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News : International Last Updated: Nov 7, 2012 - 10:21 AM


Markets: Obama win shifts focus to economy; Smurfit Kappa/ Aer Lingus report strong third quarter earnings
By Finfacts Team
Nov 7, 2012 - 10:17 AM

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Aer Lingus today issued an un-audited interim management statement [pdf] for the period from 1 July 2012 to 30 September 2012, representing the third quarter of the group's financial year.

In the first nine months of 2012 with operating profit of €86.5m was 29.7% ahead of the same period last year. In the third quarter, operating profit was €90.9m "despite weaker business demand on core routes to London during the Olympic Games and fuel price and airport charge inflation." The operating profit was down 2.9% on last year.

Revenues for the three month period rose by 2.8% to €275.9m from €268.3m the same time last year.

Glanbia expects earnings to rise by 10% this year

Smurfit Kappa, the Dutch-Irish packaging group,  reported pre-tax profits of €105m for the three months to the end of September - - a rise of 24% on the same time last year.

Third quarter revenues dipped by 2% to €1.830 billion from €1.89bn while basic earnings per share rose by 50% to 33.4 cent from 22.2 cent.

David O'Brien of Goodbody commented  - -  "Smurfit Kappa has reported Q312 EBITDA of €280m (+6% yoy), which compares to our forecast of €256m (10% ahead) and beats the top end of the consensus range of €233-275m.

The key variance with our forecasts was the performance of the European Division, which reported EBITDA (earnings before interest, taxes, depreciation, and amortization) of €226m (+9% yoy) compared to our forecast of €202m with reduced maintenance costs for the Kraft liner system and better pricing (flat corrugated pricing versus our forecast for -1%) the key variances. Management note that the focus continues to be pricing over margin as evidenced by Smurfit Kappa’s 2% decline in corrugated volumes versus a 1% decline in the market. Following a difficult Q2 Latam has recovered to EBITDA of €63m in line with our forecasts. The division benefitted as the effects of strike action in some of the regions subsided and a robust underlying Mexican market.

Net debt decreased by €137m over the period to €2,640m, which compared to our forecast of €2,680m. The key variances were capex spend of €55m (versus GBS forecast of €75m) and higher profitability."

Overall management has reiterated guidance for FY12 EBITDA to be in line FY11 (€1,015m). Following these results we see c. 2% upside to our FY12 EBITDA forecasts and our positive thesis remains intact. With the stock trading on 4.9x EV/EBITDA a 20% discount to historic averages we reiterate our BUY recommendation with nearly 40% upside to our price target.

President Obama wins; focus shifts to economy: David McNamara of Davy comments - - "In the end, a decisive Electoral College victory for President Obama projected at 303-206 but a much closer popular vote victory of just over a million votes. The Senate and House also remain divided along partisan lines, with the looming fiscal cliff providing the first test of the re-elected administration. With the election so closely contested, Republicans may be emboldened to continue to pursue real-term cuts to the Federal Budget while retaining many of the Bush-era tax cuts due to expire. Democrats will cite President Obama's re-election an endorsement of his policies and fight to ease the pace of fiscal consolidation, with the budgetary negotiations set to go down to the wire once again.

As we pointed out yesterday, an expiration of these tax cuts and the automatic cuts to the Federal Budget of over €600bn would in the long term bring the Federal deficit and debt down but would also plunge the US economy into a sharp recession in the short term. The Congressional Budget Office has estimated a 0.5% decline in output in 2013, with unemployment ticking up to 9.1% from the current 7.9% if the tax rises and spending cuts are enacted. So businesses are likely to hold off on investment until Q1 2013 pending the outcome of these negotiations which will prove a drag on GDP growth expected at 2% in Q4. Asian markets closed up overnight, while the dollar fell as investors anticipated looser monetary policy under an Obama administration."

Economic View; Greek tensions surface again; Juliet Tennent of Goodbody comments - - "While focus has been very much on the US presidential election, where President Obama has secured a second term, uncertainty has been increasing in the euro-area about the ability of the Greek government to pass two critical upcoming votes. The Greek Prime Minister, Antonis Samaras, appears confident that new austerity measures totalling €13.5bn and the accompanying labour reforms will pass later today. However, there is disagreement within the three party ruling coalition, with the junior partner, Democratic Left, opposed to the labour reforms in particular. Without the support of Democratic Left, the government will be left with only a slim majority which means that passing the measures is not a foregone conclusion. A further test for the Greek government will be parliamentary approval the 2013 budget which according to the Greek media is scheduled for November 11th ahead of the next meeting of euro-area finance ministers on the 12th of November. Passing the budget is crucial to the release of the next tranche of official aid totalling €31.5bn.

While expectations are that the Greek government will pass further austerity measures later today and approve the 2012 budget later in the week it will be a tense week for Greek, and euro-area, politicians."

US Markets

In New York Tuesday, the Dow rose 133 points or 1.02% to 13,246.

The S&P 500 rose 0.79% and the Nasdaq added 0.41%.

Asia Markets

The MSCI Asia Pacific Index rose 0.7% Wednesday.

Japan's Nikkei 225 closed down 0.03%; China's Shanghai Composite Index dropped 0.01%; South Korea's Kospi rose 0.49%; Australia's S&P/ASX 200 added 0.71% and in Mumbai, the Bombay Stock Exchange's Sensex 30 Index climbed 0.40%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.38% in morning trading Wednesday.

The ISEQ  has dipped by 0.19%.

Smurfit Kappa is down 1.05%; No movements on Glanbia and Aer Lingus.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.2838 and at £0.8020.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Tuesday this week the BDI closed down 24 points or 2.47% at 947 - -  the BDI is down 43.27% in 2012.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for December 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $88.20 down 51 cents from Tuesday's close. In London, Brent for December delivery is trading on the International Commodities Exchange at $110.31. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is at $22 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,726.50, up $8.60 from Tuesday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

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