Business news in brief
Glencore ready to pay out, snap up assets after profit rebound
Commodities trader and miner Glencore reported an 18 per cent rise in 2016 profit yesterday, buoyed by a rebound in raw material prices, and said it was well-placed financially for small acquisitions or a special dividend payout. Analysts said the results beat expectations, driving the share price 2.7 per cent higher by 1100 GMT, building on gains of nearly 20 per cent so far this year. The wider sector was flat.
Companies across the mining sector, which was pounded by the commodity market rout of 2015, have exceeded expectations following a recovery in the price of raw materials such as iron ore and coal last year. Glencore's earnings before interest, tax, depreciation and amortisation were $10.3bn (£8bn), up 18 per cent.
For the trading, or marketing division that sets Glencore apart from other miners, adjusted earnings before interest and tax were $2.8bn (£2.2bn), up 14 per cent and above previous guidance of $2.5-$2.7bn
(£1.9bn-£2.1bn). It now says, marketing this year should deliver between $2.2bn (£1.7bn) and $2.5bn (£1.9bn) in profit, adding the lower range reflected the sale of 50 per cent of Glencore Agriculture in December 2016.
Glencore, like other miners, has embarked on asset sales to drive down debt and has said it will maintain a lower net debt to EBITDA ratio, a crucial measure of available cash in capital-intensive mining. Chief executive Ivan Glasenberg said that ratio could slip below 1 this year if no further acquisitions were made, compared with its goal of 2:1 and the 3:1 ratio it used to favour.
Reuters
BAE systems hails Trump’s defence spending pledge as profits rise to £1.9bn
BAE Systems has reported rising full-year profits and the defence giant expects the election of Donald Trump to further boost its performance in 2017. The company said underlying earnings rose 13 per cent to £1.9bn last year as it reaped the benefit of its weaponry and aircraft being used in war-torn Syria and Yemen. BAE also said it would be helped by increased defence spending in the US over the coming 12 months.
“In the US, following the two-year Bipartisan Budget Act signed in 2015, there are signs of a return to growth in defence budgets, with the new administration expected to further increase defence and security spending,” the group said.
President Trump has pledged to raise defence spending by $500bn (£406bn) to a $1trillion (£811bn), which would raise demand for the defence and armament sector. Revenue at BAE grew 6 per cent to £17.8bn as the company flagged continued demand in the Middle East for protection against “national threats”.
PA
AXA steers clear of big deals, manages risks stemming from French politics
AXA has reached a “critical size” and is ruling out major acquisitions such as Italy's Generali, the French insurer's chief executive Thomas Buberl said yesterday. It is managing risks relating to May's presidential election in France and raising its profitability through higher prices and cost cutting, after increasing underlying earnings per share by 4 per cent in 2016.
Although AXA's earnings were helped by tariff hikes in property insurance coverage and a recovery in its life and savings business, Buberl's first set of annual results as CEO were at the lower range of its targets. Concerns that far-right National Front leader Marine Le Pen might win and lead France out of the eurozone – an event dubbed “Frexit” – have rattled financial markets.
“Frexit is a probability, it is clear, we need to look at it. Our job is to manage risks and volatility. A potential Frexit is not the first surprise and not the first crisis that AXA has seen over its history,” Buberl said. However, AXA saw the probability of “Frexit” as not very high, Buberl added, with opinion polls currently showing Le Pen as eventually losing to either centrist Emmanuel Macron or right-wing candidate Francois Fillon in the vote.
Reuters
BAT looks to double its vaping markets
British American Tobacco wants to double the number of countries where it sells vaping products this year
and again in 2018, it said yesterday, as it chases rivals Philip Morris International to grab a share of a growing market. BAT and Philip Morris were the first of the big tobacco firms to invest in cigarette alternatives a few year back, as growing health consciousness reduces traditional smoking.
Earlier this year, BAT agreed to buy US peer Reynolds American for $49.4bn (£40bn), a deal that will help boost its position in the small but growing market for e-cigarettes and other cigarette alternatives. However, analysts say BAT is scrambling to catch up with Philip Morris in the heated products “vaping” market, where the US firm has established a stronghold with its IQOS device, the result of a decade of research and $3bn (£2.3bn) of investment.
IQOS, which electronically heats tobacco enough to produce a vapour without burning it, is currently in 20 markets, including most notably Japan, and will be in as many as 30 by the end of this year, Philip Morris said on Wednesday. BAT said yesterday it now had the biggest vapour business in the world outside of the United States and was present in 10 markets, with almost 40 per cent of the market in Britain and around 50 per cent in Poland.
Reuters
France’s PSA seeks to be ‘European car champion’ with Opel
The chairman of French carmaker PSA Group wants to create a “European car champion” with the purchase of General Motors' European car business and pledged to work with governments and unions worried over job cuts. After reporting a near-doubling in 2016 profits, Carlos Tavares lauded the benefits of a deal that could reshape the continent's car market and leave PSA, the maker of Peugeot and Citroen cars, leapfrogging the Renault Nissan alliance to be second behind Germany's Volkswagen.
Speaking in Paris yesterday, Tavares said PSA's ambition to buy GM's loss-making Germany subsidiary Opel and its British brand Vauxhall is rooted in its remarkable financial turnaround. The company, which had to be bailed out by Chinese investors and the French government just three years ago, was able to announce its first dividend payment in six years yesterday, alongside the profit jump.
Tavares insisted that the potential deal is “nice to have” but “not a must” and laid out a string of reasons why he thinks it would be a good idea: it could improve Opel's bottom line, expand PSA's market, and keep both companies competitive globally. He said a combined company, which would be Europe’s No 2 carmaker behind Volkswagen, could have volumes of 5 million cars.
AP
Google to help publishers find malicious comments on articles
Alphabet's Google and subsidiary Jigsaw launched a new technology yesterday that helps news organisations and online platforms identify abusive comments on their websites. The technology, called Perspective, will review comments and score them based on how similar they are to comments people said were “toxic” or likely to make them leave a conversation.
It has been tested on The New York Times and the companies hope to extend it to other news organisations such as The Guardian and The Economist as well as websites.
Perspective examined hundreds of thousands of comments that had been labelled as offensive by human reviewers to learn how to spot potentially abusive language. CJ Adams, Jigsaw Product Manager, said the company was open to rolling out the technology to all platforms, including larger ones such as Facebook and Twitter where trolling can be a major headache.
Reuters
Barclays Africa chief executive apologises after bank's role in rand fixing
Barclays Africa apologised for its role in a rand-fixing affair involving more than a dozen banks, saying that it tipped off regulators about the practice after suspending two of its own traders.
“We deeply regret that this conduct took place within our organisation,” chief executive Officer Maria Ramos said on a conference call yesterday, without identifying the employees. “Those who contravened our rules will be held accountable.”
South Africa’s antitrust investigators listed more than a dozen banks, including Barclays Africa, in its probe earlier this month and named more than 30 traders for price fixing and market allocation in the trading of foreign-currency pairs involving the rand. Citigroup on 20 February said that it agreed to pay a penalty of almost 70m rand (£4.3m) to settle the case and would make witnesses available to help prosecute other banks.
Bloomberg