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News : International Last Updated: Feb 11, 2013 - 10:03 AM


Markets: Aer Lingus, Elan, Smurfit Kappa and DCC issue performance reports
By Finfacts Team
Feb 6, 2013 - 11:21 AM

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Bloomberg reports that European Central Bank officials may consider as soon as today which concessions they are prepared to grant Ireland to lower the cost of the nation’s bank bailout, according to two people with knowledge of the matter.

Patrick Honohan, Irish Central Bank governor, will meet his European counterparts for the first time since they rebuffed an initial bid to cut the burden of Anglo Irish Bank’s rescue two weeks ago. He will likely pitch a new proposal during an unofficial dinner preceding the ECB’s Governing Council meeting tomorrow, according to the people, who declined to be named because the matter is private.

While Honohan’s plan will continue to include the replacement of the so-called promissory note the government issued in 2010 with a long-term bond, he’ll drop a proposed guarantee that the Irish central bank would hold the security for at least 15 years, the people said. A decision may be made as soon as tomorrow, one of the people said.

Aer Lingus today reported that full-year 2011 revenues rose  by 8.2% to €1.39bn from €1.29bn in 2011.

Operating profits before exceptional items surged 40.7% to €69.1m from €49.1m. However pre-tax profits for the year to the end of December fell by 51.9% to €40.6m from €84.4m.

Christoph Mueller, Aer Lingus' CEO commented: "2012 was an excellent year for Aer Lingus. We made an operating profit for the year which is 40.7% above 2011. Our operating margin, as a measure of our competitiveness, has increased to 5.0% with free cash flow of €75.2 million. Improved processes and service delivery are reflected in a record on-time arrival performance of 88% and a high customer satisfaction level. At 31st December 2012, the number of forward passengers booked on our services was ahead of the figure booked at the same time in 2011 and in January 2013, we recorded the single highest day of revenue booked in our history. I firmly believe that this result, representing our third consecutive year of profitability, validates our value carrier business model and shows that our strategy is delivering a leaner, more efficient and profitable airline, to the benefit of customers, shareholders and staff. Therefore we are proposing to pay an increased dividend of 4 cent per share for 2012."

Total flown passenger numbers, including Aer Lingus Regional operations, increased by 3.6% to 638,000 in January 2013 compared to January 2012. Short haul flown passengers, including Aer Lingus Regional, in January 2013 were 583,000, an increase of 2.8% on January 2012, while long haul flown passengers in January 2013 were 55,000, an increase of 12.2% on January 2012. Aer Lingus mainline’s flown passenger load factor in January 2013 increased by 2.3 points on January 2012 to 64.6%. Short haul flown load factor was 62.7%, an increase of 0.2 points on January 2012, with capacity decreasing by 4.4%. Long haul flown load factor was 68.2%, an increase of 6.4 points on January 2012, with capacity increasing by 2.9% on prior year.

Results detail

Dónal O'Neill of Goodbody commented: Aer Lingus Impressive FY12, cautious but confident FY13 outlook; "Aer Lingus has delivered an impressive set of results for FY12 driven primarily by a very strong revenue performance on both short haul and long haul. Revenue for the year was up 8.2% to €1,393m. Passenger revenues grew by 8.1% to €1,336m, primarily due to a 7% increase in yields. Short haul revenue grew by 4.5% to €816m on a 3.8% increase in yield, while long haul fare revenue was up by 19.7% to €344m on a 9.6% increase in yield.

Ancillary revenues climbed 4.6% to €177m due to the introduction of the sky deli menu on board and the flexi-fare family. Cargo revenue rose 7% due to export led cargo demand on long haul flights.

On the cost line, the fuel bill was again a major headwind, rising 24% to €359m, while nonfuel expenses increased by just 1.5% to €966m due to further cost savings from the Greenfield programme. In total, Greenfield has now achieved cost savings of €104.2m, which equates to 7.9% of total revenue. The airline has to date hedged 57% of its FY13 fuel requirement at $994/mt and its dollar requirement at €1 = $1.35. Given its expected tonnage requirement of c.450k tonnes for the current year, we would expect the fuel bill to remain broadly flat for FY13. Additionally, management expects a €15m headwind from increased airport charges in Dublin, Heathrow, Italy and Spain.

Management has given a cautious but confident outlook. While the macro environment remains weak, most notably in Ireland and the UK, management believes that it can create sustainable and profitable growth opportunities as it wins market share from legacy and low cost carriers. In a sign of confidence in the business and the expectation that cash generation will continue to be strong as capex declines, management is proposing to increase the dividend by one third to 4c." Elan today posted 2012 revenues of $1.20bn for 2012, up 13% on the previous year. It said that adjusted EBITDA rose by 31% to $220m from $168.6m mainly due to the continued growth of Tysabri, the multiple sclerosis drug.

It reported a loss of $137m in 2012. 

