Toyota H1 net profit jumps 16%

Japanese car giant Toyota upgraded its full-year forecast yesterday, as the firm posted a 16% gain in net profit for the six months to September thanks to steady global sales and cost-cutting efforts.

The maker of the Camry sedan and Prius hybrid revised upward its net profit forecast to ¥2.3tn ($20.3bn) from its earlier estimate of ¥2.12tn for the year to March 2019 thanks to a weak yen.

But even if the firm, which also has the Lexus luxury brand, hits this forecast, profits would still be lower than the record 2.49tn yen posted for the previous fiscal year. In the April-September period, Toyota’s bottom-line profit rose 16% to ¥1.24tn, beating a 10% gain forecast by analysts.

The upbeat results boosted its shares by more than 2% on the Tokyo Stock Exchange.

Senior managing officer Masayoshi Shirayanagi said in a statement the firm was “steadily making progress” in its efforts to cut costs. Revenue for the first half increased 3.4% to a record ¥14.7tn amid steady vehicle sales in North America, Europe, and Asia. Toyota also revised upward its full-year sales forecast to what would be a record ¥29.5tn.

“Toyota is showing solid results so far in this fiscal year thanks to its cost-cutting efforts,” said Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm.

Japanese automakers, however, remain on edge over talk of US tariffs, though immediate action by Washington has been put off for now.

“Trade rows are still hanging over the Japanese auto industry,” Takada told AFP.

“Immediate fears of extra tariffs on Japanese auto exports have been put off for now but they may revive depending upon JapanUS trade talks,” he said.

Toyota has warned the cost of an imported vehicle would rise by $6,000 if the US levies a 25-percent tariff on cars and parts from abroad. “We can’t yet say the risk has receded,” said Didier Leroy, Toyota executive vice president. “There is still great uncertainty. Our goal is to be ready if it should happen,” Leroy said. In September, Donald Trump and Japan’s Prime Minister Shinzo Abe announced an agreement to start negotiations on a trade deal. The two leaders also agreed that the US will not impose additional tariffs on Japanese-made cars as long as the bilateral negotiations continue.

Petrobras

Brazil’s Petroleo Brasileiro yesterday reported a surge in thirdquarter net profit that still lagged forecasts as oil prices rose but spending at the state-owned company jumped. Petrobras made a net profit of 6.644bn reais ($1.78bn), well above the 266mn reais it posted a year earlier, but shy of a $1.98bn average Refinitiv IBES estimate.

Analysts were particularly concerned by a 50% cut in free cash flow to 8.115bn reais from the prior quarter, as Petrobras boosted capital spending and made a second payment as part of the settlement of a class action lawsuit over graft in January.

“We have a negative view,” Goldman Sachs said in a client note. The lower free cash flow “mainly reflects the pick-up in capex in order to revert the negative trend in production,” it said. Petrobras oil output slid in September by 13% compared with the same period last year while the results report yesterday showed investment rose to 15.441bn reais from 10.434bn reais in the same period last year.

Petrobras said its growing share of the domestic diesel market provided an earnings boost, as a diesel subsidy program put in place in June to resolve a truckers’ strike over rising fuel costs hit the company’s competitors. But analysts at XP Investimentos said increased spending by Petrobras on importing diesel fuel contributed to the company’s earnings miss.

Petrobras said it received 1.6bn reais from the government as part of the second phase of the subsidy program, which is set to end in December. It was also hit by the payment of a $853.2mn fine to settle charges by US authorities that former executives and directors of the company broke US anti-corruption laws.

Net debt at the world’s most indebted listed oil company rose slightly to 291.834bn reais ($78.30bn) from 284.027bn reais in the second quarter. It managed to lower its net debt to an EBITDA ratio to 2.96 from 3.23 in the second quarter, as it seeks to reach 2.5 by year-end.

