Societe Generale yesterday reported stronger than expected third-quarter profits, helped by a big one-off gain related to the French bank’s stake in Euroclear and higher overall revenues.
SocGen made a capital gain of €271mn after the bank more than doubled the valuation of its Euroclear stake, which had a €250mn positive impact on the bottom line.
Big European banks like SocGen are struggling to boost profitability as low interest rates hurt their traditional lending business, while they have to spend heavily on new technologies to keep up with customer demands.
“Societe Generale published solid results in the third quarter 2018 with a good level of profitability,” chief executive Frederic Oudea said in a statement.
The bank’s shares rose 3.6%. They are down nearly 20% so far in 2018.
Analysts at brokerage Jefferies said SocGen’s results looked positive, although they would look to see if it could continue that trend in forthcoming quarters.
“We need to see a strong performance over consecutive quarters for Societe Generale to see full benefits,” Jefferies said.
Net profits rose 32% to €1.23bn ($1.41bn), above an average profit forecast of €917mn in a poll of analysts by Inquiry Financial on behalf of Reuters.
Revenues during the quarter rose 9.6% to €6.53bn, above the €6bn expected by the analysts.
SocGen’s French retail bank also performed better than the previous quarter with a 1.8% revenue increase, while revenue from its fixed-income, currency and commodity trading division was stable. SocGen’s stable performance at its fixed-income, currency and commodity trading arms contrasted with its French rivals BNP Paribas and Credit Agricole, which both said market trading slumped even though they posted higher overall Q3 profits.
Burberry’s new creative designer has had an “exceptional” response to his debut collection, but it will take time to turn around a business where first-half revenue and operating profit both fell, the luxury brand said yesterday.
Former Givenchy star Riccardo Tisci’s first designs for the British label, which included metallic trimmings and corset-like belts on Burberry’s trademark trenchcoats, wowed critics and buyers alike when they were shown in September.
“The initial response from influencers, press, buyers and customers to our new creative vision and Riccardo’s debut collection ‘Kingdom’ has been exceptional,” chief executive Marco Gobbetti said.
But he added his multi-year turnaround was only in the first phase and translating the buzz around the brand into better financial results would take time.
While luxury brands have benefited from a rebound in Chinese demand and interest from younger shoppers, Burberry has lagged rivals such as LVMH’s Louis Vuitton and Kering’s Gucci, leading to Tisci’s appointment in March.
Burberry reported revenue of £1.22bn ($1.60bn) for the 26 weeks to September 29, down 3% but ahead of analyst forecasts, and adjusted operating profit of £178mn, down 4%. It said its outlook for the full year for broadly stable revenue and adjusted operating margin at constant exchange rates and cost savings of £100mn, was unchanged. Chief financial officer Julie Brown said the response to Tisci’s collection, which will be in store in February, had been strong, with wholesalers in Europe, Middle East and Africa doubling their previous order levels.
Brazilian food processor BRF SA posted a wider-than-expected quarterly loss yesterday as trade embargoes, a drop in sales volumes and higher feed prices weighed on management’s efforts to turn the company around.
In its second quarter after a corporate restructuring following a string of bad financial and operating results, BRF said it lost 812mn reais ($218mn). That was almost double the average loss of 443mn reais forecast by analysts, according to IBES data from Refinitiv.
A decrease of roughly 3% in total sales volumes was partly compensated by price adjustments which helped the company keep net revenue roughly flat at 8.76bn reais, BRF said.
BRF, the world’s largest chicken exporter, said the average price of whole chicken in Brazil rose about 10% from last year as the market tightened in the face of higher grain costs.
BRF also cited one-off events including a truckers strike in May and trade bans as contributing to the price spike.
The trade embargoes, introduced after Europe found gaps in Brazil’s food inspection procedures, more than halved direct BRF poultry sales to Europe and Eurasia, which totaled 8,000 tonnes last quarter compared with 17,000 tonnes a year ago.
A Russian trade ban on Brazilian pork exports also hammered BRF’s business there.
The company’s direct pork exports to Europe and Eurasia tumbled to 1,000 tonnes from 28,000 tonnes, the filing showed. BRF’s international pork sales last quarter fell 37% to 31,000 tonnes and international poultry sales fell 8% to 181,000 tonnes.
The head of Deutsche Telekom warned that Europe’s largest telecoms company could face a disaster in its home market if German politicians botch plans for fifth-generation mobile services.
The comments from CEO Tim Hoettges came after Telekom raised its outlook for the third time this year as its US unit T-Mobile led the way and all of its divisions increased third-quarter profits, including its struggling IT services arm.
