French oil company Total’s new chief will visit oil-rich countries to cement links with their leaders after the sudden death of his predecessor and will go ahead with cost cuts after falling oil prices squeezed third-quarter profits.
Europe’s second-largest oil company elevated former refining head Patrick Pouyanne to the top post following the death this month of its charismatic chief executive Christophe de Margerie in a plane crash in Russia.
Pouyanne said he would carry out de Margerie’s plan to reduce capital expenditure and operating costs, aimed at returning more cash to shareholders.
“The recent decrease in the price of Brent highlights the importance of the programmes we launched to reduce costs and control investments to strengthen the resilience of the group,” he said. Third-quarter net adjusted profit fell 2% to $3.56bn, hit by the oil price drop and not quite offset by a sharp increase in refining margins. But it beat the expectations of three analysts for $3.36-$3.37bn.
“Much of the credit for that goes to the incoming CEO, who has successfully lowered Total’s breakeven point in the (downstream) division via his cost reduction initiatives,” BMO analyst Iain Reid wrote in a note.
Although Total’s much larger exploration and production division would be a harder nut to crack, Pouyanne had a good chance of successfully driving similar reductions across the rest of the business, Reid wrote.
Shares in the biggest French company by market value rose as much as 2.2%, outperforming a 0.5% increase in the European oil and gas sector. Pouyanne’s priority though is to build contact with key oil-producing countries and he will also embark on a “mini-roadshow” to meet shareholders in Europe and the US before the end of the year, Total Chief Financial Officer Patrick de La Chevardiere said in a call with reporters.
Adjusted net profit in the refining and chemicals unit rose 70%, only partly offsetting a 10% drop in the upstream business and a 16% fall in the marketing and services unit - mainly petrol stations.
Third-quarter revenue fell 2% year-on-year to $60.36bn, while adjusted cash flow from operations was down 7% to $6.74bn.
Carlyle
Carlyle Group reported a 15% drop in third-quarter pre-tax profit yesterday, as a halt to a stock market rally led to its private equity funds appreciating at a slower pace than a year ago.
While cash generated in its buyout arm more than doubled thanks to asset sales, the value of Carlyle’s private equity funds rose by 3% in the quarter, less than the 5% appreciation a year ago. Its hedge funds and secondary funds businesses also showed weakness.
Peer KKR & Co reported a 17% decline in third-quarter pre-tax profit earlier this month, while Blackstone Group LP reported an 18% rise.
Washington, DC-based Carlyle said economic net income (ENI), a metric that factors in the mark-to-market value of its portfolio, was $166mn in the third quarter versus $195mn a year earlier.
This translated into post-tax ENI of 55 cents per adjusted unit in the third quarter of 2014, slightly ahead of the average analyst estimate of 54 cents in a Thomson Reuters poll.
Distributable earnings rose to $159mn from $105mn a year earlier, as Carlyle continued to cash out on its investments.
Asset sales included Beats Electronics to Apple for $3bn, and hotel amenities supplier ADA Cosmetics International GmbH to Ardian, as well as share divestments in hospital operator Healthscope Ltd, defense contractor Booz Allen Hamilton Inc and industrial distribution company HD Supply Holdings Inc
William Conway, Carlyle’s co-founder and co-chief executive, told analysts on a conference call that the fair value of Carlyle’s investments rose by $4bn in the last two years despite it selling $38bn worth of assets in that period.
X5 Retail
Russia’s second-biggest food retailer X5 Retail Group raised its 2014 forecasts yesterday, emerging largely unscathed from a food import ban, and said it was positive about next year despite challenging economic conditions.
X5 will also consider secondary listing of its shares on the Moscow Exchange, Chief Executive Stephan DuCharme said, in a move which could help meet investor demand for more crisis-resilient stocks at a time when the country’s economy is being hit by Western sanctions over the Ukraine crisis.
“We are in a positive mood regarding next year, we have built the right operational model, we have the right people in place and each of our formats has its own value proposition,” DuCharme told reporters as X5 held a series of briefings for analysts and investors.
Russia’s ban on many food imports in retaliation to Western sanctions added to the challenges X5 was facing and DuCharme said the ban had reduced X5’s sales growth by up to 2 percentage points in the third quarter.
It also increased its EBITDA margin forecast to 7.2 to 7.5% from 6.8 to 7.2% and cut its capital spending plan to 34bn roubles ($797mn) from 40bn. The revisions came as X5 posted a 49% rise in third-quarter net profit to 3.4bn roubles, echoing a trend set by Magnit and smaller rival O’Key which both reported sharp increases in their earnings.