CVS Health

CVS Health Corp’s third-quarter profit beat analysts’ estimates yesterday, as it benefited from higher sales of prescription drugs as well as consumer health and beauty products. Quarterly same-store sales at front-end stores rose 0.8% in contrast to analysts’ expectation of a 0.8% drop despite brickand-mortar drugstore chains like CVS coming under increasing pressure from consumer shift to online options.

“Front of store sales have fallen during this quarter for every year since 2012,” said Neil Saunders, managing director of GlobalData Retail, who called the sales rise at front-end stores a “break from tradition.”

Sales for beauty products at CVS stores have benefited from sales promotions and newer products.

Last year, the company announced a initiative to have over a hundred new South Korean beauty brands at its stores.

CVS has also been testing its plan to sell a bigger assortment of brands and services like hair and nail salons in around four of its stores. The company’s pharmacy same-store sales rose 8.7%, while analysts were expecting a 7.7% rise, driven by higher demand for prescription drugs.

The company said its $69bn acquisition of health insurer Aetna Inc, which won US Department of Justice nod in October, is likely to close before Thanksgiving.

The deal is expected to reshape healthcare sector as it brings together one of the largest pharmacy benefits manager and one of the nation’s oldest health insurers. The company said net income rose to $1.39bn, or $1.36 per share, in the quarter ended September 30. Excluding items, CVS Health earned $1.73 per share, compared with the average analyst estimate of $1.71. Net revenue rose 2.4% to $47.27bn, beating expectation of $47.18bn.

Intesa Sanpaolo

Italy’s top retail bank Intesa Sanpaolo posted a better-than-expected third-quarter net profit yesterday and kept its core capital intact despite Italy’s sovereign travails, which weighed on fees. Italy’s populist government has locked horns with the EU Commission over an expansionary 2019 draft budget, sparking a sell-off of Italian assets and driving up Rome’s debt costs. Italian banks have seen their capital hurt by the falling value of their large sovereign holdings.

Intesa said its pro-forma fully-phased core capital ratio stood at 13.7% at the end of September, unchanged from three months earlier. Fees, which are key to Intesa’s business model built around its wealth management operations, dropped 3.4% quarter-on-quarter.

Overall revenues fell 7.3% in the period while costs were unchanged. Net profit came in at €833mn ($951mn), compared with €785mn in a consensus forecast of six analysts compiled by Reuters. Intesa, which performed strongly in last week’s Europewide stress tests, said its full-year net income was on track to beat the adjusted 2017 level of €3.8bn.

Thomson Reuters

Thomson Reuters Corp yesterday reported a smaller-thenexpected fall in third-quarter earnings and said it was on track for a solid 2018 and a better performance in 2019.

Adjusted for one-time items, the news and information provider reported earnings per share of 11 cents, down from 27 cents a year ago, but above Wall Street’s average estimate of 3 cents, according to IBES data from Refinitiv.

Revenue rose 3%, excluding the effect of fluctuating exchange rates, to $1.29bn.

Analysts had expected revenue of $1.32bn, on average.

“Our year-to-date performance strengthens our confidence that we are on track to deliver a solid year and an even better 2019,” chief executive Jim Smith said in a statement.

The company reiterated its forecast, originally given in May, for low single-digit revenue growth in 2018.

It said it now expects adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.3bn for the year. It previously said it expected $1.2bn to $1.3bn. The year ago figure was $1.6bn.

For the third quarter, the company’s adjusted EBITDA fell 21%, excluding the effect of exchange rates, to $302mn, due to higher income tax expense from the company’s continuing operations, offsetting higher earnings from its discontinued operations.

Deutsche Post

German logistics giant Deutsche Post DHL reported a sharp drop in quarterly profit yesterday as a costly overhaul of its struggling post and parcel divisions weighed on earnings.

The DHL owner said net profit plunged 77% to €146mn ($167mn) between July and September compared with the same period a year earlier, falling short of analyst expectations. The group blamed the steep drop on one-off costs of nearly €400mn, mainly for early retirement schemes, linked to a major restructuring to improve profitability at its post-ecommerce-parcel unit.

