Dettol Flies Off Shelves; Chemicals Feel the Heat: Earnings Wrap
(Bloomberg) -- The second busy week of Europe’s earnings season is highlighting the haves and have-nots of the pandemic, with some industries struggling to reach suppliers and others busier than before as they navigate through the crisis.
Reckitt Benckiser Group Plc, the maker of Lysol and Dettol, posted its strongest start to a year in recent memory as hygiene-conscious customers loaded up on cleaning supplies. U.K. retailer J Sainsbury Plc said grocery sales were surging, but that fewer people were shopping for clothes and an initial jump in orders from its Argos stores was beginning to taper off. Deutsche Boerse AG reported a 27% increase in net revenue for the first quarter as increased volatility kept traders busy and lifted volumes.
On the other hand, BASF SE, which gets a large part of its sales from the floundering auto industry, warned that it anticipates a significant revenue drop in the second quarter after it abandoned its full-year forecast late on Wednesday. Nokia Oyj said some of its customers may start to reassess their spending plans and said it sees difficulty getting the parts it needs and delivering products next quarter.
Royal Dutch Shell Plc, trying to find a way to cope with a historic drop in oil prices, cut its dividend for the first time since at least the Second World War.
A common theme across industries: CEOs are finding it difficult to impossible to quantify the expected impact of the coronavirus pandemic over the next few quarters, leaving investors flying blind in trying to value stocks. For now, they’re defaulting to optimism, with lockdowns easing and stimulus flowing, lifting the Stoxx Europe 600 Index by 24% since the depths of the selloff in March. The benchmark fell 0.5% at 12:05 p.m. Thursday in London.
- European stocks declined, led by banks and metals companies.
- Shell Makes Historic Dividend Cut as Oil Crash Reshapes Industry
- SocGen Posts Loss as Equities Trading Wiped Out in Rout
- For more on dividends, click here. For the latest company guidance, click here.
- Spain Cases Slow; China Rejects Trump’s Claims: Virus Update
Here’s the top virus-related earnings news for today by sector.
- Danish brewer Carlsberg A/S reported its first decline in quarterly sales in two years as lockdowns led to a slump in demand in China, where the Danish company has become one of the most prominent beermakers in recent years. Revenue in the first quarter fell 7.4% on an organic basis, reaching 12.9 billion kroner ($1.9 billion), slightly higher than the analyst estimate for 12.8 billion kroner. Chief Executive Officer Cees ‘t Hart said volumes will decline again in the second quarter. Analysts praised the group’s resilience and the stock climbed 0.6% after bouncing between gains and losses.
- Reckitt Benckiser raised its outlook after high demand for hygiene and health products drove its strong start to the year. Comparable sales grew 13% in the quarter versus a company-compiled estimate of 5.3%. Sales of Lysol rose more than 50% in North America as the health crisis became more pronounced. The results cap a particularly unusual period for the company. In a bizarre twist, it felt compelled to advise shoppers against ingesting or injecting bleach after comments made by President Donald Trump. Analysts said Reckitt’s outlook is strong and the shares rose 4.4%.
- British American Tobacco Plc expects its full-year adjusted revenue growth at constant currencies to be at the low end of guidance. It said it has had a strong start to the year and most of its factories are open and operating at full capacity. Shares rose as much as 1%, with Jefferies saying BAT’s earnings and dividend outlook is encouraging.
- Food company Kerry Group Plc withdrew its earnings guidance, and said the impact of the outbreak on second-quarter performance will be “much more significant” than in the first three months of the year. While stockpiling by customers boosted the company in March, Kerry said its food-service channel will continue to be affected while restrictions in movement remain. Bloomberg Intelligence said the firm’s bias to food-service will be its “Achilles heel” in the near term. The shares fell as much as 2.2% only to erase losses at midday.
- Sainsbury said the pandemic will disrupt its business until at least mid-September and anticipates profit for its 2021 financial year will be flat if that’s the case. Earnings for the 2020 fiscal year fell by 2% but was slightly ahead of analyst expectations. The stock fell as much as 5.1% with Morgan Stanley saying a lack of visibility on the dividend is a key negative.
