BP’s 2018 profit doubles to 5-year high as output soars

BP joined its competitors in posting a strong 2018 performance, with a doubling of profits driven by strong growth in oil and gas output following a large US shale acquisition. Record utilisation of its oil and gas fields and refining capacity further helped BP seal what was a transformational year as the aftermath of the deadly 2010 Deepwater Horizon disaster eased. But while the London-listed firm’s revenue beat forecasts, debt rose and the pace of its share buyback scheme slowed in the last quarter after it paid the first and largest tranche of the $10.5bn BHP acquisition. BP shares rose more than 3.3% in early trade, hitting their highest since early December.“We now have a powerful track record of safe and reliable performance, efficient execution and capital discipline. And we’re doing this while growing the business,” BP chief executive officer Bob Dudley said in a statement yesterday.


Royal Dutch Shell, Exxon Mobil and Chevron all reported stronger-than-forecast earnings last week driven by higher production in US shale basins where Oil Majors have invested billions in recent years. The strong gains came despite a sharp drop in crude prices at the end of the year that wiped out most gains made in share prices throughout the year. Uncertainty over the outlook for oil prices as well as concerns over global economic growth and sino-American trade tensions are likely to continue to weigh on the sector. For the year, BP’s profit rose to a five-year high of $12.7bn, double the previous year’s $6.17bn and above analyst expectations of $11.88bn.“Overall, we see this as a strong set of results, with stronger underlying earnings translating into cash,” Biraj Borkhataria, analyst at RBC Capital Markets, said in a note. Production rose to 3.7mn barrels of oil equivalent per day in 2018 after BP completed the acquisition of BHP’s onshore US shale portfolio and thanks to the start up of new fields including the 120,000 barrel per day Clair Ridge project in the North Sea.



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WestJet Airlines
WestJet Airlines said yesterday it would scale back capacity growth during 2019 as it faces competition from rivals and weaker economic conditions, after the Canadian carrier beat analyst estimates for profit in the fourth quarter. Canada’s second-largest carrier is aiming to grow its share of higher-paying passengers by introducing fees for perks like priority boarding and added legroom, while introducing business-class service this year on its new Boeing Dreamliners. Its premium economy cabin revenue surged 70% in 2018. The Calgary-based airline said it would increase capacity by between 6% and 8% in 2019, fuelled by new flights on its Dreamliners and budget carrier Swoop. WestJet expects system-wide capacity to grow between 5.5% and 6.5% during the first quarter of 2019.Revenue per available seat mile — an industry measure of how much the airline makes from each seat on the plane — rose almost 1% to C$14.72 in the fourth quarter. The company earned 26 Canadian cents a share in the quarter ended December 31. Net profit, however, dipped to C$29.2mn from C$47.8mn a year earlier, reflecting pressure on airlines from a rise in fuel costs over the past year.


Itaú Unibanco
Itaú Unibanco Holding, Brazil’s largest private lender, set weaker-than-expected targets for 2019 yesterday, sending preferred shares down nearly 4%, even as profitability is expected to improve. Itaú forecast loan book growth of 8% to 11% in 2019, better than the 6.1% expansion last year, but lower than competitors’ goals, according to analysts. Last week, Banco Bradesco SA said its loan book would grow up to 13% in 2019. “With the notable exception of margins, all other lines compare poorly to levels guided by peers,” Goldman Sachs analyst Carlos Macedo wrote in a note to clients, saying its forecast was “underwhelming.” Still, Itaú’s goals were not conservative, chief executive officer Candido Bracher said at a briefing for reporters. “They imply a return on equity of 24% for 2019,” he said. In 2018, the bank’s profitability was 21.9%, already the highest among Brazil’s largest banks. Itaú posted fourth-quarter net income of 6.478bn reais ($1.76bn), up 3.1% year over year and meeting the average analyst estimate, according to Refinitiv data. Bracher said loan books will grow in lines with higher risk of default this year, mainly for individuals and small companies.“Asset quality is likely to improve, that is why the bank will grow in credit lines that are not collateralised,” the CEO said, citing credit cards and personal loans as examples.