The group’s third-quarter revenues meanwhile climbed 1.4% to €14.9bn, driven by strong performances in its DHL express and freight divisions.

Despite an ongoing boom in online shopping deliveries, Deutsche Post has struggled to offset its thriving e-commerce business with a decline in letter volumes, high labour costs and investments in items like electric delivery vans.

The group announced in June that it was lowering its outlook for the year as it embarked on a €500mn restructuring designed to slash costs and raise productivity at the troubled unit. “We are tackling the challenges in our post-ecommerce-parcel division with determination and are making good progress,” CEO Frank Appel said in a statement.

As part of those efforts, the group plans to split the division into a German unit and an international/e-commerce one from January 2019. Looking ahead the group confirmed its trimmed full-year forecast, saying it continues to expect operating profits before interest and tax of €3.2bn, down from an earlier estimate of 4.15bn. The group also stuck to its 2020 goals, aiming for an operating profit of more than €5bn. “We are confident that we will reach our earnings targets for 2018 and 2020,” Appel said.

Andritz

Engineering group Andritz lowered its full year profitability forecast yesterday as it plans to reduce capacities at its metals and hydro operations to cut costs after third-quarter earnings fell nearly 30% in both units.

The group also reported third-quarter operating profit below expectations, sending its shares down 7% to a five-month-low. “Solid order intake but disappointing operating result,” Baader analyst Peter Rothenaicher said in a note to clients. However, he reiterated a Buy recommendation.” We consider Andritz a value play in the sector with attractive multiples.” Andritz, which manufactures and supplies plants and systems to hydropower stations, pulp and paper said provisions of more than €20mn ($23mn) for the restructuring of the metals and hydro operations would be booked in the fourth quarter and weigh on earnings.

Adjusted for this effect, the margin on its earnings before interest, tax and amortisation (EBITA) will “reach almost the level of the previous year”, which was at 7.1%, it said.

The group had previously forecast its EBITA margin to reach “roughly the level of the previous year”. “With adjustments we mean measures to reduce the cost base sustainably in both divisions. This certainly includes reduction (of) capacities,” a spokesman said. He did not say whether the restructuring would include plant closures.

Third-quarter EBITA fell 13% to €85.9mn, hit by higher costs at its metals unit and lower earnings at its hydro operations. Analysts polled by Reuters on average had expected €95.5mn. The group, which has been on a shopping spree lately, said it would focus on cutting costs and integrating recently bought companies in coming months.

Order intake increased 9.5% to €1.47bn in the period, slightly missing analyst expectations of €1.52bn. Andritz shares fell as much as 7% to €41.84, its lowest since early June.

The company said its pulp & paper and separation businesses, which contribute nearly half of group sales, were developing well and would continue to do so.

It expects continued moderate demand for the electromechanical equipment it provides for hydropower plants and a “satisfactory project and investment activity” in its metals unit.

The order backlog amounted to €6.9bn at end-September, providing a solid basis for next year, chief executive Wolfgang Leitner said in a statement.

Zalando

Zalando, Europe’s biggest online only fashion retailer, reported its slowest rate of sales growth since it was launched a decade ago and recorded a loss due to unseasonably warm weather, higher logistics costs and operational problems.

Zalando, which is facing rising competition from e-commerce players like Amazon.com and big chains like H&M, cut its 2018 outlook for a second time in as many months in October due to the weather, sending its shares tumbling. Third-quarter sales rose 12% to €1.2bn ($1.37bn), missing average analyst forecasts for €1.22bn, and well below the 20 to 25% growth it has targeted for years. Its adjusted loss before interest and taxation came in at 39mn, which it blamed on the slow start of sales of colder weather gear due to the hot summer, as well as higher fulfilment costs and problems with how it handles returned goods.

About half of the products Zalando sells are returned, processed and resold.