Eramet
Mining group Eramet yesterday reported a 4% increase in turnover in the third quarter, to €787mn, thanks to rising nickel prices.
The French group’s share price surged 4.62% to €76.6 after the company, a leading nickel miner with interests in New Caledonia, predicted an increase in its current operating profit in the second half of 2014 thanks to higher turnover.
Sales in the first nine months of the year reached €2.3bn ($2.9bn), down 2.0% from a year earlier, it said in a statement.
The manganese division, which usually accounts for around half the turnover, continued shrinking with an 11% drop to €358mn in the third quarter. Eramet said that China’s slowing economy had pushed down the price of manganese ore by 16%.
Eramet reported that production of manganese returned to the record levels of late 2013 of nearly a million tonnes, after a drop blamed on a rail accident in Gabon.
ST Microelectronic
French-Italian microchip maker ST Microelectronic, reporting a return to profit in the third quarter, warned yesterday that demand for its processors could fall.
The group’s share dropped 9.17% to €5.05 after it announced some $100mn (€78mn) in cost-cutting measures that will entail 450 job cuts worldwide.
STM, which makes products widely used in high-tech industries, said its third-quarter profit was $72mn—compared with a net loss of $142mn in 2013 - but predicted a downturn in the October-to-December period. Turnover fell back by 6.3% to $1.88bn in the third quarter, mainly because STM stopped selling products taken on from ST-Ericsson but also because of lower demand in August, the company said.
Its hookup with Ericsson for cellphone chips was the source of major losses over several quarters.
“The slowing demand that we saw in August, especially in the mass market for microcontrollers, put a brake on the turnover growth we expected for the second quarter,” said CEO Jean-Marc Chery.
“It continued into September and we predict a resulting 3.5% decrease in turnover in the fourth quarter of 2014,” Chery said.
The gross margin stood at 34.3% compared with an operational margin of 4.0%, not counting the costs of restructuring and depreciation provisions, while free cash flow was $140mn.
Rosneft
Russian energy giant Rosneft yesterday announced its third-quarter profits crashed as it operates under Western sanctions over the Ukraine crisis and the rouble plunges.
Net profit fell by 99.3% to €18.3mn ($23.4mn).
The fall in profits year-on-year from 143bn roubles to 1bn (€18.3mn) came after Rosneft asked the Russian government for massive financial support to help it survive US and EU sanctions imposed this summer.
The US in July added Rosneft, which is almost 70% state-controlled, to its list of companies that face sanctions over the Ukraine crisis, drastically limiting its access to US markets.
The European Union adopted sanctions against Rosneft and other major companies in September.
The company said in its report that it “considers these sanctions in its activities, continuously monitors them and analyses the effect of the sanctions on the Company’s financial position and results of operations.”
Its total revenues in the third quarter grew 1.92% to 1.382bn roubles (€25.2bn). The Russian oil giant reported a fall in its profits over the first nine months of the year of more than 37% to 261bn roubles (€4.8bn).
But excluding Rosneft’s acquisitions of TNK-BP assets in 2013, the net profits for nine months were up 4.4%.
The total revenues before interest, tax, depreciation and amortisation (Ebitda) were up 25.4% for the first nine months, to 4.192bn roubles (€76.7bn).
It said its net profits over nine months not including losses from foreign currencies were 411bn roubles.
Novatek
Russia’s largest non-state gas producer, Novatek, said yesterday its third-quarter net profit fell by 67.5% because of a weaker rouble, slightly missing forecasts.
The company, co-owned by an ally of President Vladimir Putin and under US sanctions, said its July-September net profit reached 7.6bn roubles, just below an average forecast for 7.7bn roubles in a Reuters poll.
After the report, Novatek’s shares pared gains and were trading up 2.5% on the day.
Russia’s faltering economy has been hit further by the falling price of oil and Western sanctions imposed over Moscow’s role in Ukrainian conflict. Oil revenues account for 40% of state revenues. The sanctions, placed on the company and its co-owner Gennady Timchenko, have complicated Western companies’s joint work with Novatek and blocked the company from borrowing long-term money from Western banks.
French major Total, which owns 18% of Novatek, said it had stopped increasing its stake in July after a Malaysian airliner crashed over Ukraine. The West blamed pro-Russian separatists for shooting down the plane.
Novatek said its losses, related to foreign currency fluctuations, totalled 6bn roubles for the quarter, after a gain of 751 roubles in the year-earlier period.