AMS
AMS, which supplies Apple with sensors for its Face ID technology, disappointed investors with a 58% decline in fourth quarter core profit, its guidance and the suspension of a dividend payment for 2018. The Austrian group shied away on Tuesday from a full-year earnings forecast after a downturn in 2018 results, saying shorter order cycles reduced visibility in a difficult market environment.Investors punished the Swiss-listed firm’s already battered shares also for its decision to no longer provide a mid-term guidance figure, sending the stock down 15%. The shares tumbled 75% last year while the European sector index lost 11% and Apple shares 9%.“Given a market we are seeing that is very volatile and hard to read and also demand that is smaller than we had envisaged, we see first quarter sales of $350-390mn,” chief executive Alexander Everke said at a news conference in Zurich.That is a fall of more than 20% compared to last year’s period and to the fourth-quarter. AMS’ statement added to a bleak earnings season for semiconductor companies and further stoked fears of an industry slowdown after sales warnings from Apple, Samsung and Taiwan Semiconductor last month pointed to stagnating smartphone demand and a cooling Chinese economy.German chipmaker Infineon Technologies on Tuesday revised down its guidance for full-year revenue growth. Analysts pointed to another challenge for the firm after AMS reported a 38% increase in net debt end-December and a 46% fall in its order backlog. The group is still considering options for its business with environmental sensors but has already switched staff from that unit to new projects, Everke said.


Archer Daniels
US grains trader Archer Daniels Midland Co yesterday reported fourth-quarter earnings that fell short of estimates as three of its four key business groups reported results below the same period a year earlier. Adjusted operating profit in ADM’s origination business, which includes grain trading, fell nearly 30% to $183mn in the quarter, despite higher volumes of North American corn and soybean exports to markets outside of China.Profits also were hurt by “significant insurance settlements” tied to sorghum shipments in early 2018.Last April, Reuters reported that several ships carrying cargoes of sorghum, a niche animal feed, from the United States to China changed course after Beijing slapped hefty anti-dumping deposits on US imports of the grain. An anti-dumping probe by Beijing, which halted trade between the world’s biggest buyer and seller of the grain early last year, was among the first trade fights between the United States and China, which are still embroiled in a trade war.Net earnings attributable to ADM fell to $315mn, or 55 cents per share, from $788mn, or $1.39 per share, a year earlier, when the company recorded $249mn in tax gains. Excluding one-time items, the company earned 88 cents per share, while analysts, on average, estimated 92 cents, according to IBES data from Refinitiv. Revenue fell to $15.95bn from $16.07bn.


Mitsubishi Corp
Japan’s biggest trading house Mitsubishi Corp yesterday posted a 6% rise in its April-December net profit thanks to higher income from energy operations, and stuck to its record profit forecast for the year despite one-off losses.Mitsubishi’s net profit grew to a record ¥442bn ($4bn) for the nine months to December 31 from ¥416bn a year ago.The company booked an impairment loss of ¥28bn on its stake in Singapore’s Olam International and ¥31bn on its investment in iron ore mines in Chile in the October-December quarter, but it kept its forecast of a record 640 bn yen profit for the year ending March. “We have paid a premium for Olam as we had expected synergy with our operations, but the outcome has missed our target,” Mitsubishi Chief Financial Officer Kazuyuki Masu told a news conference.But Mitsubishi, which owns a 17.4% stake in Olam, has no plan to trim its stake in the Singaporean commodity trader and plans to seek more synergies in areas such as Africa, Masu said.Olam said last month that it plans to invest $3.5bn into key growth areas, such as edible nuts, coffee and cocoa, over the next few years, while exiting four existing businesses to raise funds.Mitsubishi’s annual profit prediction missed the ¥655bn mean forecast in a poll of 9 analysts, according to Refinitiv.Its nine-month profit was only 69% of its full-year estimate, but Masu said a special gain from its planned sale of two Australian thermal coal mines and stronger profits from some segments are expected to fill the gap.


