Vodafone Group reported first-quarter service revenue that beat analysts’ estimates amid gradual improvements in its European mobile-phone businesses and growth in developing markets. The stock gained.
Organic service revenue - the money Vodafone earns from its customers’ monthly phone bills and usage on its network, but not including handset sales - rose 2.2% to €12.3bn ($13.6bn) in the first quarter through June, the Newbury, England-based company said yesterday. Analysts had predicted growth of 1.8%, according to data compiled by Bloomberg. The figure excludes the impact of acquisitions and currency fluctuations.
Chief Executive Officer Vittorio Colao is succeeding in reviving growth in European markets such as Germany and Italy, while relying on developing markets such as India, Turkey and Egypt for customer gains. Competition is fierce in the UK, where fixed-line operator BT Group in January completed its acquisition of mobile carrier EE and European Union authorities blocked the proposed combination of two other network operators.
“This is a reassuring set of results,” said Polo Tang, an analyst at UBS Group AG. “It amounts to the strongest acceleration in growth for five quarters.”
Service revenue rose 0.3% in Europe, with Germany, Spain and Italy growing and the UK shrinking 3.2%. The company is facing EU regulations aimed at cutting roaming rates at its biggest markets such as Germany and the UK. European Commission’s roaming directive went into force April 30 and ordered carriers to reduce such rates by 75%. The fees are to be cut entirely by June 2017, according to the EU’s plan.
Britain’s plan to leave the EU is adding to Vodafone’s challenges, and Colao said on a conference call the carrier is seeking “pragmatic solutions” to deal with the matter. Vodafone said after the June 23 referendum that it couldn’t guarantee that its headquarters would remain in the country if Brexit negotiations resulted in unfavourable business conditions.
Outside of Europe, growth is faster. Service revenue increased 19.5% in Turkey, 9.4% in Egypt and 6.4% in India. The improvement in India was partially attributed to the unwinding of a service tax on mobile termination rates, analysts surveyed by Bloomberg said.

American Airlines
American Airlines Group reported a better-than-expected quarterly profit as fuel costs fell and the world’s largest airline said it would defer taking delivery of 22 Airbus planes to be able to adjust capacity according to demand.
American’s shares rose as much as 4.6% in morning trading on Thursday.
However, the company joined Southwest Airlines Co, the No 4 US airline by traffic, in warning of a drop in a key profitability metric for the third quarter. American said it expected revenue per available seat mile (RASM) to fall 3.5-5.5% in the current quarter, which JP
Morgan Securities analyst Jamie Baker said was “at the higher end of our expectations.”
A day earlier, Southwest forecast a decline of 3-4% in RASM, a key indicator of an airline’s performance that measures sales against flight capacity.
American said it would defer taking the delivery of the A350 aircraft from Airbus Group to late 2018 through 2022, with an average deferral of 26 months.
The deferral will reduce planned capital spending for 2017 and 2018, the company said.
American’s operating costs fell 3.3% to $8.61bn in the second quarter ended June 30, with fuel costs declining by a fifth.
Net income plunged 44% to $950mn as provisions for income tax surged to $543mn from $15mn.
Excluding an item, its profit of $1.77 per share handily beat the average analyst estimate of $1.68, according to Thomson Reuters I/B/E/S.
Operating revenue declined 4.3% to $10.36bn, hurt by intense competition, global macroeconomic headwinds and foreign currency weakness.
There are investor concerns that carriers will continue to add flights and push down prices despite insufficient demand, and rebounding oil prices will add to their fuel costs.
Economic slowdown abroad poses an even greater risk to revenue, with foreigners reluctant to buy tickets on US airlines to visit the United States as the dollar rises in value against other currencies.

CITIC
China’s conglomerate CITIC expects its net profit to roughly halve in the first half of the year due to lower property sales, a sluggish stock market and a depreciation of the yuan currency.
In another sign of China’s slowing economy, CITIC’s net profit is expected to fall by about 40-50% in the six months ended June, it said in a filing to the Hong Kong stock exchange on Friday.
CITIC recorded a six-month net profit of HK$37.7bn ($4.86bn) a year earlier.
“The overall decline in the completed and delivered property projects has resulted in a decrease in profit for (our) property business,” it said in the filing. However, CITIC, whose businesses span from financial services and real estate to energy and engineering, will be offloading some property assets, which will help support its second-half financial results.
It plans to sell its mainland China residential property projects to developer China Overseas Land & Investment Ltd, which will likely contribute to some gains in the second half of 2016.
CITIC Ltd’s forecast for lower profits comes a day after CITIC Securities, in which the conglomerate owns a stake, reported a 57% fall in preliminary net profit of 5.3bn yuan ($794.25mn) as China’s weak markets dampened brokerage and securities businesses. As CITIC’s main operations and assets are in China, a weakening yuan also weighed on CITIC’s first-half net profit, which is denominated in Hong Kong dollars, it said in the statement.