Germany’s telecoms regulator is finalising terms for an auction of 5G mobile spectrum which it will present on November 26. The actual process, expected to raise billions of euros, is due to take place in the first quarter of 2019.
“There’s a contest under way among politicians on network coverage and buildout,” Hoettges told reporters on a conference call.
“I am not going to take part in the further inflation of targets.
If we carry on like this, we will face an industrial policy disaster,” he added. His intervention appeared aimed at containing the costs of building out Germany’s 5G network while cementing Telekom’s leadership on its home market.
Hoettges opposes ideas like national roaming that would help new market entrants cover areas where they don’t have their own infrastructure. Germany’s existing 4G networks are notoriously patchy, leading the government to pile pressure on the industry to plug holes in their coverage.
Those demands are spilling over into the 5G debate, even though the 2 Gigahertz and 3.6 Gigahertz frequencies on offer are suited to data-intensive applications such as connected factories, and don’t have the range to cover remote rural areas.
The 5G roll-out around the world should generate billions in orders for equipment makers such as Ericsson and Nokia.
British supermarket group Sainsbury’s talked up its prospects with or without Asda, the close rival it has agreed to buy, after beating forecasts with a 20% rise in first half profit.
The £7.3bn ($9.6bn) deal to buy the UK arm of Walmart, a transaction that could see the combined group leapfrog Tesco as Britain’s biggest retailer, is being assessed by the Competition and Markets Authority (CMA). The CMA said last month it expected to issue provisional findings early next year.
Sainsbury’s and Asda have both said they believe the CMA will not insist on a level of store disposals that will make the deal, announced in April, unattractive.
“We remain confident in the case that we’re making to the CMA,” said chief executive Mike Coupe, noting Sainsbury’s “key and central” argument was that the deal would lower prices for customers. The CEO also told reporters that Sainsbury’s was on the right track in a sector that has faced pressure from the rise of discount chains and fears that online shopping giants could muscle into the territory.
“We have a clear strategy and you can see in the numbers today we’re delivering against that strategy.
We’re adapting our business to changes in customers’ behaviour and we’ll continue to do so,” Coupe said.
“We’re confident in our future whatever basis that future is.”
Coupe has already reshaped the group by buying general merchandise retailer Argos for £1.1bn in 2016.
Although industry data shows Sainsbury’s trading performance is lagging rivals, its shares are up 32% this year on the back of the Asda proposal.
Shares in Sodexo, the world’s second largest catering company, jumped yesterday after the French firm met annual earnings expectations and vowed to improve revenue this year.
Sodexo had warned in March that its annual results would take a hit from weakness in its North American business, where cost savings have lagged and several large contracts have taken time to pay off.
Sodexo reported a 1.6% rise in like-for-like revenue of €20.407bn ($23.33bn), slower than the 1.9% growth it achieved the previous year but topping the €20.277bn expected by analysts in a poll by Inquiry Financial for Reuters.
“We are confident over this year though we are not yet at satisfactory sales growth and profitability levels.
Growth is coming back in the US but is not yet at levels I want,” chief executive Denis Machuel said on a call with journalists.
“This has been a challenging year for Sodexo, but we know what went wrong, and we know what we need to do to fix it,” said Machuel, adding that the “turnaround is going to take some time”.
The caterer, the second largest after Compass Group, plans a renewed focus on food contracts, improving its productivity and cutting its use of temporary workers to help contain costs.
There were signs of progress in some key performance indicators including client retention rate which rose 30 basis points to 93.8% helped by an improvement in education in North America. Sodexo is aiming for a retention rate of 95% in three years.
Commerzbank’s third-quarter net profit beat forecasts yesterday despite a sharp year-on-year drop as the German lender focused on a major overhaul, sending shares higher.
Net profit of €218mn ($249mn), while down from €467mn a year earlier, was above the €211mn forecast by analysts in a Reuters poll.
In a note to clients, analysts at Citi called the results “underlying positive”, and Credit Suisse said they represented a “good Q3 update”. Germany’s second-largest listed bank, still partly owned by the German government, is overhauling its business by reducing staff, digitising its back office and expanding its retail customer base. “The environment remains challenging and although we have made a lot of progress, we still have some work to do,” chief executive Martin Zielke said in a statement.
The restructuring programme, announced in 2016, is due to be completed in 2020. The bank maintained its outlook for the full year, stating that revenue from private and small business customers would rise from 2017, while revenue from corporate clients would decline. The lender is slightly revising down its 2020 revenue target of €9.8bn due to factors macroeconomic factors like Brexit and ongoing trade tensions, chief financial officer Stephan Engels said in a call with analysts.