Ralph Lauren
Ralph Lauren reported better-than-expected holiday-quarter revenue and profit yesterday, as the luxury fashion group’s bigger push on marketing helped it woo more customers, sending its shares up more than 8%. The 50-year-old retailer, known for its preppy Polo shirts, said it spent about 18% more on marketing during the quarter, sponsoring fashion events and hiring models and actresses to promote its brand on social media.“Solid execution on our key initiatives, especially during the important holiday period, delivered better-than-expected results for the third quarter” Chief Executive Officer Patrice Louvet said.Revenue rose to $1.73bn from $1.64bn, beating analysts’ average estimate of $1.66bn, according to IBES data from Refinitiv.The company reported net income of $120mn, or $1.48 per share, in the third quarter ended December 29, compared with a loss of $81.8mn, or $1.00 per share, a year earlier when it incurred charges related to changes in US tax laws.


Intesa Sanpaolo
Italy’s top retail bank Intesa Sanpaolo met its widely trumpeted dividend pledge as it reported a higher 2018 net profit despite a weak end to the year, adding profit would rise further in 2019.Revenues stagnated in 2018 but net profit totalled €4.05bn ($4.6bn) compared with €3.8bn in 2017, when excluding a €3.5bn cash payment it received from the state to take over two failing regional banks.Results were boosted by a €400mn capital gain from the sale of a majority stake in its loan recovery business to Swedish debt collector Intrum. The results allowed the bank to stick to its pledge to pay out €3.45bn in dividends, or 85% of profits, on the year’s accounts.Shares in the bank trimmed gains after the results with an analyst pointing to shrinking interest income. This measure of returns made on lending fell by more than 5% in the three months from October to December, both on a quarterly and annual basis. With asset management and insurance fees also weak in the fourth quarter while personnel costs rose sharply, Intesa’s operating profit dropped 17% from the previous three months.


Epiroc
Swedish mining equipment maker Epiroc reported quarterly order intake and underlying profitability slightly below analyst forecasts yesterday and said it expected near-term demand to remain at the current level. Shares of Epiroc, which makes equipment such as drill rigs, loaders and haulers, were down 2.6% following the results.The company, spun out of industrial group Atlas Copco last year, said order intake rose to 9.47bn Swedish crowns ($1.04bn) from 8.06bn in the year-ago quarter, just below the 9.56bn seen in a Reuters poll. It reported an adjusted operating margin of 20.4%, slightly below the 20.6% seen by analysts.Epiroc’s fourth-quarter operating earnings rose to 2.16bn crowns from 1.53bn in the same quarter a year earlier and above the 2.05bn mean forecast.


Viacom
Viacom Inc beat analysts’ estimates for profit yesterday, boosted by higher fees from US cable and satellite operators and the success of “Transformers” reboot “Bumblebee”. Revenue, however, came in just below Wall Street expectations at $3.09bn compared to estimates of $3.12bn, according to IBES data from Refinitiv.That reflected lower advertising revenue and a hit from currency swings at a time when the company is fighting for its place in a hugely competitive and changing US media landscape.Domestic affiliate revenue, or the fees collected from US cable and satellite operators and online distributors, rose 5% to $969mn.Analysts expected a 2.4% rise, according to research firm FactSet.The company, which owns MTV, Comedy Central and Nickelodeon, said total affiliate revenue rose 3% to $1.17bn, beating estimates of $1.11bn, according to IBES data from Refinitiv.As Netflix and other streaming service providers shake up the traditional US cable industry, Viacom and sister company CBS Corp are redoubling efforts to become original content resources for other distributors. Excluding items, the company earned $1.12 per share, above the average estimate of $1.03 per share.Net income attributable to Viacom fell to $321mn, or 80 cents per share, in the first quarter ended December 31 from $537mn, or $1.33 per share, a year earlier.