Lindt & Spruengli
Swiss chocolate maker Lindt & Spruengli said yesterday it had managed to lift sales and profit in the first half of this year despite the torpid consumer market and rising cocoa prices.
Lindt, a leader in the premium, or affordable luxury segment, said that sales rose by 6.6% to 1.5bn Swiss francs ($1.5bn, €1.4bn). Net profit jumped 11.1% to 72.2mn francs.
While sales in Europe rose by 5.7% to 738.5mn francs, they only edged up by 0.8% in North America, the world’s top chocolate market.
Lindt, which bought Russel Stover in 2014 to expand its market position in North America, said it was reducing the brand’s more than 2,000 products and lifting prices to set a healthy foundation for profitable growth in the future.
Sales increased 6.6% in North America excluding Russel Stover.
Lindt’s shares gained 0.6% to 69.84 francs in late morning trading in a Swiss market up 0.11% overall.

Husky Energy
Husky Energy, Canada’s No 3 integrated oil company, reported a smaller-than-expected quarterly loss as the focus on fewer, more efficient resource plays helped reduce production costs.
Production operating costs fell about 12% to $10.79 per barrel in the second quarter from a year earlier, as the company benefits from its six-year long effort to transform its business by investing in projects with lower costs.
More than 40% of the company’s production is expected to come from low break-even projects, by the end of this year, up from just 8% in 2010, when it began the turnaround, the company said in June.
Husky has also sold non-core assets, including royalty interests in Western Canada, for about C$1.2bn.
Overall earnings break-even is expected to be sub-$40 WTI by the end of 2016, as several key projects are up and running, including the 30,000-barrel-per-day (bpd) Sunrise in Alberta and the Edam East thermal project in Saskatchewan, the company said yesterday. Total production fell about 6% to 316,000 barrels of oil equivalent per day (boepd) in the three months ended June due to planned maintenance and the Fort McMurray wildfire in Alberta, the company said. Several oil producers and pipeline operators curbed activities due to the wildfires that began on May 1, forcing more than 1 mn barrels of capacity offline. However, Calgary-based Husky said it expected annual production at the low end of its previous forecast of 315,000-345,000 boepd.
The company’s cash flow from operations more than halved to C$488mn in the latest quarter.
Husky reported a loss of C$196mn ($149.4mn), or 20 Canadian cents per share, in the three months ended June, compared with a profit of C$120mn, or 10 Canadian cents per share, a year earlier.

Honeywell
Honeywell International cut its full-year sales forecast and reported lower-than-expected quarterly revenue as sales in its aerospace division unexpectedly declined.
The company’s shares dropped more than 2.4% to $115.80 in premarket trading yesterday.
Honeywell lowered it 2016 sales forecast to $40.0-$40.6bn from $40.3-$40.9bn, slightly short of analysts’ average estimate of $40.64bn, according to Thomson Reuters I/B/E/S.
The company’s revenue rose 2.2% to nearly $10bn in the second quarter ended June 30, falling shy of analysts’ estimates of $10.13bn. Sales in Honeywell’s aerospace business, its second-biggest division by revenue contribution, fell 1% to $3.78bn, while the company had issued a sales forecast range of flat to up 1%.
The company said business was hurt by delays and completion issues in certain programs as well as higher incentives paid to commercial aircraft makers to select its aircraft equipment.
Revenue in the performance materials and technologies fell 3% to $2.33bn, due to weak demand from oil and gas customers.
The business, which makes catalysts and absorbants used for petroleum refining, contributed about 23% of total sales.
The bright spot was the automation and control solutions business, where sales rose 9% to $3.89bn, helped by acquisitions. The division contributed 39% of revenue, while the aerospace business accounted for 38%.
Honeywell said it would realign the automation and control business - which makes industrial safety products and controls and displays for heating and cooling systems - into two new divisions: home and building technologies and safety and productivity solutions.
Net income attributable to Honeywell rose 7.4% to $1.28bn, or $1.66 per share, in the second quarter, beating analysts’ estimates of $1.64 per share.