VTB, Russia’s second-biggest bank, said yesterday its third-quarter net profit more than doubled from a year earlier on higher lending although the results still fell short of analysts’ expectations. VTB said its net profit rose to 41.2bn roubles ($623mn) in the third quarter from 17.4bn roubles a year earlier.
Analysts polled by Reuters on average expected VTB to post 45.3bn roubles in the third-quarter net profit.
For the first nine months of 2018 state-run VTB posted an 85.5% increase in net profit to 139.7bn roubles.
The net profit increase was driven by “growth in core income lines, lower provision charges year-to-date and enhanced cost efficiency,” the bank said. Dmitry Olyunin, VTB’s first deputy president and management board chairman, said the banking sector growth in Russia has exceeded initial expectations even though the central bank’s rate has not gone as low as previously expected.
“We are moving towards the target of 170bn roubles in profit at year-end,” Olyunin told a conference call with reporters, presenting the bank’s financial results. Gross loans to legal entities rose 11.4% by the end of the third quarter compared with three months earlier, while gross loans to individuals declined by 3.1%. The bank’s total assets rose 2.8% to 14.07tn roubles by the end of the third quarter from 13.68tn roubles as of end of the second quarter. The bank’s operating income before provisions rose 27.2% in July-September, while net interest income increased by 3.3% to 120.5bn roubles.
British bicycles-to-car parts retailer Halfords Group reported a 17.1% fall in first-half underlying pretax profit yesterday, hurt by higher operating costs and a challenging consumer environment.
Halfords has already warned profits will not grow until its 2021 financial year as it looks to boost investment in its stores, services and digital operations to improve its position in Britain’s ultra-competitive retail market.
Britain’s traditional retailers are under pressure from subdued consumer spending, a drop in the value of the pound following the country’s vote to leave the European Union and stiff competition from online retailers.
Industry data for October showed that while total UK retail sales rose 1.3% year-on-year, uncertainty over the economic outlook was holding back spending.
Halfords, which was founded in 1892 and was bought four times before its London market debut in 2004, said underlying pretax profit fell to £30.5mn ($39.97mn) in the 26 weeks ended September 28, from £36.8mn a year earlier.
However, good sales of electric bikes, dashboard cameras and motoring services helped half-year revenue rise 1.9% to £599.9mn. The company stuck to its forecast for underlying pretax profit in its 2018/19 financial year to be broadly unchanged from the £71.6mn made in 2017-18.
Italy’s biggest bank UniCredit missed third-quarter profit forecasts due to a write-down on its stake in Turkish bank Yapi Kredi and said it would step up cost cuts to offset lower revenues.
A slump in the Turkish lira has hit the value of UniCredit’s 41% indirect stake in Yapi. Like other Italian banks, UniCredit also faces trouble at home where the spending plans of Rome’s new anti-establishment government have sent sovereign debt costs soaring.
UniCredit said net profit came in at €29mn ($33mn) in the third quarter after an €846mn write-down on Yapi.
Analysts had been looking for a €907mn profit based on a consensus provided by the company.
Net interest income and fees were in line with expectations. UniCredit confirmed its 2019 profit goal of €4.7bn but increased proposed cost cuts by €200mn to offset lower-than-expected revenues in a more challenging environment.
“We maintain the operating profitability (target),” CEO Jean Pierre Mustier told a press call.”We’re being super conservative on the Turkish side and the trading side and we compensate with lower costs.” The bank’s core capital ratio fell to 12.11% on a fully-loaded basis down from 12.51 at end-June. UniCredit said it now saw its core capital next year at 12-12.5% compared with a previous estimate of more than 12.5%.
Siemens said it expects a continued favourable market environment with limited risks related to geopolitical uncertainties as the German engineering group on Thursday reported industrial profit in line with expectations.
The trains-to-turbines maker said it wanted to raise its dividend and launch a new €3bn ($3.4bn) share buyback after reporting flat industrial profit of €2.145bn during its fiscal fourth quarter.
The company’s net profit fell 46% to €681mn during the three months ended September 30, better than the €595mn expected by analysts polled by Reuters.
The figure was hit by €301mn in restructuring charges Siemens incurred from job cuts at its troubled Power and Gas business.
The business, which has been hit by a collapse in demand for large gas-powered turbines, chalked up a loss of €139mn during the quarter.
Siemens said the service business did well, but demand continued to slide in its manufacturing side.
The business, which competes with General Electric and Mitsubishi Heavy Industries, also has seen falling prices due to over-capacity in the sector.
General Electric last month took a $22bn goodwill charge on its power business, which it will reorganise into two businesses as new chief executive Larry Culp took his first steps to revive the struggling American conglomerate.
Zurich Insurance posted a 2% rise in nine-month property and casualty premiums and confirmed its financial targets yesterday despite a hit from larger-than-expected natural catastrophe losses.