- Royal Dutch Shell cut its dividend as the pandemic and a price war hammers oil markets. It is the first time Shell has reduced its payout since the Second World War. The Class A shares slumped by as much as 7.9% in Amsterdam and some analysts said the smaller dividend payout may be the new normal. You can follow the live blog on Shell’s earnings report here.
- German chemical company BASF withdrew its outlook but kept its 2019 dividend. It said it anticipates a significant drop in second-quarter sales. The group is facing a cash and earnings crunch at a vital time, with spending on a new plant in China ramping up and work ongoing on selling its construction chemicals and pigments unit. Analysts said the results were ahead of consensus across the board but shares fell by as much as 4.2%.
- Specialty chemicals maker Clariant AG expects a hit to sales and profit in 2020 from the pandemic and said the effects of the outbreak will be more clearly seen in its second-quarter operations. First-quarter sales were slightly below consensus, affected by lower demand due to a mild winter and the virus. The stock fell as much as 6.1%, with Baader Helvea noting a weak performance in de-icing.
- Catalysts firm Umicore SA said it anticipates its recurring earnings to be “well below” the previous year in 2020 on hits to its catalysis and its energy and surface tech units. The shares fell as much as 4.6% and Citigroup said demand from Umicore’s key auto end-markets will be slow to recover.
- LafargeHolcim Ltd. said the real impact of the pandemic will show through in the second quarter and it’s too early to assess the effect this will have on its 2020 results. First-quarter sales slumped 11%, driven by a 24% fall in the Asia-Pacific region, though the company said it’s seen encouraging signs in April of a recovery in Chinese demand. Analysts said the update shows resilience. The shares rose as much as 5.1% though they were unchanged around midday.
- Toilet manufacturer Geberit AG said the pandemic started to have a negative impact in virtually all of its markets from the second half of March onward. The company said it can’t currently provide an outlook. The stock jumped as much as 6.1% as earnings and margins beat expectations.
- Irish construction materials supplier Kingspan Group Plc said its sales fell by 35% in April amid the full or partial closure of construction markets worldwide. It expects to be near breakeven for April, which is a significant month for yearly profit. The shares fell as much as 4.8%.
- Nokia lowered its outlook for 2020 and warned that the pandemic may make it hard to get crucial components and deliver its products to customers in the second quarter. So far, the network-equipment vendor has seen little impact on demand, but some customers may reassess their spending plans in the wake of the outbreak, Chief Executive Officer Rajeev Suri said. The shares jumped as much as 6.7%.
- French phone carrier Orange SA reported first-quarter profit in line with estimates and a slight beat on revenue. With most of its European stores closed, equipment sales are down. However, retail income was stable in France and the company kept its guidance for the full year. Orange had already cut its full-year dividend, blaming uncertainties around coronavirus. The shares were up as much as 2%, and Bloomberg Intelligence said the company is entering the Covid-19 period in good shape.
- Dutch telecoms group KPN NV said it started to see a limited impact from the virus in the latter part of the first quarter and that risks to its outlook have increased. The shares bounced as much as 5.4%. Swisscom AG reported results roughly in line with last year, saying that Covid-19 had “minimal” impact on first-quarter earnings. The carrier said it recorded 70% more mobile phone calls in March than in the previous month and reached peak levels every night at prime time with TV and streaming services, something that only happened on Sunday evenings before the crisis. Swisscom stock fell by as much as 2%.
- Belgian telecoms firm Proximus SA maintained its full-year cash flow forecast as it reported first-quarter profit that was slightly ahead of consensus. Domestic peer Telenet Group Holding NV adjusted its outlook to take into account the effects of the virus lockdown as it posted a small beat on earnings and revenue. Telenet shares rose as much as 9.7% in Brussels and Proximus fell 0.4%.
- Societe Generale SA said it swung to a loss in the first quarter, with revenue declining by 16%. It set aside more money for bad loans and its stock traders were hit hard by the market volatility following the virus outbreak, with equities trading revenue down 99%. The shares dropped by as much as 6.1%. Morgan Stanley said the results were weak.
