BHP Warning Hits Miners, PSA Sees Car Sales Slump: Earnings Wrap

(Bloomberg) -- A dire outlook for Europe’s car market, caution about the potential for a new wave of Covid-19 infections and weak bottled-water sales were the order of the day as first-quarter earnings rolled in from European companies.

French automaker PSA Group forecast the European car market will shrink by a quarter this year because of the coronavirus outbreak, while mining giant BHP Group warned that a second wave of infections could derail the recovery in China’s steel industry. Danone withdrew its guidance as the pandemic takes a toll on bottled-water sales, though it did benefit from consumers stockpiling.

On the brighter side, Dutch payments firm Adyen NV reported a bounce in revenue, two medical-equipment firms saw demand grow and exchange-traded products company Flow Traders NV earned more in the first three months of the year than it did in the entire 2019.

Key Developments:

• European stocks fell with the Stoxx 600 benchmark down 2%, dragged lower by declines in oil and basic resources shares.
• BHP Sees Lower Capex Amid Caution Over Virus Second Wave
• Danone Withdraws 2020 Forecast Amid Coronavirus Uncertainty
• For more on dividends, click here. For the latest company guidance, click here.
• On Wednesday, we’ll have earnings from Swiss drugmaker Roche Holding AG, Dutch brewer Heineken NV, Swedish telecoms equipment group Ericsson AB, French hotel chain Accor SA and semiconductor manufacturer STMicroelectronics NV.
• Italy to Ease Lockdown; Singapore Sees 1,111 Cases: Virus Update

Here’s the top virus-related earnings news for today by sector.

Consumer

• Yogurt maker Danone said like-for-like sales grew in the first quarter amid stockpiling by consumers but it withdrew guidance for 2020 as bottled-water sales come under pressure from the pandemic. It’s facing challenges in adapting to rapidly-changing consumer demand and seeing higher costs in its supply chain. The shares fell 3%.
• Associated British Foods Plc said it’s too early to provide earnings guidance for this year and said the timing to reopen Primark budget fashion retail stores is uncertain. Primark has no online business, so the hit it has taken from stores being closed has been more severe than for rivals. Shares in the group fell as much as 6.5%.
  • Chief Executive George Weston said the group is working on plans to ensure social-distancing in Primark stores and would not be drawn on whether the pandemic will prompt Primark to launch an online business.

Basic Resources

• BHP reported a rise in iron ore output as the steel industry in China recovers from the pandemic, though it warned that a second wave of infections could threaten the rebound. The shares fell as much as 5.9% in London. The world’s biggest miner is reviewing its annual copper and energy coal guidance after cutting its expectations for nickel production and forecasting lower capex in fiscal 2021. The Covid-19 impact for the group is minor, with both iron ore production and shipments topping expectations, Goldman Sachs Group Inc. analysts said.
  • The Stoxx 600 Basic Resources sector dropped after BHP’s caution on the virus risks, with diversified miners and steel stocks slumping.
• Gold miner Centamin Plc kept its full-year production forecast at 510,000 to 540,000 ounces, as well as cash cost guidance at $630 to $680. CFO Ross Jerrard said the miner had a strong start of the year, with operational and financial performance delivered ahead of plan. The company will pay a first interim dividend of 6 cents. The shares rose by as much as 5% before dropping 1.3%.

Autos

• PSA Group said sales dropped by 16% in the first three months and it expects the European car market will shrink by a quarter in 2020. The owner of the Peugeot and Citroen brands, which is planning to merge with Fiat Chrystler Automobiles NV, said it has secured liquidity and has cut costs as it prepares for a rebound in what is a chaotic economic environment. The stock fell as much as 2.6% before rebounding as much 0.9%. Goldman Sachs said the results were solid but said the downturn in the car market will result in a “notable step-up” in inventories which will put pressure on the carmaker’s balance sheet and liquidity.
  • Bloomberg Intelligence’s Michael Dean said the prediction of a 25% drop in European car sales in 2020 is “scary but realistic.”

Financials

• It’s not all doom and gloom out there: Some companies actually benefit from the volatility in the financial markets. Flow Traders, the Amsterdam-based market maker for exchange-traded funds, said first-quarter net trading income surged to 495 million euros. The number exceeded the level achieved in all of 2019. The shares jumped as much as 7.5% but later reversed to fall as much as 3.5%, with analysts at KBC saying further upside is limited as they cut their rating on the stock.
• London Stock Exchange Group Plc still expects to complete its $27 billion takeover of data company Refinitiv in the second half of the year even as the European Union asked companies to put on hold formal submission of papers for regulatory review. First-quarter total income rose by 13%, driven by increased equity trading and higher clearing activity. Shares rose 0.2%. Citigroup said the equity trading and clearing results were notably strong.
• PKO Bank Polski SA, Poland’s biggest lender, said its first-quarter profit was hit by the virus and said it will set aside a “conservative” provision to cover deteriorating loan risks. The shares fell 3.3% in Warsaw.

