Exxon Mobil Corp’s third-quarter profit nearly halved, hit by lower oil prices and weaker margins in refining and chemicals, with its three major business reporting lower year-over-year profit.
Earnings fell to $3.17bn, or 75 cents per share, in the quarter, from $6.24bn, or $1.46 per share, a year earlier, the company reported yesterday.
It beat analysts’ recently reduced expectations for earnings of 67 cents per share. The company last month warned results would be hurt by weaker chemicals and lower oil prices, prompting analysts to reduce estimates from 86 cents per share.
“Maybe expectations were a little bit weak going in, but I think overall it is probably slightly negative relative to expectation,” said Anish Kapadia, director of energy at London-based Palissy Advisors.
Analysts at Tudor, Pickering, Holt & Co called yesterday’s results “neutral for the stock.”
Exxon’s results mirrored weaker earnings at rivals BP Plc and Royal Dutch Shell, which earlier this week indicated they might delay dividend increases or a buyback programme because of low prices. Chevron Corp on Friday reported a 36% drop in third-quarter profit.
Prices have fallen for oil and gas as US shale producers keep pumping more oil amid slowing global consumption growth.
Exxon has been investing in major projects to boost production at a time when investors have been pressing oil companies to cut spending and increase returns to shareholders.
It spent $7.7bn in the third quarter, up from $6.6bn the same period the year prior and higher than what analysts expected.
Exxon’s cash flow, a closely watched metric by investors, fell 24% from a year ago. Investors have been looking for the company to improve cash flow to cover its dividends and capital expenses.
Despite rising output from US shale, profits in Exxon’s oil and gas production unit were down 49% to $2.17bn on weaker prices, its lowest earnings in two years. Its refining business earned $1.23bn, down 25% from last year, on lower margins for its gasoline and diesel. Its chemicals business was down 66% year-over-year.
Results have been weaker because of global overcapacity in plastics and higher project expenses.
Chevron
Chevron Corp reported a 36% drop in third-quarter profit yesterday, hit by lower oil and gas prices and refining margins, and warned higher costs would affect results in its current quarter, sending shares lower.
Results mirrored weaker earnings at BP Plc and Royal Dutch Shell, which indicated they might delay dividend increases or a buyback programme due to low prices.
“Lower crude oil and natural gas prices more than offset” production increases, Chevron chief executive Mike Wirth said in a statement. Chevron’s profit fell to $2.58bn, or $1.36 per share, in the quarter, from $4.05bn, or $2.11 per share, a year earlier.
Excluding one-time charges and foreign currency gains, the company said it earned $1.55 per share, exceeding the $1.45 per share expected by analysts, according to Refinitiv IBES.
“This was a solid quarter for the company,” said Jennifer Rowland, an analyst with Edward Jones, with cash from operations exceeding spending on major projects and shareholder dividends.”We expect robust cash returns to shareholders to continue, she added.
However, the company offered a tepid outlook for the fourth quarter, saying it expected full-year oil and gas production to fall in the middle of its forecast increase of 4% to 7%. It also warned that overall costs for a giant oil project in Kazakhstan would rise 25% to $45.2bn. The second-largest US oil company also said it expects additional costs in the fourth quarter from “high” refinery maintenance and from a $430mn tax payment. Chevron’s worldwide net oil equivalent production grew about 3% to 3.03mn barrels per day, but average sales prices fell both in the United States and internationally.
AbbVie
AbbVie Inc yesterday forecast 2019 revenue above Wall Street estimates and expressed confidence in future sales of blockbuster wrinkle treatment Botox, which it will acquire with its $63bn purchase of Allergan Plc.
Shares of the Illinois-based drugmaker rose more than 3% to $82.10.
AbbVie is counting on the Allergan acquisition, expected to close early next year, to help lessen its dependence on Humira, the world’s top selling medicine, and diversify its product portfolio.
Humira, which treats rheumatoid arthritis and psoriasis, has begun to come under pressure from cheaper rivals in Europe and faces patent expiration in the United States, its biggest market, in 2023. Third-quarter Humira sales dipped 3.7% to $4.94bn, a decline primarily due to biosimilar competition in Europe.