Revenues grew 12% to 84.7bn roubles, the company said in a statement. Analysts had expected rising sales of liquids, such as gas condensate, to drive revenues 12.5% higher to 85.1bn roubles.
Deutsche Bank
Deutsche Bank fell to a net loss in the third quarter after falling victim to the legal costs which already this week prompted a management reshuffle designed to help tackle a long list of unresolved litigation issues.
The bank, which in June raised €8.5bn to strengthen its balance sheet, originally hoped to clear the decks of legal issues in 2014, but has postponed that target to 2015. “There continues to be significant uncertainty about the timing and size of potential impacts” of litigation, Chief Finance Officer Stefan Krause said.
Its shares fell 1.4% yesterday, contributing to a 28% fall so far this year and placing the bank just a notch ahead of National Bank of Greece in performance rankings in the STOXX Europe 600 index of European banks.
Deutsche Bank also sounded a note of caution on some of its revised 2015 profit goals after spending €894mn on litigation in the quarter, saying conditions remained challenging in several areas including “transaction” banking, or the provision of money transfers, trade finance and treasury services to Corps.
Deutsche fell to a quarterly net loss of €92mn from a 51mn profit in the year-earlier period, while net revenue increased a modest 2%. Pretax profit rose 3.6% in Deutsche’s important investment banking division, boosted by a 15% jump in revenue derived from trading debt and foreign exchange.
BBVA
Spain’s second-biggest bank by market value BBVA said yesterday its profits tripled in the third quarter despite falling over the first nine months of this year after exceptional gains in 2013.
Net profit for the July to September period surged to €601mn ($765mn) from €195mn a year earlier thanks to an increase in business, BBVA said in a statement.
Over the first nine months of this year, profits fell to €1.8bn, 37% lower than a year earlier when its profits had been boosted by one-off “capital gains on the sale of non-strategic assets”.
The bank said it saw a “nascent recovery” in demand for loans in Spain, which is timidly recovering from a financial crisis which drove its banking sector to seek a bailout.
This timid recovery “has not managed to turn around the average total balance” but the bank did get a boost from the growth of business in the US, Turkey, Mexico and South America.
BBVA reduced the ratio of bad loan debts weighing on its balance sheet—a hangover from the 2008 real estate collapse that plunged Spain into economic crisis—to 6.1% in September.
The results came after two other big Spanish finance groups, Bankia and Caixabank, last week reported rising profits in an encouraging sign for the sector two years after it nearly collapsed.
Hitachi
Hitachi said yesterday its net profit for the six months to September nearly tripled to $850mn as the Japanese giant hiked its full-year earnings forecast.
The vast conglomerate said net profit soared to ¥91.54bn ($850mn) during the first half of its fiscal year to March, up from ¥32.77bn a year earlier, as it pointed to a strong performance in its information technology and elevator divisions.
Operating profit rose about 23% to ¥214.02bn on sales of ¥4.50tn, up 0.6%, said the company which sells everything from batteries to nuclear plants.
Hitachi also revised up its annual forecast.
It now expects a net profit of ¥250bn on sales of ¥9.5tn, up from a previous outlook of ¥230bn and ¥9.4tn, respectively.
Demand picked up for IT systems, electronic devices, and so-called social infrastructure such as elevators and trains, Hitachi said.
Strong demand for elevators and escalators in China helped results, Hitachi added, but it also warned that demand some parts of the world could be shaky.
“In terms of the overall global business environment going forward, the US economy will likely keep a steady recovery path while the global economy as a whole faces uncertainties,” it said in a statement.
“Risks pertaining to the European economy such as financial instability in southern Europe and the Ukraine crisis, a slowing growth in the Chinese economy, and geopolitical risks in the Middle East” may weigh on results.
LG Electronics
LG Electronics reported yesterday an 87% jump in third-quarter net profit from a year ago after profits from its mobile unit surged to a five-year high.
Net profit for the South Korean electronics giant in the July-September period amounted to 202.6bn won ($193mn), up 87% from a year ago, the company said in a statement.
Operating profit also jumped 112% to reach 461.3bn, while sales rose seven% to 14.9tn won.
The firm’s handset unit led the growth with a 39-percent rise in sales and an operating profit of 167.4bn won—the highest for five years and a turnaround from a 79.7bn won loss a year ago.
The handset unit sold 16.8mn smartphones in the third quarter, breaking the quarterly sales record set in the second quarter.