Industrials

• Royal Vopak NV, the world’s largest independent oil storage company, said that space for traders to store crude and refined fuels has all but run out as a result of the fast-expanding glut caused by the coronavirus pandemic. The shares fell as much as 1.8% after the company posted first-quarter results on Tuesday, with ING saying the results were disappointing.
• Construction materials manufacturer Sika AG said its first-quarter sales grew and confirmed its medium-term targets, but said it can’t provide an outlook for 2020. CEO Paul Schuler said Chinese construction is bouncing back from the downturn. Jefferies said the results were a “slight beat” and the impact the virus has had so far has been more limited than anticipated. Sika shares were up 4.9%.
• Finnish forestry and packaging firm Stora Enso Oyj said it was discontinuing its quarterly guidance and annual outlook and said the decline in demand for European paper has accelerated. Handelsbanken said the firm’s packaging materials, forest and wood-products units all beat expectations. Shares in Stora Enso slipped 0.5%.
• Swiss pump maker Sulzer AG said its five factories in China have reopened and it is seeing a pick up in activity in the country. But the group plans to cut jobs this year as oil companies delay projects.

TMT

• Germany’s SAP SE said software license revenue dropped 31% to 451 million euros in the first quarter while cloud revenue jumped 27% to more than 2 billion euros. The company, which also announced late Monday that co-CEO Jennifer Morgan was stepping down, which Citigroup analysts said overshadowed the results, which had been pre-announced. The shares fell 2.4%.
• Adyen said revenue grew by more than a third in the first quarter despite fees from the travel and accommodation sector taking a hit. It said it processed 67 billion euros of payments in the first three months, a 38% increase, though warned that a deep recession could hurt its earnings. Adyen shares bounced as much as 7.8%, the most since January 2019.
• Just Eat, which is being acquired by Takeaway.com, said online food delivery orders rose 6% in the quarter to 65 million compared with the same period last year. Morgan Stanley said the order growth in the U.K. may disappoint.
• Swedish telecoms firm Tele2 AB said underlying earnings declined in the first quarter owing to lower equipment margins, higher bad-debt provisions and a reduction in international roaming due to the pandemic. The shares fell as much as 10%.

Health Care

• Laboratory equipment maker Sartorius AG reported growth in first-quarter earnings and said the pandemic has had a neutral impact on the group overall but very different effects on its divisions. It said demand for lab instruments was noticeably hit in January and February, but demand for consumables for producing medicine and vaccines and for diagnostic kits has been higher. The shares bounced as much as 11% to a record high. Warburg analysts said the company is “working like clockwork.”
• Sartorius Stedim Biotech, the company’s French business, raised its full-year sales forecast after reporting a strong start to the year. The virus has boosted demand for its single-use technology franchise as labs increase efforts to prevent cross-contamination. Shares surged as much as 14% to a record in Paris.
• Spanish plasma protein maker Grifols SA said it has the resources and liquidity to fulfill its short- and medium-term obligations. The company announced the development of an anti-Covid-19 blood plasma product, which may be available in mid-July, and is also spearheading trials in agreement with the U.S. Food and Drug Administration to determine the efficacy of such therapies. The shares rose 1.2%.

Travel & Leisure

• French state-controlled lottery and gaming group FDJ said that stakes over the first quarter dropped 5% to 4.1 billion euros, as a positive trend from the start of the year was cut short in its tracks in March 16, when France imposed a lockdown to fight the Covid-19 outbreak. The halt of most sports competitions meant the end of nearly 95% of sports betting, it says. The group outlined a cost-savings plan and cut its dividend by 30%. Shares rose 1.6%.

Energy

• Spanish natural gas firm Enagas SA said its dividend policy is unaffected by the pandemic, it has a solid liquidity position and that earnings grew in the first quarter. It said industrial gas demand in Spain has dropped since mid-March when restrictions to slow the virus outbreak were put in place. The shares rose 1.4%.

Market Strategy

• The relative performance of momentum shares indicates that the crisis period for stocks is not yet over, according to UBS strategists. High-momentum shares have typically outperformed their low-momentum peers in previous sell-offs before this trend reversed as the market recovers. This has not happened yet, the strategists said.
• The distress gripping crude oil markets may be a bullish signal for stocks, BTIG strategists said. Large historic dislocations between front and second-month oil futures have traditionally been a positive omen for markets, they said.
• Listed companies have an advantage over private entities in the pandemic turmoil as their accounts are scrutinized more closely and balance sheets are better positioned, Peel Hunt LLP says in a note.

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