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The following is a summary of top news stories Friday.
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COMPANIES
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BASF reported a return to profit in 2021 thanks to a significant increase in sales and volumes, but expects sales to slow in 2022. In 2021, the Germany-based chemical company reported net income of EUR5.52 billion, a sharp improvement on the EUR1.06 billion loss in 2020. Earnings before interest and taxes advanced to EUR7.68 billion versus a EUR1.56 billion loss a year prior. Helping the firm returning to profit was a sharp jump in sales - which rose to EUR78.60 billion from EUR59.15 billion. Chemicals sales were up 68%, while Materials were 42% higher, Surface Technologies 36%, Industrial Solutions 16%, Nutrition & Care 7.0% and Agricultural Solutions 6.6%. BASF noted its 2021 Ebit was up 67% compared with the pre-pandemic level in 2019. The company said it has made a "very strong" start to 2022, with its January sales ahead of the year prior. BASF is guiding for 2022 sales between EUR74 billion and EUR77 billion, and Ebit before special items between EUR6.6 billion and EUR7.2 billion.
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International Consolidated Airlines Group posted a narrowed loss for 2021, saying that after the setback caused by Omicron at the end of the year, bookings have rebounded strongly and it expects to fly 85% of its 2019 capacity in 2022. The British Airways-parent reported a pretax loss of EUR3.51 billion, halved from a EUR7.83 billion loss in 2020, this was on total revenue of EUR8.46 billion, up 8.3% from EUR7.81 billion. IAG posted an operating loss of EUR2.77 billion in 2021, narrowing from EUR7.45 billion in 2020. Its operating loss before exceptional items narrowed to EUR2.97 billion from a EUR4.39 billion, beating consensus estimates for a loss of EUR3.03 billion. IAG expects a significant quarterly operating loss for the first quarter of 2022, due to normal seasonality, the effect of Omicron on near-term bookings, and the operating costs involved in re-building capacity. However, the airline group, which also include Spain's Iberia and Ireland's Aer Lingus, expects operations to be profitable from the second quarter, leading to a significantly positive year for both operating profit and net cash flows from operating activities.
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Educational materials publisher Pearson launched a share buyback programme, as it said 2021 brought a strong financial performance and it is building growth momentum. Pearson posted pretax profit of GBP157 million, down from GBP354 million in 2020, on total sales that rose marginally to GBP3.43 billion from GBP3.40 billion. Operating profit was GBP183 million in 2021, down sharply from GBP411 million in 2020. Pearson said the decrease in 2021 was mainly due to the gain on sale of its remaining interest in Penguin Random House recognised in 2020 and restructuring costs in 2021. Pearson declared a total dividend of 20.5 pence, up 5.1% from 19.5p in 2020. In addition, the publisher said it intends to start a share buyback of GBP350 million in 2022. CEO Andy Bird said: "Pearson has been reorganised and refocused with a new purpose to 'add life to a lifetime of learning' at the heart of everything we do. Our direct-to-consumer strategy is being driven by Pearson+, which had 2.75 million registered users at the end of 2021, with a strategy in place to engage more consumers and grow beyond Higher Education. Pearson is a digital first business, with consumer grade products, and the momentum across the company underpins our confidence for further growth in 2022 and beyond."
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Russian steelmaker Evraz delivered a robust financial performance in 2021 as demand increased, saying it is "conscious of the current geopolitical circumstances". Evraz said steel prices rose to their highest in years in anticipation of more robust demand from the construction and manufacturing sectors. Evraz posted pretax profit of USD4.18 billion for 2021, more than three times higher than USD1.30 billion in 2020 on total segment revenue of USD14.16 billion, up 45% from USD9.75 billion. Evraz generated free cash flow of USD2.26 billion last year, doubled from USD1.02 billion in 2020. The demerger of Evraz's coal business is expected to complete in late March 2022, the company said. "We are conscious of the current geopolitical circumstances. We continue to monitor the situation and will keep you updated regarding any material developments that can influence our business," Chief Executive Officer Aleksey Ivanov said.
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Property portal Rightmove said pretax profit nearly doubled last year to GBP225.6 million from GBP134.8 million in 2020, as revenue jumped by nearly half to GBP304.9 million from GBP205.7 million. Revenue also beat 2019's total of GBP289.3 million. Rightmove said it expects the number of property transactions in the UK to return to pre-pandemic levels, but it expects the online property advertising market to continue to grow. The company declared a 4.8 pence final dividend, up from 4.5p a year ago, taking its total payout for 2021 to 7.8p.
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Hikma Pharmaceuticals has instructed Citigroup Global Markets to conduct the USD150 million first tranche of the USD300 million share buyback that it announced on Thursday. The initial phase will begin on Friday and end by June 25.