Zalando said it had incurred higher costs due to inefficient reconditioning of returned goods caused by operational faults that had since been addressed and resolved. Zalando said profitability was also hit by a 7% fall in average order size to €57.50, despite efforts to bolster the metric by adding beauty products to its range in the hope that customers will add a lipstick when they buy a dress. Higher transport costs and investments in logistics also weighed, although Zalando trimmed its expectation for capital expenditure for 2018 to €300mn, from a previous €350mn, as projects are spread over a longer period of time.

Eli Lilly

Eli Lilly and Co’s diabetes drug Trulicity helped power higherthan-expected third-quarter profit yesterday, while sales of some other newer treatments fell short of Wall Street estimates.

The quarterly beat is encouraging, but mostly driven by lower taxes and expenses, and sales were affected by lower-than-expected Revenue from new drugs, SunTrust Robinson Humphrey analyst John Boris said.

Chief financial officer Joshua Smiley told analysts on a conference call that the company expects 2019 sales to take a hit from the Loss of patent protection on erectile dysfunction drug Cialis, but that he expects new products to “more than compensate.”

He also said Lilly would consider more acquisitions similar to its recent $1.6bn purchase of cancer drug developer Armo Biosciences.

The Indianapolis-based drugmaker raised its 2018 adjusted earnings forecast to between $5.55 and $5.60 per share, from $5.40 to $5.50 per share.

Lilly, which took its Elanco animal health unit public in September, is banking on 10 new drugs launched since 2014 to drive growth as older treatments face increasing competition.

Trulicity, which recently overtook Humalog as Lilly’s top-selling medicine, had sales of $816.2mn in the quarter, above analysts’ consensus estimate of $801mn, according to brokerage SunTrust. Lilly on Monday announced that Trulicity had significantly reduced the risk of heart attack, stroke and heart-related death in a broad range of patients with type 2 diabetes in a large clinical trial.

Results from that trial should strengthen, if not cement, Lilly’s position as a leader in diabetes care, analysts said. Excluding one-time items, Lilly earned $1.39 per share, topping analysts’ average estimate by 4 cents, according to IBES Data from Refinitiv. Revenue rose about 7% to $6.06bn, edging past analysts’ expectations of $6.05bn. Net income in the quarter more than doubled to $1.15bn.

Pandora

Jewellery maker Pandora slashed its 2018 sales outlook for the second consecutive quarter after posting disappointing profits yesterday, saying it will review its strategy as it struggles to regain investor confidence.

Shares in the world’s top jewellery maker by production capacity are down more than 40% this year as new jewellery lines fail to charm and fewer shoppers visit shopping malls in key markets, hitting sales.

The firm said it would launch a cost-cutting programme aimed at reversing negative like-for-like sales and cancelled its long-term revenue growth ambition of 7 to 10%. It also said it would review its long-term EBITDA margin target of around 35%.

“We have reviewed our business and decided to launch a forceful programme with the aim to materially reduce costs across the company to free up resources to invest in sustainable like-for-like growth,” chief financial officer Andres Bowyer said in statement. Like-for-like sales fell 3% in the third quarter while the EBITDA margin came in at 29%, a far cry from the 37.8% achieved in the same period last year. In August, the firm known for its silver charm bracelets ousted its chief executive after issuing a profit warning.

The business is currently being run jointly by former Body Shop CEO Jeremy Schwartz and chief financial officer Andres Bowyer. Pandora said a health check of the business undertaken by the new management team showed there was a need to change how the company operates.

A first step will be to significantly reduce acquisitions of franchised stores, as well as opening fewer stores generally. Pandora now expects 2018 sales in local currencies to increase by between 2 and 4% down from a previous guidance of 4 to 7%, while it kept its EBITDA margin target at around 32% this year.

Hugo Boss

German fashion house Hugo Boss expects a significant improvement in sales and earnings in the fourth quarter after higher markdowns to shift unsold stock in an unseasonally long summer dented profits in the last three months.

Known for its smart men’s suits, Hugo Boss has been introducing more casual and sportswear styles to appeal to a younger audience and investing heavily in its online offer.