That still topped Wall Street expectations of $4.89bn, according Refinitiv.
The deal for Allergan will give AbbVie another multibillion-dollar product with a lucrative aesthetics business that does not depend on insurance reimbursement, as well as several medical uses.
Botox sales in 2018 reached $3.6bn. Despite competition from a new rival made by Evolus Inc, the companies are confident that Botox’ strong brand recognition and market dominance will continue to power sales.
“Our model is more conservative than what the Allergan current performance is, and it’s certainly more conservative than their longer-range forecast, but it still does project growth for Botox going forward,” AbbVie Chief Executive Officer Richard Gonzalez said on a conference call with analysts. AbbVie said it now expects 2019 revenue to grow about 2.5% on an operational basis, implying the drugmaker will exceed the average estimate of $33.16bn analysts have forecast for the year. AbbVie raised the low end of its 2019 adjusted profit forecast range by 8 cents a share to $8.90, while maintaining the top end at $8.92.
Excluding items, AbbVie earned $2.33 per in the quarter, edging past analyst’ average estimate by 3 cents. That was helped by a nearly 30% jump in sales of leukaemia treatment Imbruvica to $1.26bn, ahead of estimates of $1.19bn. Total revenue rose nearly 3% to $8.48bn, exceeding estimates of $8.38bn.
TC Energy
TC Energy reported a better-than-expected quarterly profit yesterday, buoyed by higher volumes of crude and natural gas the pipeline operator transported.
Earnings from the company’s oil-transporting liquids segment, which comprises its 590,000-barrel-per-day (bpd) Keystone pipeline system, surged more than 55% to C$491mn in the third quarter ended September 30.
Though there has been a surge in oil transportation, with peer Kinder Morgan also reporting higher movement last month, oil producers in Canada are desperately in need of more pipelines as they face discounts on their product due to transportation constraints.
TC Energy, formerly known as TransCanada, has been investing heavily in the disputed 830,000 barrel per day (bpd) Keystone XL pipeline, which is expected to boost export volumes from the oil marketing hub of Alberta to US refineries.
The $6bn project has, however, faced regulatory and environmental hurdles despite backing by US President Donald Trump.
Separately, in a major leak reported on Thursday, about 9,120 barrels of oil are estimated to have spilled from TC Energy’s Keystone crude pipeline in Walsh County, North Dakota, the state regulator said. The initial estimate makes it one of the biggest onshore crude spills in the past decade and the largest for Keystone, according to US Pipeline Hazardous Materials and Safety Administration (PHMSA) data back to 2010. On an adjusted basis, the Calgary-based company earned C$1.04 per share, beating the average analyst estimate of 98 Canadian cents per share, according to IBES data from Refinitiv.
However, net income attributable to shareholders fell to C$739mn, or 79 Canadian cents per share, compared with C$928mn, or C$1.02 per share, a year earlier. TC Energy said the earnings were hit by combined after-tax losses of C$266mn from the sale of Ontario natural gas-fired power plants and certain Columbia Midstream assets. Revenue also fell marginally to C$3.13bn.
Imperial Oil
Canada’s Imperial Oil Ltd reported a 43% fall in quarterly profit yesterday, as higher Canadian crude prices dented refining margins and expenses rose.
The company said refinery throughput averaged 363,000 barrels per day (bpd) in the third quarter, compared with 388,000 bpd a year earlier. Earnings from downstream unit fell nearly 56% to C$221mn in the quarter.
Canada’s main oil-producing province, Alberta, imposed mandatory curbs on oil production this year, reducing a price discount on Canadian oil compared with US oil. The move, which helped some producers, was opposed by integrated companies such as Imperial, which benefited from low-cost oil to run through their refineries. Narrower Canadian crude price differentials have also made it less economic for producers to ship their crude by rail.
Alberta’s current government, elected in April, on Thursday answered the call from a number of producers to allow them to produce above their current limit as long as any incremental production is moved to the market by rail.
