Shares in Swedish telecoms firm Ericsson shot up by 5% in early trades yesterday after it posted better-than-expected third quarter earnings, turning its first net profit in more than two years.
Ericsson’s net profit soared to 2.7bn kronor ($301mn, €261mn) during the period July-September, compared to a net loss of 3.6bn a year ago.
Analysts had expected a loss of 167mn kronor.
“We see improvements across our businesses,” chief executive Borje Ekholm said in the report.
Once a market leader in the mobile phone industry, Ericsson saw its earnings slump year after year following the meteoric rise of smartphone giants in the United States and Asia.
But it has fought on against the odds, adapting to the rapidly shifting market by focusing its attention on research and development of new technologies for telecoms equipment.
The company launched a major 10bn kronor restructuring drive in July 2017 that has seen 20,500 jobs cut.
Ericsson is now finally able to see the light at the end of the tunnel, with good opportunities ahead as operators prepare for the roll-out of 5G.
“There is strong momentum in the global 5G market with lead markets moving forward,” said Ekholm, who has headed Ericsson since January 2017.
“The global radio access market is recovering from several years of negative growth and our investments in R&D have positioned us well to benefit from this development,” he added.
Sales during the third quarter rose by 8.9% to 53.8bn.
Gross margin, excluding restructuring costs, meanwhile skyrocketed to 36.9%, up from 28.5% a year ago.
Ericsson’s networks division, its core operations, saw sales rose by 5% and its gross margin climb to 41.5%, up 6.7 points in one year.
Ekholm warned that “more work remains, however, to get all parts of the business to a satisfactory performance level.
We remain confident in reaching our long-term target of at least 12% operating margin beyond 2020.”
In the third quarter, Ericsson’s operating margin was 6%, compared to -7.4% a year ago.
Travelers Corp is girding for “significant” losses from Hurricane Michael, which caused destruction in Florida and six other US states this month, chief financial officer Daniel Frey said yesterday.
Travelers, one of the largest US property and casualty insurers, is still reviewing the losses but expects them to be “manageable,” Frey said in a call with analysts to discuss third-quarter results.
They will not preclude the company from restarting a stock buyback program planned for next week, he added.
Hurricane Michael occurred in early October, so its losses will affect fourth-quarter results.
During the third quarter, Travelers’ profit more than doubled, driven by lower catastrophe losses and an increase in premiums and investment income.
Net premiums written rose 6% to $7.06bn, helped by improved prices coupled with higher levels of retention.
Higher returns from its fixed income and private equity portfolio business helped boost investment income by 20% to $547mn.
Net of reinsurance, Travelers’ catastrophe losses plunged 62.3% to $264mn in the quarter, and the insurer incurred higher-than-expected losses in September in the aftermath of Hurricane Florence that hit North Carolina, a state where the company has a large presence.
The company’s combined ratio fell to 96.6% from 103.2% a year earlier.
A ratio below 100% means the insurer earns more in premiums than it pays out in claims.
Net income rose to $709mn, or $2.62 per share, in the quarter, from $293mn, or $1.05 per share, a year earlier.
Excluding items, the company earned $2.54 per share while analysts expected $2.26, according to Refinitiv data.
Total revenue rose 5.4% to $7.7bn.
The insurer incurred a $436mn charge from catastrophe losses in the same period last year due to mounting claims arising from hurricanes Irma, Maria and Harvey, which hit the United States.
Travelers has closed more than 90% of homeowners’ claims stemming from Hurricane Florence, chief executive officer Alan Schnitzer said during the call.
Philip Morris International
Philip Morris International, maker of Marlboro cigarettes, maintained its full-year guidance yesterday after higher pricing helped it to report better than expected quarterly sales and profit.
Sales were helped by market share gains and pricing increases, the company said.
Philip Morris is pinning its hopes for the future on its IQOS device, which heats tobacco instead of burning it, thereby producing a vapour instead of smoke.
It says this is less dangerous than smoking.
However, the company has previously cut its full-year forecast twice this year, citing currency fluctuations and slower IQOS sales.
Philip Morris stood by its 2018 forecast for diluted earnings per share of between $4.97 and $5.02 at prevailing exchange rates.
Excluding currency fluctuations, it said its forecast represented growth in adjusted earnings of 8-9%. The company expects sales to fall 5% in the fourth quarter, compared to the year earlier period, and earnings to be hurt by greater investment in its new IQOS models.
It reported third-quarter earnings per share of $1.44, ahead of $1.27 in the same period last year and analysts’ average estimate of $1.28, according to I/B/E/S data from Refinitiv.
Net revenue was $7.5bn, up 0.4%, held back by currency fluctuations.
Analysts had expected $7.17bn.
Total volume of cigarette and heated tobacco units was 203.7bn, down 2.1%. Excluding the impact of estimated distributor inventory movements, volume was up 1.1%, the company said.