Textron
Textron Inc, the maker of Cessna aircraft and Bell Helicopters, reported better-than-expected quarterly revenue and profit as the company delivered more business jets.
Revenue in Textron’s aviation division, the company’s largest, rose 6.4% to $1.2bn in the second quarter ended July 2.
The unit delivered 45 Citation jets and 23 King Air turboprop aircraft in the quarter, compared to 36 jets and 30 King Airs in the same period last year.
The world’s largest maker of business jets also reaffirmed its 2016 earnings forecast of $2.60-$2.80 per share, excluding a tax benefit.
The company, which makes small and midsize business jets, also said it expected to record an income tax benefit of about $315mn in the third quarter as a result of a settlement with the US
Internal Revenue Service Office of Appeals.
Analysts on average were expecting a profit of $2.72 per share, according to Thomson Reuters I/B/E/S. Revenue increased 8.1 % to $3.51bn in the latest quarter, beating the average analyst estimate of $3.36bn.
Textron’s net profit rose to $177mn, or 65 cents per share, from $167mn, or 60 cents per share.
The company reported earnings from continuing operations of 66 cents per share, above the average analyst estimate of 64 cents.
Textron’s stock was untraded before the opening bell yesterday.

Syngenta
Syngenta, the world’s largest pesticides maker being taken over by state-owned ChemChina, still expects the deal to close this year despite concerns that US regulators could throw a spanner in the works, it said yesterday.
The Swiss company’s shares slipped after it reported a worse-than-expected drop in first-half profit yesterday, adding to a heavy discount with ChemChina’s agreed offer price. “We are having constructive discussions with all regulatory authorities which reinforce our confidence in closing the transaction by the end of the year,” new Chief Executive Erik Fyrwald said in Syngenta’s results statement.
Syngenta shares were down 0.2% at 387 Swiss francs after the pesticides and seeds maker said first-half net profit fell 13%, hurt by weak agricultural markets, a rainy summer in Europe that kept farmers from spraying and a continued decline in sales in Latin America.
The share price is well below ChemChina’s offer of $465 (458 Swiss francs) per share, plus a 5 franc special dividend — worth a combined 463 francs — and currently dangles an almost 20% gain in front of shareholders.
However, there are persistent concerns in financial markets that the deal could yet be scuppered by the Committee on Foreign Investment in the United States (CFIUS). Syngenta derives about a quarter of its sales from North America.
Syngenta finance chief John Ramsay said the current share price discount to the offer price reflected investor uncertainty about what stance CFIUS will take. “It’s largely due to the fact that CFIUS is an opaque process,” he told Reuters.”I think arbitragers typically go out into the market, they listen to the chatter, they take a position.
The challenge for everybody is that CFIUS is very tight, very private.
They do their job professionally but they don’t go leaking information.” Syngenta reported group net income declined 13 % to $1.06bn in the first half from a year earlier, below a Reuters poll forecast of $1.28bn. Efficiency measures, lower raw material costs and currency hedging should allow Syngenta to keep its full-year EBITDA margin at around last year’s level, he said.

General Electric
General Electric Co yesterday reported a sharp rise in adjusted net income in the second quarter, as its aviation, healthcare and power businesses countered weak demand for oil and gas and transportation equipment.
GE, long considered a bellwether for the US economy, posted adjusted earnings of 51 cents a share, topping the 46 cents that analysts expected, according to Thomson Reuters I/B/E/S.
The figure included a gain of 20 cents a share from the sale of GE’s appliances business to Qingdao Haier Co Ltd, which closed in June.
The gain was offset by 9 cents in restructuring costs and other items, GE said.
GE affirmed its 2016 operating forecast and forecast strong growth continuing in the second half.
“The diversity and scale of our portfolio enabled the company to perform well despite a volatile and slow-growth economy,” GE Chief Executive Officer Jeffrey Immelt said in a statement.
Revenue rose 15% to $33.49bn, helped by a 31% rise in the power business. Sales from continuing industrial operations, known as organic segment revenue, fell 1 % to $24.4bn, less than some analysts expected. Net profit was $2.73bn, or 30 cents a share, compared with a loss of $1.36bn, or 13 cents a share, in the year-earlier quarter.
GE’s order backlog rose 1.3% to $320bn, reflecting a 2% rise in services orders to $233bn, while equipment orders fell 2.2% to $86bn.
With the stock performing well in recent weeks, the second-quarter results “should be sufficient to keep the bulls satisfied,” analyst Deane Dray at RBC Capital Markets wrote in a note.”But we would not expect anything better than a flattish stock performance today, with much depending on commentary” from the company conference call.