Imperial said crude-by-rail shipments averaged 52,000 bpd in the quarter, compared to 64,000 bpd in the previous quarter.
The company, majority-owned by Exxon Mobil Corp, said net income fell to C$424mn ($322.12mn), or 56 Canadian cents per share, in the third quarter, from C$749mn, or 94 Canadian cents, a year earlier.
Safaricom
Kenya’s Safaricom plans to bid for one of two Ethiopian telecoms licences next year in partnership with South Africa’s Vodacom, it said after posting a jump in first-half profit yesterday.
East Africa’s most profitable company hopes to replicate its Kenyan success in neighbouring Ethiopia, acting CEO Michael Joseph said.
“It is the biggest prize left in Africa from a telecommunications point of view,” he told an investor briefing, referring to Ethiopia’s huge protected market and population of more than 100mn.
Officials plan to award two telecoms licences to multinational mobile companies by April 2020, the Ethiopian communications regulator said last month, as it opens up its market to foreign investors. Ethio Telecom, the state monopoly, has also taken steps towards offering a minority stake to a strategic investor.
Safaricom is considering all the options, Joseph said. Companies that want to secure the licences have to come with deep pockets, he added.
“You have to bid for the spectrum. There is talk about it and it is in the billion-dollar range, just for the licence,” he told Reuters. Other challenges include a nascent democracy initiated by Prime Minister Abiy Ahmed, foreign exchange shortages and delayed new regulations for the telecoms sector, he added.
Safaricom has signed an agreement with an unidentified Ethiopian firm to introduce its M-Pesa mobile financial service in the country, said the interim CEO.
Safaricom’s Service revenue grew at 5.3%, down from 7.7% a year earlier, as the company cut tariffs in response to increased competition and pressure on consumer incomes.
Danske Bank
Danske Bank shares fell more than 4% yesterday after the troubled lender said its annual profit would come in at the low end of forecasts, and unveiled plans to get costs and compliance under control by 2023. Denmark’s biggest lender has seen thousands of customers flee and its chief executive depart since reports emerged in 2017 of its involvement in one of the world’s biggest money-laundering scandals via its Estonia branch. The bank now expects annual net profit to come in at the lower end of its previously announced 13bn to 15bn Danish crown ($1.9-$2.2bn) range.
That followed an announcement earlier this month it had initiated a hiring freeze to cope with rising compliance costs and a tough business environment, which has also prompted two cuts to its annual outlook this year.
The softer guidance came despite a 21% rise in third-quarter profits announced yesterday, above analysts’ expectations.
“We saw a good underlying business with high customer activity and lending growth, but overall, our performance is under pressure,” chief executive Chris Vogelzang said in a statement.
The bank will spend 1.5-2bn crowns next year on cost management and digitalisation, which it expects will result in a return on shareholders’ equity of 5-6% next year. The measure fell to 9.8% last year from 13.6% in 2017, and Danske said it is targeting a move back towards 9-10% by 2023.
Shares have lost about two-thirds of their value since money-laundering allegations against the bank gained pace in March last year and are trading near a 7-year low. “Everyone needs a strategy, but I don’t think the patience of market participants reaches all the way to 2023.
Alibaba
Chinese e-commerce giant Alibaba said second quarter revenue growth slowed to 40% on-year yesterday, although net profits more than tripled thanks in part to a one-time payment from a fintech affiliate.
Total revenue was 119bn yuan ($16.9bn), with growth down from 42% in the April-June period and 54% in last year’s second quarter, a company statement said, in its first earnings report since founder Jack Ma stepped aside as chairman in September.
The second quarter jump in net profits was partly due to a one-time payment received in September as part of a deal in which Alibaba acquired 33% equity in fintech affiliate Ant Financial while ending a previous profit sharing arrangement, the company said.
In a presentation to investors yesterday, Alibaba attributed the group’s continued revenue growth — which comes amid a slowdown in the world’s number two economy — to “robust” expansion of its China retail and cloud businesses.