Lazard
Financial adviser Lazard topped analysts’ estimates for quarterly profit yesterday, as strong performance in its M&A advisory business helped make up for a drop in revenue in its asset management unit.Lazard, seen as a bellwether for mergers and acquisitions activity, said revenue from its advisory business rose 19% to $398.6mn in the fourth quarter ended December 31.The company’s asset management business saw outflows of $3.2bn during the quarter, due to a spike in market volatility and that resulted in a 17% drop in revenue in the unit. Lazard, which has been trying to grow its asset management business to diversify its revenue streams, said total revenue was largely unchanged at $684.5mn.The Bermuda-headquartered advisory firm had a market share of 25.1% for completed deals globally in the latest quarter, according to Refinitiv EIKON data. Adjusted net income fell to $118.9mn, or 94 cents per share, in the fourth quarter ended December 31, from $148.1mn, or $1.12 per share, a year earlier. Analysts on average were expecting a profit of 92 cents per share, according to IBES data from Refinitiv.


Ocado
British online supermarket Ocado said yesterday investment in its partnership deals would hit short-term profits, while remaining tight-lipped about media reports of tie-up talks with Marks & Spencer.The company also reported a 21% fall in full-year earnings, hit in part by new accounting rules.Though Ocado has a 1% share of Britain’s grocery market, its £6.9bn ($9.0bn) stock market valuation has been driven by the technology side of its business — providing third parties with the infrastructure and software to develop their own online grocery businesses.The firm’s shares have nearly doubled over the last year on the back of four major overseas partnership deals — the biggest of which was signed last May with US supermarket chain Kroger.Last week media reports said Ocado was in talks over a possible tie-up with Marks & Spencer (M&S), Britain’s best-known retailer.M&S currently sells wine, flowers and clothes online, but does not offer a full food delivery service. “It is our business to talk to retailers and we never comment on who we’re talking to,” Ocado chief executive Tim Steiner told reporters.M&S has also declined to comment.Ocado made earnings before interest, tax, depreciation and amortisation (EBITDA) of £59.5mn ($77.6mn) in the year ended December 2, down from £75.0mn in 2016-17. Group revenue rose 12.3% to £1.6bn.


Assa Abloy
Assa Abloy, the world’s biggest lock maker, beat quarterly sales forecasts yesterday, boosted by strong demand for its electronic devices.Its shares jumped more than 5% in early trading.The Swedish firm also said that as part of an earlier flagged programme to integrate recent purchases, launched in the quarter, it would close about 50 offices and factories, outsource more activities and boost automation to make savings.Fourth-quarter operating profit before restructuring and other one-off costs rose to 3.75bn Swedish crowns ($411mn) from 3.36bn crowns in the same period a year earlier, matching analysts’ expectations.Sales before acquisitions climbed 6%, beating analysts’ average forecast of 4% and including a 30% jump for electronic locks, as well as double-digit growth in the Americas and Asia Pacific divisions.Assa Abloy, which has more than doubled sales over a decade and outgrown rivals helped by acquisitions in a fragmented market, is betting on an accelerating shift from mechanical locks to hi-tech alternatives ranging from fingerprint scanners to smartphone-activated systems. “Today, 30 % of our sales are generated by electromechanical products,” CEO Nico Delvaux said.”We are seeing gratifying improvements in both the commercial and residential segments.” Assa Abloy said sales in China, where it has for years faced headwinds ranging from slowing demand and troubles at acquired companies to higher metals prices, were good in the quarter.China is a relatively small market for the group, but one that is seen as key for growth.


SoftBank
Japan’s SoftBank Corp booked a 24% rise in quarterly profit yesterday as users switched to data-heavy plans, pinning future growth on the rise of 5G services in the mobile carrier’s first earnings report as a public company.With concerns over a changing mobile market keeping its shares below their blockbuster IPO price, investors are looking for reassurance that the telco can keep its promise of paying 85% of annual profit in dividends.Others are looking for any hint of the health of majority shareholder SoftBank Group Corp, which relies on cash from Japan’s third-biggest network provider to fund investments.Echoing the expansive rhetoric of founder Masayoshi Son, SoftBank Corp’s chief executive Ken Miyauchi said new services and the adoption of high-speed 5G networks meant the smartphone market had ample room for growth.“5G smartphones in a few years will probably take over the entire world,” Miyachu said at an earnings briefing.Operating profit reached ¥191.6bn ($1.74bn) in October-December, SoftBank Corp said in a stock exchange filing.The results cover a turbulent three months during which SoftBank suffered a network outage, fielded ongoing government calls for lower prices, and faced scrutiny over ties to Huawei Technologies Co — a Chinese company whose telecoms equipment Western powers fear could be used for espionage.