The company said distributors in Japan reduced inventories of existing IQOS products ahead of the launch of new models of the device, which heats up small tobacco sticks.
Nonetheless, the company said worldwide sales of its heated tobacco units was set to almost double this year, and it continued to expect shipments of 41bn to 42bn units.
Fertiliser maker Yara International reported a smaller than expected increase in third-quarter earnings yesterday as higher prices and production were partly offset by the rising cost of natural gas, a key input.
The Norwegian company’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose 16% year-on-year to $402mn before non-recurring items, short of the $458mn in a Reuters poll of analysts.
“Yara’s operating environment is improving, due to a combination of higher grain prices and receding urea supply pressure, resulting in an improving urea price trend,” the company said in its third-quarter report.
“However, gas prices have increased in many regions including Europe, and look set to stay high through this winter,” Yara added.
The company predicted its fourth-quarter gas cost would rise by $125mn year-on-year, and the first-quarter 2019 cost would be $100mn higher than in the same period of 2018.
While the market price of fertilisers has also risen, the company’s product deliveries typically lag orders by around three months, chief financial officer Petter Oestboe said during a presentation of the earnings.
“We’re now selling at a higher premium,” he added.
Brokers Pareto Securities, which have a buy recommendation on Yara’s stock, said fertiliser prices were also likely to rise and this could help the company overcome the gas price pressure.
“In total, the (earnings) do not change our positive stand and hence weakness today could be a buying opportunity,” said Pareto, which has a target for the share price of 450 Norwegian crowns. The company’s plan to improve annual profits by at least $500mn by 2020 has so far resulted in gains of $330mn, up from $310mn at the end of the second quarter, Yara said.
Swedish telecom operator Tele2 yesterday raised its full-year profit forecast for the second consecutive quarter after producing third-quarter core earnings above analyst expectations, sending its shares higher.
“The final quarter before the closing of the merger with Com Hem was once again a quarter of solid business trends, allowing us to make another upgrade of our full-year guidance,” chief executive Allison Kirkby said in a statement.
Kirkby, who is moving to become CEO at Danish telecoms company TDC, said business in Tele2’s home market Sweden had remained resilient, while earnings in smaller markets such as Lithuania and Croatia also topped forecasts.
Sweden accounts for more nearly 60% of Tele2 group sales.
The company reported third-quarter adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 1.98bn Swedish crowns ($220.36mn), up from 1.77bn a year earlier, and beating the 1.88bn crown mean forecast in a Reuters poll.
The company raised its 2018 core EBITDA forecast to 7.0-7.2bn crowns, up from a previous range of 6.8-7.1bn.
It said in January it had agreed a $3.2bn takeover of cable TV company Com Hem, a deal expected to be completed in early November following approval from the European Commission.
Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip maker, reported a 0.9% fall in third-quarter net profit, amid worries over trade tensions that could undermine global technology demand.
TSMC, whose clients include iPhone maker Apple Inc, said July-September profit was T$89.07bn ($2.9bn). That compared with the T$89.0bn average forecast drawn from 23 analysts, according to Refinitiv data.
Revenue rose 1.9% to $8.49bn, compared with the company’s own estimate of $8.28bn-$8.38bn and the average $8.4bn estimate of 25 analysts, according to Refinitiv data.
The results come weeks after rival GlobalFoundries announced that it would not compete in the latest generation of chip-making technology, a move analysts said will further consolidate TSMC’s technological leadership advantage.
And semiconductor industry bellwether ASML Holding NV, a supplier to TSMC, posted better-than-expected third quarter results and gave a bullish outlook on Wednesday, helping assuage fears of slackening demand.
But an intensifying trade spat between the United States and China could also be a near-term risk for TSMC, whose semiconductors are widely used in electronics devices made in China.
KGI analyst Benjamin Chiang said in a report prior to the results in early October that near-term demand for products such as servers will be affected by the trade spat, but TSMC’s leading position in foundries could help it partially offset that.
Analysts said solid demand for Apple’s new iPhone models, estimated from contract electronics maker Foxconn’s revenues for September, will also support TSMC’s growth in the fourth quarter, a crucial year-end holiday season for smartphone makers.
Top US aluminium producer Alcoa Corp reported a better-than-expected quarterly profit on Wednesday, as a series of supply hits boosted alumina prices.
Alumina prices spiked during the year, largely due to supply disruptions such as lower production at Norsk Hydro’s Alunorte, the world’s largest alumina refinery, a strike at Alcoa’s Australian operations and US sanctions on Russian aluminium giant Rusal.
chief executive Roy Harvey said on a post-earnings call with analysts that while increased alumina prices represented an added cost, the company benefited from strength in third-party alumina sales.
Third-party alumina sales, or supplies to other smelters, surged 54.4% to $1.10bn in the third quarter, the company said.
Alcoa said it had a net benefit of $27mn in the third quarter from US tariffs as they helped push up the Midwest regional premium.