- Lloyds Banking Group Plc warned that the turmoil has made its old targets obsolete. Britain’s biggest mortgage lender booked a provision of 1.4 billion pounds for possible soured loans as efforts to halt the spread of the virus crushed the economy. Lloyds also scrapped its previous targets, saying the upheaval of the pandemic, which has led to widespread interest rate cuts, meant its guidance was no longer appropriate. Pretax profits in the quarter plunged 95%. Lloyds shares fell by as much as 6.6%.
- Spanish lender BBVA SA recorded 1.4 billion euros of provisions linked to the impact of Covid-19. The bank also booked a 2.1-billion-euro goodwill impairment for its U.S. unit, driven by the macroeconomic pressures caused by Covid-19. The shares fell as much as 6.1%. Domestic peer CaixaBank SA said its net income dropped by 83% in the first quarter and it has set aside 400 million euros for virus-linked credit provisions. And Banco Sabadell SA said net income fell by 64% as it set aside 213 million euros for potential virus-linked loan losses.
- Denmark’s Danske Bank A/S said profit this year will fall to at least 3 billion kroner, its lowest level since 2014, after impairments soared on the Covid-19 crisis. The shares fell by as much as 5.3%. Norway’s DNB ASA said its first-quarter net income sank 51%, adjusted its CET1 ratio target and said its 2020 targets are unlikely to be met. DNB stock fell by as much as 5.1%.
- Deutsche Boerse AG said revenue for the first quarter jumped by 27% as it got a boost from a spike in virus-related trading volumes. The exchange operator maintained its 2020 guidance and said volatility has exceeded that seen in the financial crisis. The results beat on several lines and topped even high expectations, Citigroup said. The shares rose by as much as 3.4%.
- Clients of Amundi SA, Europe’s biggest money manager, pulled 3.2 billion euros in the first quarter, with new investment in the firm’s joint ventures in Asia helping limit the damage as the pandemic pummeled markets. The withdrawals, coupled with sluggish performance in some funds, pushed assets under management down to 1.53 trillion euros. Jefferies said the results topped expectations. The shares fell 1.7%.
- U.K. wealth manager St. James’s Place Plc says net flows in April are below the same month in 2019, and 2020 is “shaping up to be another challenging year.” The firm has decided to withhold about one-third of its proposed final dividend. The shares fell as much as 5.7% with Panmure Gordon highlighting the drop in April net flows.
- Janus Henderson Group Plc suffered $12.2 billion of outflows in the first three months, the most for any quarter since the asset manager’s creation in a merger almost three years ago. That, paired with the coronavirus-fueled market rout, saw assets under management plunge to $294.4 billion from $374.8 billion at the end of last year.
- Chip-equipment maker BE Semiconductor Industries NV looks relatively unaffected by the pandemic, reporting higher-than-expected first-quarter earnings and forecasting a sequential increase in revenue in the second quarter. Its mostly Asian supply chain network has “functioned reasonably well considering the circumstances,” the Dutch firm said. The company expects its first-half financial performance to improve from last year, but said it’s difficult to look beyond that. The shares rose as much as 11%.
- Construction software maker Nemetschek AG expects at least stable or a slight increase in 2020 revenue as it reported a rise in first-quarter earnings, revenue and margins. It maintained its full-year outlook. The shares rose as much as 2.9%.
- Payments firm Network International Holdings Plc said revenue was broadly flat in the first quarter, with significant declines showing up once lockdown measures were put in place. The shares fell as much as 6%.
Metals & Mining
- Glencore Plc joined rivals in cutting spending plans this year as the world’s biggest commodity trader moves to protect its balance sheet. The company will reduce capital expenses in 2020 to between $4 billion and $4.5 billion from its previous forecast of $5.5 billion. Glencore also lowered output forecasts for metals such as zinc and nickel after operations were disrupted. Shares rose as much as 1.5% and Citigroup said the spending cuts and costs were better than expected, but reversed later to fall as much as 1.6%.