Gilead Sciences
Gilead Sciences Inc on Monday reported a fourth-quarter profit that fell short of Wall Street estimates, sending shares lower, as sales of its flagship hepatitis C treatments continued to slide and it recorded one-time charges, and the company.Chief financial officer Robin Washington listed a number factors that could impact the company’s 2019 results, including demand for higher discounts on HIV drugs from US payers, price competition from generics and further shifts in hepatitis C market share.Gilead, which expects pivotal liver disease trial results in the next few months, projected relatively flat full-year 2019 product sales of $21.3bn to $21.8bn.Shares of the drugmaker, which has hired Roche veteran Daniel O’Day to be its new chief executive starting March 1, were down nearly 4% in after-hours trading from a Nasdaq close at $70.05.On an adjusted basis, Gilead said it earned $1.44 per share in the fourth quarter, missing analysts’ average expectations by 26 cents, according to IBES data from Refinitiv.Fourth-quarter sales of Gilead’s HIV drugs rose to $4.1bn from $3.4bn.


Alphabet
Alphabet Inc’s fourth-quarter revenue and profit beat Wall Street’s expectations on Monday but sharply higher spending, as it added data centres, cloud engineers and marketed its services heavily during the holidays, worried investors.The company’s shares, which have risen almost 17% over the past six weeks, fell 2.3% to $1,114.60 in after-hours trading.Partly because of the higher spending, Alphabet reported an operating margin of 21% in the fourth quarter, down from 24% a year ago.“Google saw a steep decline in operating margins,” said Richard Kramer, analyst at Arete Research. “They have plenty of cash to invest, and $7bn in capex is a huge spend.”Alphabet chief financial officer Ruth Porat said capital expenditures this year would “moderate quite significantly,” speaking to investors and analysts after results were announced.The company has authorised a plan to buy back an additional $12.5bn worth of its shares, Porat also said.Facebook Inc’s better-then-expected fourth-quarter results last week had lifted expectations for Alphabet as they suggested that concerns about a global economic slowdown may be overblown.Alphabet’s fourth quarter revenue rose 22% from a year ago to $39.28bn, compared to the average expectation of $38.93bn among analysts tracked by Refinitiv.


Rosneft
Russia’s largest oil producer Rosneft said yesterday the political upheaval in Venezuela was only temporary, while the country had cut its debt, and expected its own total oil output to grow in 2019.Kremlin-controlled Rosneft’s operations in Venezuela have come into focus as the country has plunged into political turmoil and the United States imposed sanctions on state oil company PDVSA last week. PDVSA is paying debt back to Rosneft via oil supplies.Rosneft’s operations in Venezuela have come to public attention amid a power struggle between the National Assembly and pro-Moscow President Nicolas Maduro.In a presentation on its website, Rosneft said Venezuelan state oil company PDVSA’s principal amount of debt to Rosneft stood at $2.3bn at the end of the fourth quarter, down from $3.1bn at the end of the previous three months.The company does not expect oil output to decline at its projects in Venezuela this year, Rosneft’s first vice president Eric Liron said on a conference call, adding that the company saw the current situation in Venezuela as temporary.Venezuela’s own oil production has plummeted due to years of underinvestment and weak oil prices.Earlier yesterday, Rosneft, in which BP controls a 19.75% stake, said its net profit fell by almost a quarter to 109bn roubles ($1.7bn) in the fourth quarter, hit by weaker oil prices.Rosneft is the first Russian oil and gas producer to report results for 2018, the first year of annual losses for oil prices since 2015.Rosneft said the production of liquid hydrocarbons in the fourth quarter stood at 4.79mn barrels per day, up 1.4% from the third quarter.

Sources and photo-credits: Reuters, Gulf Times