The world’s sixth-largest smartphone maker struggled for years with sluggish sales after making a late entry into the market following competitors like Samsung and Apple.
But LG recently showed signs of revival with its flagship G3 smartphones, while its bigger South Korean rival Samsung saw profits sag. Samsung—the world’s top maker of smartphones and TVs—is set to post a nearly 60% plunge in its third quarter operating profit to be announced today, although the figure of 4.1tn won is still nearly 10 times bigger than LG’s.
Software AG
German business software maker Software AG yesterday posted flat third-quarter operating profit, beating expectations, as cost cuts aimed at turning around its consulting business started to pay off. The Darmstadt-based company has shifted its focus to tools which help companies deliver their software over the Internet using so-called cloud computing from software that used to be installed on individual computers - a painful transition that has weighed on income for the past two years.
But in the latest quarter, earnings before interest and tax (EBIT), excluding some special items, were unchanged at €49.1mn ($62.5mn, beating even the most optimistic expectation of €43mn in a Reuters poll.
The poll average was €40.1mn.
Its operating margin climbed to 30.5%, up 7.5 percentage points from the second quarter, the company said.
“This was primarily due to the focus on our product business, financial discipline and the improved efficiency of internal processes,” said Software AG’s Finance Chief Arnd Zinnhardt in a statement.
But Germany’s second-largest business software maker after SAP said it still expected its operating margin, excluding special items, to be between 26 and 28% in 2014.
Software AG products include those that help companies such as Nissan Motor Co and Deutsche Telekom keep inventories at efficient levels, monitoring in real time how fast clients are being served, and those which help with retrieving data from outdated software systems.
Statoil
Norwegian oil giant Statoil posted yesterday an unexpected third-quarter loss owing to weak oil prices and a charge for depreciated assets.
The 67% state-owned firm reported a switch into a net loss of 4.7bn kroner (€558mn, $706mn).
That was down from a 14.3bn-kroner profit a year earlier.
It came as a shock to analysts who had expected a profit of at least 9.0bn kroner.
The big downturn was mainly the result of a charge of 13.5bn kroner linked to the write down of its Kai Kos Dehseh oil sand project in Canada.
That was the result of the postponement of the Corner field development. It also took a charge for a fall of the value of assets in the Gulf of Mexico and Angola.
Like other oil companies, Statoil was also hit by lower prices of oil—down 7.6% this year in Norwegian kroner—and of natural gas.
Production was also slightly down to 1.829mn of barrels equivalent (mboe) per day from 1.852 mboe per day in the third quarter of 2013.
At the operational level, Statoil stayed in the black with operating income reaching 17bn kroner, but far from last year’s 39.3bn kroner.
Revenue fell by 12.2% to 148.2bn kroner.
Statoil shares were up by 1.74% on the Oslo stock market in midday trading, while the main index was 0.61% higher.
The group, which is looking for a new head after Helge Lund left to join Britain’s BP, kept its production target for 2014 at 2.0% higher than 2013.
Facebook’s mobile ads powered the social network past Wall Street revenue targets in the third quarter, even as the company revealed deep losses in its recently acquired WhatsApp business.
Shares of Facebook, which are roughly up 47% this year, were down less than 1% at $80.20 in extended trading on Tuesday.
Facebook said revenue in the three months ended September 30 totalled $3.2bn, up 59% from $2.02bn in the year-ago period. Analysts polled by Thomson Reuters I/B/E/S were looking for revenue of $3.12bn on average.
“They continue to show that there is a lot of demand for their product, both in terms of users wanting to spend time there and advertisers wanting to spend money,” said Ben Schachter an analyst with Macquarie Research.
Facebook also for the first time disclosed the financial performance for WhatsApp, a mobile messaging app that the company acquired earlier this month for $22bn.
According to a filing with the Securities and Exchange Commission on Tuesday, WhatsApp lost $232.5mn in the first six months of 2014, compared to a loss of $58.8mn in the first six months of 2013.
WhatsApp does not currently show ads on its service and Facebook Chief Executive Mark Zuckerberg has said the company will not rush to monetize the service.
Macquarie’s Schachter said investors understand that WhatsApp is a “long-term play,” and that what’s most important right now is for the app to continue to grow its base of users.
The world’s No.1 online social network said its total number of monthly users reached 1.35bn in the third quarter, with 864mn users accessing the service every day.
Facebook’s net income increased to $806mn, or 30 cents a share in the third quarter, compared to $425mn, or 17 cents a share in the year-ago period. Excluding certain items, Facebook said it earned 43 cents a share.