- Italian steel pipes maker Tenaris SA said it anticipates a substantial drop in sales and margins, particularly in the Americas, and that second-quarter revenue could be around 35% lower than in the first three months. First-quarter revenue fell by 5.9% year-on-year and the firm swung to an operating loss. The shares bounced as much as 4.6%, with analysts “positively surprised” by the firm’s cash flow and margin resilience.
- Engine maker Safran SA said it is seeking to deliver positive cash generation for 2020 despite challenges it faces. It said first-quarter revenue declined by 6.9% and warned the drop for the second quarter could be similar, while civil aftermarket revenue for the year may fall significantly. CEO Philippe Petitcolin said the group will shutter plants in coming months to cut costs. The shares rose as much as 6.8% with analysts positive on the cash flow guidance.
- Michelin SA said a slump in tire sales volumes accelerated in March as it reported a fall in first-quarter revenue. It said the outlook is highly uncertain but it does anticipate that lower raw materials costs will partially offset the fall in volumes it anticipates for the year. Analysts said the results were solid and the price mix “reassuring.” The shares rose as much as 3.8% in Paris.
- MTU Aero Engines AG says it saw negative effects from the virus in the first quarter and anticipates this will get worse in the second. Its first-quarter earnings fell and its margins missed expectations. But CEO Reiner Winkler said the company has seen no engine-order cancelations, is not planning layoffs and does not need government aid. The shares rose as much as 4.9%, with analysts saying the plane-engine maker was “largely unaffected” by the virus.
- Mall owner Unibail-Rodamco-Westfield said the impact of the virus will be made clear in its second-quarter results, with only a limited effect in the first three months since rents are billed and paid in advance. It said any effects in the first quarter were most clearly seen in its retail and its convention center properties. The shares rose as much as 5.1%, with Berenberg saying the company had made a good start to the year until the outbreak shut down shopping centers.
- French waste-and-water utility Suez said it is seeing the full effects of the pandemic on its revenue and profit in April, compared to a smaller impact in fewer markets in the first three months. It reported a fall in first-quarter earnings and said it’s too early to assess the impact for the full year. Citigroup said investors should be relieved that the virus effect on the business is manageable. The shares rose as much as 2.8%.
- Dental implants maker Straumann Holding AG said its first-quarter organic revenue declined by 1.4%. Berenberg said sales were below consensus, though much of the hit was foreign-exchange-related, while Jefferies said the company was having a strong start to 2020 before the virus hit. The stock climbed as much as 3%.
- Draegerwerk AG, the German maker of medical devices that’s profiting from soaring demand for its ventilators in the coronavirus crisis, said it expects to achieve a higher gross margin this year than originally forecast thanks to a better product mix. Draegerwerk didn’t give a more detailed forecast, referring to the “exceptional uncertainty” of the business. The shares fell as much as 6.6%.
- Logistics firm DSV Panalpina A/S said global supply chains remain under significant pressure due to the pandemic. First-quarter earnings missed consensus and the group is planning to cut costs to cope with the situation. The shares bounced as much as 5.9%, with analysts saying there is “a lot to like” in the report.
- Swiss Re AG, the world’s second-largest reinsurer, swung to a net loss of $225 million from a year-earlier profit as the virus crisis boosts claims and hurts the value of its investments. The company has exposure to canceled events like the 2020 Tokyo Olympics and Chief Financial Officer John Dacey said it’s difficult to predict right now what the company’s potential losses will be. RBC said it was a “difficult” first quarter for the insurer, with the underwriting results disappointing. The stock dropped as much as 4.9%.
- Lagardere SCA reported a 12.5% drop in like-for-like sales for the first quarter, and the French media and publishing company said it’s taking measures, such as adapting sales and pricing whenever possible and cutting costs, to mitigate the impact of the coronavirus crisis. Given the company’s exposure to the Asia-Pacific region, its Travel Retail business was the first to be impacted during the first quarter, the company said. The company expects revenue this month to be down by about 45% for its publishing division, 90% for travel retail and 40% for its other activities. The shares fell by as much as 1.8%.
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