Cloud computing was the among the fastest growing revenue sources for the company, with revenues from the segment growing 64% year-on-year to 9.2bn yuan. Net income attributable to ordinary shareholders at the group jumped 262% in the July-September period from a year ago, to 72.5bn yuan ($10.1bn)
Nearly 60% of companies listed in China used Alibaba’s cloud services as of August 2019, the company said, thanks in part to digitisation in the public sector and traditional industries.
“With sustained consumer engagement and spending across the Alibaba Economy, we have continued our revenue and profit growth,” Maggie Wu, chief financial officer of Alibaba Group, said.
Ma, who founded the company in 1999, handed the reins over to a team of executives led by CEO Daniel Zhang in September.
Friday’s results come days ahead of Singles Day on November 11, the largest shopping holiday of the year in China.
Last year, merchants on Alibaba’s e-commerce platforms moved 213.5bn yuan worth of merchandise during the shopping bonanza.
Alibaba dominates China’s rapidly expanding consumer culture and its corporate results are closely watched for any signs that a Chinese economic deceleration or US-China trade tensions are impacting spending.
Novo Nordisk
Novo Nordisk said yesterday that its new treatment for adults who suffer from diabetes drove sales and profits higher, but the world’s top manufacturer of insulin still faced difficulties in the key US market.
The Danish firm alone supplies nearly half of the insulin to diabetes sufferers across the globe.
And while rising obesity has led to a surge in diabetes cases, it hasn’t been smooth sailing for Novo Nordisk as some buyers have balked at the high cost for new treatments, particularly in the United States.
Its sales of insulin in North America fell by 16% over the first nine months of the year when the effects of changes in currency values are removed.
“The decline in sales in the USA was driven by lower realised prices due to higher rebates across the insulin portfolio,” the company said in a statement, as well as due to changes insurance legislation and lower inventory levels.
Private US insurers and patients have been negotiating discounts, or rebates, on the price of newer forms of insulin that cost much more than previous treatments. Total North American sales were down 1% at constant exchange rates, to 43bn kroner, a region which accounts for nearly half of total sales. The drop was despite a rapid rise in Novo Nordisk’s new Ozempic treatment, which can free some people with Type 2 diabetes from taking several shots of insulin per day to control their blood sugar level. A once-a-week shot of Ozempic helps Type 2 diabetes produce their own insulin. Total sales of Ozempic jumped to nearly 6.9bn kronor. Overall sales for the first nine months of the year rose by 9% to 89.6bn kroner, with the gain of 5% once the effect of changes to currency values were stripped out.
Net profit for the period was practically flat at 30.2bn kroner, but operating profits rose by 5% on a constant exchange rate basis, hitting 40.6bn.
On a quarterly basis, net profit rose by 13% to 10.2bn kroner in the three months to the end of September. Sales rose by 5% on a constant exchange rate basis to 30.3bn kroner.
GPIF
Japan’s Government Pension Investment Fund, the world’s largest pension fund, reported yesterday a profit of ¥1.8tn ($16.7bn) for July-September, but disclosed fewer details than usual as it reassesses its investment portfolio. The GPIF, which managed ¥161.8tn of assets as of the end of September, said its return on overall assets was 1.14% in the second quarter, compared with 0.16% in the first quarter. While the fund usually discloses the amount and ratio of investments in different asset classes, it decided to withhold such details ahead of a planned portfolio review to avoid affecting the market.
The new portfolio is due to be finalised early next year, in time for the fiscal year beginning in April.
Friday’s update was GPIF’s first since the fund revealed last month that its President Norihiro Takahashi had had a relationship with a female employee, and that his pay would be cut by 20% for six months.
Takahashi did not report the relationship to the management committee in a timely manner, even after receiving complaints from other employees, GPIF said in October. The fund did not address the issue in the latest financial report, despite concerns over whether the fund had proper governance in place.
Kyushu Electric
Shares in Kyushu Electric Power fell the most since April yesterday after the company said it booked losses from the resale of liquefied natural gas (LNG) cargoes that forced it to slash its full-year earnings forecast.