President Donald Trump in March imposed tariffs on imported aluminium aimed at boosting domestic aluminium makers against the backdrop of overcapacity in China.
The tariffs, which came into force in June, also extended to products from allies such as the European Union and Canada.
Alcoa in August asked the US Commerce Department to exempt from tariffs its purchases of 40,000 metric tons of aluminium from Canada, and is awaiting the government’s response.
Excluding certain items, Alcoa earned 63 cents per share, easily topping expectation of 36 cents, according to I/B/E/S data from Refinitiv.
Peter Ward, an analyst at Renaissance Macro Research, said the quarter was “okay” given the competitive challenges in the market. “The Street had recently cut estimates way too much.”
The company tightened its 2018 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) forecast to range between $3.1bn and $3.2bn, raising its midpoint slightly, compared with its previous expectation of $3.0bn and $3.2bn.
Net loss attributable to Alcoa was $41mn, or 22 cents per share, in the third quarter ended September 30, compared with a profit of $113mn, or 60 cents per share, a year earlier.
The results include a charge of $160mn mainly from the transfer of certain of the company’s US pension and retirement benefits.
Revenue rose 14.4% to $3.39bn, topping analysts’ average estimate of $3.31bn.
US steelmaker Nucor Corp reported a tripling in profit in the third quarter as a strong US economy and President Donald Trump’s hefty tariffs on steel imports supported robust growth in both shipments and prices.
Average prices per ton achieved by the country’s largest producer rose 23% from the same quarter a year earlier and 7% from the second quarter, when the 25% tariff on imported competition was still kicking in.
Nucor steel mill’s shipments increased 7% in the quarter, while sales to external customers rose 6% from a year earlier.
Net sales rose to $6.74bn from $5.2bn, beating estimates of $6.63bn.
Net income attributable to shareholders rose to $676.66mn in the third quarter ended September 29 from $254.85mn a year earlier.
The company posted earnings per share of $2.13, compared with 79 cents a year earlier.
Excluding one-time items, the company earned $2.33 per share, just short of estimates of $2.35, according to I/B/E/S data from Refinitiv.
German software company SAP reported a 41% jump in cloud revenues in the third quarter as its business transformation gathers pace, enabling management to raise guidance for revenues and profits this year.
At Wednesday’s close, the stock was up 7.4% year-to-date.
Europe’s most valuable tech company is ramping up sales and installations of its cloud-based S/4HANA business suite, which is superseding its mainstay Business Suite enterprise software that is sold under licence and runs at on-site servers.
New cloud bookings, an order entry metric, rose by 37% in the third quarter at constant currencies. That underpinned the firm lifting its 2018 growth forecast for cloud revenues to 36.5-39% from 34-38% previously.
“The future has never been brighter at SAP — we’re fired up and ready to go,” CEO Bill McDermott told journalists on a conference call, highlighting a full fourth-quarter order book.
McDermott claimed the mantle for SAP, which competes with Salesforce and Oracle, as the world’s No.1 cloud enterprise software company by users — it has 170mn — and said it was also the fastest-growing in the cloud.
SAP now expects total revenues to grow 7.5-8.5% in 2018, up from 6-7.5% previously.
It raised the lower end of its forecast range for operating profits by half a percentage point, narrowing it to 9.5-11%. Figures are at constant currencies and on a non-IFRS accounting basis.
The bullish outlook contrasts with resistance among some SAP customers to move core processes from on-site data centres to remote servers.
In a survey this week, just 10% of respondents in SAP’s home market of Germany said they were willing to make that change.
The national DSAG user group urged the company not to retire the Business Suite as planned in 2025, but instead to continue a hybrid offering of cloud and on-site services.
“Cloud doesn’t always mean process simplification — it can also be a straitjacket,” said DSAG board member Marko Lenck.
The transition entails a trade-off for SAP: Growth in the subscription-driven cloud business helped boost the share of predictable revenues at SAP by 3 percentage points in the third quarter to 68%. But it needs to achieve scale to deliver on the promise of an expansion in operating margins to over 30% as the cloud business tends to dilute the impact of the mature, but highly profitable, licence business.
Non-IFRS operating margins, at constant currencies, grew by 10 basis points to 29.4%. Finance chief Luka Mucic said boosting efficiency was more important for margins than the revenue mix.
UNSTOPPABLE McDermott said the cloud was “where the customer wants us to go” while also playing up SAP’s push into Customer Relationship Management (CRM) with its recently announced C/4HANA suite.
“We are going to take over the CRM market, not because we are bold and innovative, but because the customers want the best end-to-end service,” he said.
SAP’s third-quarter non-IFRS revenues grew by 10% at constant currencies, ahead of market expectations.
Non-IFRS operating profit growth of 11% was less than expected.
At the bottom line, earnings per share of €1.14 beat the mean view in a Reuters poll of analysts.
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