a year earlier at 28.08bn yuan but ahead of the analyst estimate of 27.49bn yuan, according to Refinitiv data.
Baidu reported a net loss of 6.37bn yuan in the quarter mainly due to losses from the company’s equity investments, versus a profit of 12.40bn yuan a year earlier.
Excluding these losses and other one-time items, Baidu earned 12.61 yuan per American depository share (ADS), beating estimates of 7.88 yuan per ADS.
Baidu, like other Chinese internet companies, is dealing with tightening regulation even as the overall economy slows.
These issues were for now weighing on Baidu’s revenue, Li said on a post-earnings call.
Baidu, whose search engine dominates the market in China, forecast fourth-quarter revenue between 27.10bn yuan and 28.70bn yuan.
Analysts expect 27.52bn yuan.
The company’s ADS, which have lost nearly a third of their value this year, were up about 5% at $112.74 in extended trading.


Qualcomm
Qualcomm Inc forecast current-quarter profit above Wall Street expectations and beat estimates for fourth-quarter revenue from its closely watched licensing business, sending its shares up 5% in extended trading.
The world’s biggest supplier of mobile phone chips expects between 1.75bn and 1.85bn smart devices with modem chips, including 175mn to 225mn 5G handsets, to be sold in 2020.
As Qualcomm collects license fees on devices that use cellular connections to wireless data networks, more total devices sold often results in higher revenue and profits for the company.
The results come a week after Apple Inc calmed Wall Street nerves with an improvement in sales in China, the world’s largest smartphones market, and follow strong earnings from chipmaker Intel Corp last month.
Qualcomm, which generates most of its profits by licensing its technology to mobile phone makers and others, said revenue in the segment was $1.16bn, beating estimates of $1.10bn, according to FactSet. Excluding items, the company earned 78 cents per share, topping analysts’ average estimate of 71 cents.
Revenue in the fourth-quarter fell about 17% to $4.81bn, but beat analysts’ estimates of $4.70bn.
The company expects first-quarter adjusted profit of $1.20 per share, above estimates of 83 cents, according to IBES data from Refinitiv.


Siemens 
Siemens sounded a cautious note about the global economy over the next 12 months after booming industrial software sales helped the German engineering company beat forecasts during its fourth quarter.
The trains to turbines maker said yesterday it expected the macroeconomic environment to remain “subdued” next year, citing geopolitical and economic risks, as well as elections in big markets like the United States.
The problems would particularly hit demand for its short-cycle products, used by the automotive and machinery industries, where the company expects a “moderate decline” in the market.
Still, Siemens forecast a recovery during the second half of next year and said it expected to outperform the market.
“The weakening of the global economy accelerated considerably fiscal 2019,” CEO Joe Kaeser told reporters, adding Siemens nonetheless achieved its fiscal guidance.
“While many other industrial companies had to revise their outlooks, and some conglomerates had to struggle even more to survive, we kept our word.”
The €2.64bn ($2.92bn) outcome beat analyst expectations for €2.33bn.
Orders rose 4% to €24.71bn, and revenue by 8% to €24.52bn— both beating forecasts.
The Munich-based company’s full-year operating profit margin — excluding severance charges — was 11.5%, within its target range of 11-12%. During the quarter, the company benefited from demand at its smart infrastructure business, which makes products to automate buildings, and Siemens Healthineers, the medical equipment maker where Siemens retains an 85% stake.
But Siemens’s flagship Digital Industries business saw tepid revenue growth as a 21% rise in sales of industrial software as offset by weaker demand for factory automation and motion controllers.
During its 2020 financial year, Siemens expects total revenue growth of 3-5%.



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