The losses highlight an issue for Japanese utilities, which have committed to large volumes of LNG on contracts linked to oil prices, while spot market prices are much lower due to oversupply from new projects.
Kyushu is a victim of its own success in getting nuclear plants back online after all of Japan’s reactors were shutdown in the wake of the 2011 Fukushima meltdown. Utilities had rushed to sign LNG contracts after the disaster but Kyushu has succeeded in restarting all of its operable plants under post-Fukushima regulations, reducing its need for contracted LNG.
The company that supplies power to Japan’s southwestern island of the same name cut its annual profit forecast on Thursday by 45% from an earlier estimate to ¥30bn ($280mn) and reduced a planned dividend for the year.
It is also facing competition as the market is liberalised.
Despite “efforts to reduce costs, ordinary income has been revised downward, because of a decrease in sales and a loss in reselling surplus LNG as market prices significantly dropped in the domestic electric power business,” Kyushu said in a statement on its half-year earnings on Thursday.
Net income for the first-half of its financial year fell more than 60% to ¥7.2bn it said. Kyushu shares closed 4.9% lower yesterday, the biggest daily percentage loss since the end of April. While spot LNG prices in Asia have risen in recent weeks as utilities in the region stock up for winter demand, they are significantly below the average price Japanese buyers pay when taking into account the supplies coming in under contracts linked to oil prices.
Pinterest Inc fell short of Wall Street estimates for quarterly revenue on lower-than-expected average revenue per user and its revised full-year sales forecast came marginally below expectations, sending its shares tumbling 20%. Thursday’s after-market plunge is expected to wipe out a majority of the gains since the online scrapbook company’s blockbuster initial public offering in April, leaving the stock just about 6% from its IPO price.
Pinterest on average posted revenue of 90 cents per user globally in the third quarter, falling just short of analysts expectation of 91 cents, according to research firm FactSet.
The company’s net loss widened to $124.7mn from $18.9mn a year earlier, as total costs and expenses nearly doubled to $413.4mn.
Pinterest, which calls its users “Pinners”, said monthly active users jumped 28% to 322mn.
Analysts had expected about 307mn users. Total revenue rose about 47% to $279.7mn in the quarter ended September 30, but fell short of analysts’ estimates of $280.6mn, according to IBES data from Refinitiv. The company generates revenue by placing advertisements among pins or posts, basically ideas for clothes, décor and recipe, uploaded on the site by users.
Excluding certain items, the company earned a cent per share.
Analysts were expecting a loss of 4 cents.
Pinterest expects 2019 total revenue to be between $1.10bn and $1.115bn, compared to its prior forecast of $1.095bn and $1.115bn.
Analysts were expecting $1.12bn, according to IBES data from Refinitiv. Pinterest was one of the most high-profile social media companies to list in the United States since Snap Inc in 2017.
UBS
UBS Group could double the profit it makes from its American wealth management arm within a decade even as it cuts staff numbers by targeting the super-rich, the co-head of the business told Reuters.
Last year UBS made a pretax profit of just over $1.5bn in wealth management in North and South America, significantly more than in any other region.
It was $6.4bn across the group. The bank announced its focus on the American market at an investor conference a year ago. Outside the United States, UBS is already heavily involved in the super-rich business.
In the highly competitive US market, the focus has been on wealthy individuals with assets of up to $100mn.
Now UBS explicitly wants to address super-rich people with even more money.
New advisers which UBS is wooing from rivals such as JP Morgan or Goldman Sachs should also help with this growth.
But UBS is being selective, Naratil said.
The number of US advisers has shrunk in recent years. In the first three quarters of 2019 UBS recorded outflows of $8bn in the Americas region, but much of this is linked to less-wealthy customers with whom UBS also earns less, according to people close to the matter.
By encouraging customers to use more lucrative services, such as loans and mandates, where the wealth manager takes more control of a client’s investments, UBS could make do with significantly fewer US customer advisers than the 6,600 it now employs, its co-head of wealth management, Tom Naratil, said in an interview.
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