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Tax preparation software provider Intuit on Thursday reported strong second quarter growth, aided by acquisitions. Revenue in the three months to the end of January increased 69% to USD2.67 billion from USD1.58 billion year-on-year. This was in line with recently downgraded guidance, which the firm blamed on a slower forming tax season. The quarterly sales growth lead to a surge in net income to USD100 million from USD20 million. Diluted earnings per share also increased five-fold, to USD0.35 from USD0.07. Intuit noted that acquisitions boosted growth in the period, with revenue excluding its acquisitions of Mailchimp and Credit Karma up 39%. QuickBooks Online Accounting revenue grew 35% in the quarter, while Online Services revenue more than doubled, driven by the addition of Mailchimp.
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Compagnie de Saint-Gobain said on Thursday it had seen record growth, earnings and margins in 2021. For 2021, the Courbevoie, France-based construction material manufacturer reported net income had multiplied to EUR2.61 billion from EUR456 million the previous year. Earnings per share saw a corresponding jump, rising to EUR4.79 from EUR0.85 year-on-year. Sales for the year were up 16% at EUR44.16 billion, an annual record. In 2020, sales totalled EUR38.13 billion. The company noted that this was achieved in a "far more inflationary raw material and energy cost environment". It reported organic growth of 18% on 2020 and 14% on 2019, explaining that the outperformance was due to "dynamic" underlying markets and an acceleration in price, particularly in the fourth quarter.
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MARKETS
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A late rally on Wall Street on Thursday was encouraging European markets to take back some losses, but US stock indices were called to open lower again on Friday. Brent oil slipped back toward USD100 a barrel. "Whereas elevated uncertainty is rattling markets, a genuine financial crisis in which money or credit markets seize up remains very unlikely, in our view," commented Holger Schmieding, chief economist at Berenberg.
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CAC 40: up 1.3% at 6,605.87
DAX 40: up 0.8% at 14,166.25
FTSE 100: up 2.1% at 7,360.71
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Hang Seng: closed down 0.6% at 22,767.18
Nikkei 225: closed up 2.0% at 26,476.50
S&P/ASX 200: closed up 0.1% at 6,997.80
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DJIA: called down 0.6%
S&P 500: called down 0.6%
Nasdaq Composite: called down 0.6%
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EUR: up at USD1.1180 (USD1.1148)
GBP: up at USD1.3380 (USD1.3353)
USD: down at JPY115.32 (JPY115.43)
Gold: down at USD1,910.45 per ounce (USD1,924.11)
Oil (Brent): down at USD100.10 a barrel (USD104.19)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The first Russian military units have entered Kiev, the Ukrainian Defence Ministry said, as the second day of Moscow's invasion brought with it renewed airstrikes and fighting along various battle lines across Ukraine. Russian "saboteurs" were in the Obolon district in the north of the capital, the ministry announced via Facebook. The information could not be independently confirmed initially. The ministry called on locals to prepare petrol bombs for use in combat and to report sightings of Russian military equipment. Residents should not leave their homes, the ministry said. Earlier in the day, the general staff of the Ukrainian armed forces reported that the nation's troops were putting up strong resistance to "Russian occupiers" in Dymer and Ivankiv, settlements north-west of the city. Airborne assault troops had reportedly stopped "overwhelming enemy forces" on the border of the Teteriv River. The bridge across the river was destroyed, according to a statement.
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The finance ministers of Germany and France pushed back against criticism that the EU's latest salvo of sanctions on Russia for invading Ukraine do not go far enough. "All options are on the table," Germany's Christian Lindner told reporters in Paris but emphasized that Russian banks were already "completely blocked" from EU financial markets. France's Bruno Le Maire said the Russian economy was already feeling the impact of the measures. Some EU member states, especially the Baltics, had pushed for the harshest sanctions possible after Russia's invasion of Ukraine at an emergency summit in Brussels on Thursday. This included the immediate expulsion of Russia from the SWIFT payment system.
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US President Joe Biden announced "severe" economic sanctions that will make Putin a "pariah" for invading Ukraine, but conceded a lack of Western unity for enacting an even tougher measure. In a speech from the White House, Biden said four major banks would be hit with sanctions by Western powers and that export controls on sensitive components would "cut off more than half of Russia's high-tech imports." "This is going to impose severe cost on the Russian economy, both immediately and over time," Biden said. The measures, on top of a raft of other sanctions already announced this week, will make Putin "a pariah on the international stage," Biden said. Biden confirmed that for now there was no attempt to put sanctions directly on Putin, who is widely reported to have amassed a huge, secret fortune during his two decades in power.
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The US has imposed sanctions on Russia's biggest bank. US institutions must close any accounts with Sberbank that have allowed business conducted in US dollars within 30 days, the US Treasury said. The Russian bank, which is majority state-owned, is the biggest creditor of the Russian economy and the biggest holder of savings deposits, the Treasury said. Biden had already announced similar measures against Russia's second biggest bank VTB. The latest measures mean about 80% of Russian banking assets are now targeted by sanctions, the Treasury said.