Yesterday, it announced a new partnership with online retailer Zalando to strengthen its digital sales, which jumped 38% in the third quarter.

Overall, group sales were flat at €710mn ($810mn), while earnings before interest, taxation, depreciation and amortisation (EBITDA) before special items fell 12% to 126mn, both missing average analyst forecasts.

It said the fall in profitability was mainly due to markdowns to respond to the late start to sales of higher price fall and winter garments due to the long summer in Europe, as well as negative currency effects of €5mn.

However, Hugo Boss said a positive business development in October underlined its expectation for a recovery in the fourth quarter, traditionally its strongest in terms of sales, and it reiterated its full-year sales and earnings forecast.

“I’m convinced that we will return to sustainable profitable growth in the coming year,” chief executive Mark Langer said in a statement.

Luxury stocks had been under pressure due to concern about a US-China trade spat, but they have rallied in recent days on optimism about a resolution to the dispute and updates from the likes of Kering, showing no signs of slowdown in China. Hugo Boss said quarterly sales in China grew 7%, while profits in the Asia/Pacific region jumped 37%.

Nutrien

Canadian fertiliser and farm supplies dealer Nutrien reported a better-than-expected quarterly profit and raised its full-year adjusted profit forecast, driven by strong demand for its potash fertilisers.

The world’s largest fertiliser company by capacity raised its full-year adjusted profit forecast to the range of $2.60-$2.80 per share, from its prior estimate of $2.40-$2.70 per share. Nutrien, formed by the merger of Agrium and Potash Corp of Saskatchewan in January, said its potash volumes rose 17% to 3.9mn tonnes at an average realised price of $212 per tonne in the third quarter.

The company reported a net loss from continuing operations of $1.07bn, or $1.74 per share, in the quarter ended September 30. Nutrien had reported a loss of $53mn a year earlier, based on the combined results of Potash Corp and Agrium.

The company said on Monday it recorded a $1.8bn non-cash impairment charge due to closure of its Brunswick potash facility, following a strategic review.

Excluding items, Nutrien earned 47 cents per share beating analysts’ estimates of 40 cents per share, according to IBES data from Refinitiv.

US rival Mosaic Co on Monday reported better-than-expected third-quarter profit and sales, boosted by higher prices and acquisition of Vale Fertilizantes.

Rosneft

Russia’s largest oil producer Rosneft almost tripled third-quarter net profit to 142bn roubles ($2.2bn), as higher crude output and prices outweighed impairments on downstream operations. The state-controlled company took a 133bn rouble charge on refining and distribution operations.

Russian fuel prices have lagged a surge in crude oil prices, and companies have also been forced by the government to cap politically sensitive retail fuel prices. Despite the big profit jump from the same period last year, Rosneft fell just short of analysts’ expectations.

Their average forecast in a Reuters poll was 147bn roubles. Rosneft, which includes BP and Qatar among its shareholders, accounts for about 40% of Russia’s oil output and is key to Moscow’s efforts to forge closer ties with the Organisation of the Petroleum Exporting Countries (Opec).

The company increased daily oil production in the third quarter by 3.4% year on year.

A company official told a conference call that Rosneft planned to raise its liquid hydrocarbon production further next year, to 241mn tonnes, or 4.8-4.9mn barrels per day (bpd), up from 4.73mn bpd in the third quarter.

The company also said it expected capital expenditure to rise by 20-25% in 2019 from around 900bn roubles seen this year, due to the development of new upstream projects.

Headed by Igor Sechin, a long-standing ally of Russian President Vladimir Putin, Rosneft has been pursuing acquisitions at home and abroad, amassing huge debts. In May, it announced a plan to cut debt and trading liabilities by a minimum of 500bn roubles this year, partly by selling non-core assets.

The company did not disclose its latest net debt figure, but analysts at Moscow brokerage BCS put it at $71.7bn, down about 8% from the previous quarter.

After the introduction of sanctions that shut the company out of Western capital markets, Rosneft switched to prepayment deals with international traders such as Trafigura.