“We are pleased with the development of our businesses over the first nine months of the year and are on track to achieve our 2017-2019 financial targets,” chief financial officer George Quinn said in a statement.
“Life continues to perform very strongly, while the Farmers Exchanges are seeing good momentum in key customer metrics and underlying profitability.
In property & casualty we continue to focus on profitability over volumes in what remains a challenging environment.”
Gross written premiums in property and casualty rose to $25.87bn through September.
On a like-for-like business, however, premiums were flat.
Insurers across the globe have been restructuring their businesses to cope with competitive and regulatory pressures, including pricing pressures, and last year’s record losses from natural disasters. Zurich said it increased rates in its P&C business by 3% overall in the first nine months.
Chinese PC maker Lenovo Group reported a 21% rise in second-quarter net profit, beating expectations, thanks to more premium computers it sold during the period.
Net profit for the quarter ended September came in at $168mn, versus $139mn a year earlier and an average estimate of $118mn from 9 analysts, according to Refinitiv data. Revenue rose 14% to $13.38bn, the highest quarterly revenue in almost four years, helped by an improvement in product mix towards more commercial PCs — a more lucrative category than consumer PCs.
“The Group remains confident in its core PC business, and aims to grow at a premium to the market in revenue without compromising profitability,” Chairman and CEO Yang Yuanqing said in a filing to the Hong Kong Stock Exchange.
“Lenovo will leverage industry consolidation opportunities, and drive growth in high-growth segments such as gaming PCs, Thin & Light, Visuals, and workstations,” Yang said. Lenovo, which lost the world’s largest PC maker crown to HP Inc in 2017, said it had returned to the top spot with a 23.7% market share, according to industry tracker IDC.
Global PC shipments edged up 0.1% in the third quarter of the year to 67.2mn units according to data from Gartner, with Lenovo cornering the biggest share due to commercial PC growth and its joint venture with Fujitsu.
Lenovo said pretax profit at its personal computer and smart devices group rose 42% year-on-year to $940mn in its fiscal first half of April through September on a 5% pretax profit margin.
The strong core performance comes even as Lenovo continues to struggle in its smartphone business amid fierce competition.
Payments company Square forecast fourth-quarter adjusted profit below Wall Street estimates and its shares fell nearly 4% in after-hours trading.
The company, founded and led by Twitter chief executive officer Jack Dorsey, said it expects earnings of 12 cents to 13 cents per share for the final three months of 2018, while analysts were projecting 15 cents, according to IBES data from Refinitiv.
Square did report a higher-than-expected third-quarter profit, as it earned more from processing transactions and its push into financial services, including lending to small businesses.
The San Francisco-based company announced last month that its long-time chief financial officer Sarah Friar was stepping down in December.
Friar had steered the company through its blockbuster IPO in 2015 and news of her departure sent shares tumbling.
The search for a new CFO is being led by independent director David Viniar and board member Roelof Botha, Dorsey said on a call with analysts.
“That search has been progressing,” Dorsey said.”We will not be sharing a timeline, but we are working with urgency, and this is my No 1 focus at the company, is to make sure we fill this role.”
Square, best known for its signature small white credit card readers that are plugged into smartphones, has been aggressively expanding into a wider range of financial services, such as lending.
In October the company made its first significant push into consumer credit by offering a new service that enables customers of its small-business clients to pay for purchases in instalments.
Nissan Motor Co yesterday said it had more work to do to rein in US vehicle discounts to improve profit in its key market, after it took a surprisingly big profit hit from sluggish sales as well as currency moves in the second quarter.
Japan’s second-biggest automaker and domestic rivals including Toyota Motor Corp have struggled with low profit in North America for the past two years as they expanded discounts in an increasingly competitive US market where vehicle sales have plateaued near record highs.
“Unfortunately we can’t say that we’ve been able to lower incentives significantly,” chief financial officer Hiroshi Karube told reporters at an earnings briefing. During the July-September quarter, the automaker eked out only a 1 percentage point improvement in incentives as a proportion of vehicle sales revenue, he added.
“We’re still not there yet,” Karube said. “We have a lot of work to do in the third and fourth quarters.” But Nissan was making progress in reducing stock of older models, he said, which would help it cut discount levels in the second half of the year.
The automaker is betting that the latest version of its high-volume Altima sedan will boost overall US sales and help trim incentive spending following its launch last month, but the new model comes at a dire time for sedans.
Japanese automakers in the past two years have been struggling in the United States to sell sedans, a bread-and-butter product offering, as driver preferences have shifted toward larger models like pickup trucks and sport utility vehicles.
For the quarter, Nissan posted an 8.4% slide in vehicle sales in North America.
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