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Australia pilloried China's failure to denounce the Russian invasion of Ukraine, as well as Beijing's "unacceptable" decision to ease restrictions on a key Russian export in the face of Western sanctions. Prime Minister Scott Morrison said the world must unite to condemn Russia, voicing particular concern "at the lack of a strong response from China". Beijing announced Thursday that it would import more Russian wheat, in stark contrast to Western countries rolling out sanctions on the Kremlin and its allies. "You don't go to throw a lifeline to Russia in the middle of a period when they are invading another country. That is simply unacceptable," Morrison said. Russia produces around a quarter of the world's wheat, according to UN data, a trade worth billions of US dollars a year. Ukraine produces a further 10% of world supply and there are concerns that war and sanctions will strangle production and fuel already high food prices globally. China had previously only allowed wheat imports from a handful of areas in Russia, citing disease concerns.
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Japan will impose sanctions on Russia targeting semiconductor exports and financial institutions, Prime Minister Fumio Kishida said. The world's third-largest economy plans "asset freezes and the suspension of visa issuance for Russian individuals and organisations" as well as asset freezes "targeting Russian financial institutions". "Thirdly, we will sanction exports to Russian military-related organisations, and exports to Russia of general-purpose goods such as semiconductors and items on a restricted list based on international agreements," Kishida told reporters. Kishida did not detail the scale of the sanctions or which individuals and institutions would be targeted.
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US President Biden has made a final decision on who he will pick to be his first Supreme Court nominee, US media reported. The president promised during his 2020 campaign to elevate the first Black woman to America's highest bench, which he reiterated after Justice Stephen Breyer, 83, announced his retirement in late January. CNN first reported that Biden had made his decision, which was later confirmed by CBS News, both citing sources familiar with the process. The cable network added that the decision could come as soon as Friday but no later than Monday, the day before Biden's State of the Union address. Among the favourites are US Circuit Court judge Ketanji Brown Jackson, South Carolina judge Michelle Childs and California Supreme Court judge Leondra Kruger.
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The US economy is healthy enough that interest rates should go from their current zero level to one percent by summer, and the first hike could be twice as big as normal, Federal Reserve Governor Christopher Waller said Thursday. However, with Russia's invasion of Ukraine threatening to drive up global commodity prices and disrupt the US recovery at a time of high inflation, Waller said the Fed may have to change its plans to end the easy money policies it put in place to support the economy as Covid-19 spread. "I expect inflation to remain elevated and only show modest signs of deceleration over the next several months," Waller said in a speech at the University of California, Santa Barbara. "As a result, I believe appropriate interest rate policy brings the target range up to 1 to 1.25% early in the summer." With consumer prices last year having increased at the highest rate in decades, the central bank's Federal Open Market Committee at its meeting next month is expected to increase interest rates for the first time since slashing them to zero when the pandemic began.
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The German economy declined in the final quarter of 2021, data from the Federal Statistical Office showed, but performed better than expected. Europe's largest economy contracted 0.3% in the final three months of 2021 compared to the previous quarter - coming in ahead of market consensus, according to FXStreet, of a 0.7% drop. In the third quarter, the German economy had advanced 1.7%. GDP improved 1.8% in the fourth quarter of 2021 from the fourth quarter of 2020, but was down 1.1% compared with the fourth quarter of 2019, before the Covid-19 crisis began. Meanwhile, import prices increased by 27% in January, the highest year-on-year change since October 1974. It improved upon December and November's rises of 24% and 25%, respectively.
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France confirmed the economy slowed in the fourth quarter, while consumer inflation accelerated in February, data from official statistics office Insee said. Gross domestic product grew by 0.7% in the three months to December 31 from the quarter before, having grown by 3.1% in the third quarter from the second. The fourth-quarter increase was in line with market consensus, cited by FXStreet. France's economy expanded by 7.0% in all of 2021, rebounding from 2020's steep 8.0% contraction. Turning to inflation, preliminary figures show the consumer price index rose by 0.7% in February compared to the previous month, which builds on January's 0.3% monthly rise. Market consensus had predicted a 0.4% rise. Annually, inflation was 3.6%, picking up from 2.9% in January.
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UK consumer confidence plunged in February amid a "perfect storm" of price rises, increased taxation and interest rate hikes, a long-running survey shows. GfK's Consumer Confidence Index fell seven points to minus 26 this month. The headline score is the lowest since January last year one of the worst points in the Covid crisis. Worries about the onslaught of pressures on household finances saw every measure of the survey fall on a month ago. Confidence in personal finances and the wider economic situation over the next 12 months suffered the biggest drops, down 12 points and 11 points respectively.
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Car production in the UK fell to its lowest January total in a decade despite an increase in the manufacture of electric vehicles. Almost 68,800 cars left factories in January, down by 20% on a year ago and the worst figure for that month since 2009, said the Society of Motor Manufacturers & Traders. Production for overseas and domestic markets was down by 18% and 31% respectively. Battery electric vehicle production was up a third, with one in 11 cars rolling off factory lines zero emission. Including plug-in hybrids and hybrids, electrified vehicles accounted for more than a quarter of output. The worldwide shortage of semiconductors was still affecting production as well as the changeover of some popular models, said SMMT.
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