Kelly Martin, CEO said: “2012 was a year in which we continued to make significant progress and adjustments in our business. We achieved top line revenue growth of 13%; advanced ELND005 into two Phase 2 programs for neuropsychiatry; strengthened our balance sheet through refinancing and sale of our Alkermes shares; we remained disciplined with our cost structure and investment decisions. In addition, we demerged our pathology-based drug discovery platform into a new listed company, Prothena Corporation plc, enabling shareholders investment choice.”

Results detail

Elan also announced that it has agreed to restructure the Tysabri collaboration with Biogen Idec. Under the terms of the agreement, Elan will move from the current 50:50 business collaboration to an upfront payment of $3.25bn and a double digit tiered royalty structure for the complete asset.

Smurfit Kappa, the Irish-Dutch packaging group, reported pre-tax profits of €331m for 2012, up 11% on 2011 but revenues were almost flat at €7.33bn compared with  €7.36bn in 2011.

Results detail

David O'Brien of Goodbody commented  - - Smurfit Kappa Significant increase in dividend is key take away from Q4 results:  "Smurfit Kappa has reported Q412 EBITDA of €240m (-2% yoy), which compares to our forecast of €249m (4% behind) but ahead of consensus estimates of €233m. A better than expected outturn for European operations was offset by a weaker Latin American.

As expected net debt (€2.79bn) has come in better than forecast (€2.83bn), helped by strong working capital inflows. The strength of the balance sheet and cash flow dynamics has given management the confidence to announce a 37% increase to the final dividend bringing the FY12 dividend to 28c versus our forecast and consensus expectations of 22.5c.

EBITDA for the European division increased by 3% yoy to €200m, 3% ahead of our forecast of €194m. European corrugated volumes were broadly flat in Q4 (-2% in Q312 and -1% in FY12) in contrast to our forecasts for a 1-2% decline. Corrugated prices were down by less than 1% qoq which was in line with the outturn for the FY. Latin America was more challenging than expected reflecting difficult market conditions in Venezuela and Argentina where volumes were down 17% and 12%, respectively. The performance was stronger in Mexico (vols +2%) and Columbia (flat vols).

Management has indicated that the acquisition of Orange County Container Group in Mexico is already exceeding expectations with FY EBITDA of $60m reflecting positive pricing momentum. An update on the integration synergies, which we believe are conservative at $14m, will be given in Q1. The focus on cost efficiencies is again evident with the announcement of another cost savings programme which aims to take €100m of costs out in 2013.

This is a solid set of results from Smurfit Kappa and reinforces the investment case. We believe the increased dividend is likely to be well received by the market. In addition, we believe the bias to forecasts is to the upside given the potential for further refinancing, conservative synergy targets, and the improving pricing cycle. With a solid balance sheet, attractive yield and good exposure to high growth markets we believe Smurfit Kappa’s valuation discount to peers is unwarranted. We reiterate our BUY recommendation. David O'Brien added on DCC's Q313 IMS (interim management statement) – Trading in line with expectations, guidance nudged upward: "

This morning DCC released its Q313 IMS covering the three months to December end. Management expects operating profit and eps to grow by 17.5% and 20% in constant currency terms respectively. This compares to previous guidance for a 15% increase in operating profit and eps on a constant currency basis. We are forecasting operating profit of €222m in line with current guidance. However, there is upside to our 195c eps forecast which compares to DCC guidance of 200c driven by better tax and interest.

The Energy division grew volumes by 19% yoy benefitting from both acquisitions and stronger demand for heating oil. The SerCom business is also trading in line with expectations as strong growth in mobile communications and tablets offset continued weakness in the home entertainment market. Healthcare and Food & Beverage are trading ahead of the prior year while Environmental is slightly behind yoy.

At first glance we estimate that we will be upgrading our FY13 eps forecasts by 2- 3% to circa 200c. In addition, we believe the record acquisition spend in the ytd will underpin earnings growth in the medium term. Despite its consistently strong double digit returns and the attractive growth opportunities available for its three main divisions (representing 90% of Group Profit) DCC continues to trade at a discount to peers which we feel is unjustified. We reiterate our Buy recommendation.

Economic View: Irish industrial production shows signs of recovery in December; Juliet Tennent comments  - -"Provisional industrial production for December, released yesterday, saw an annual increase in seasonally adjusted production volumes of 2.8%. This follows three consecutive months of annual declines. Within this the “modern” sector, which includes chemicals, pharmaceuticals, medical and computer goods rose by 1.9% yoy, also halting a three month run of annual falls. The “traditional” sector saw annual volumes decline by 1.3%. Volatility in the “Basic pharmaceutical products and preparations” category is responsible both the weakness in production volumes for the “Modern” sector seen between September and November 2012 and the recovery seen in the latest data. As the monthly data is volatile we also analyse the data on a three monthly basis. Here the annual decline in industrial production persisted (-7% yoy) driven by the modern sector (-10% yoy). However the rate of decline has eased from -7% and -10% respectively.

The fall in production volumes in the pharmaceutical sector may be as a result of the well documented patent cliff that the sector faced last year. At the time the industry maintained that they had made plans to deal with the expiration of patents. With the production of pharmaceuticals accounting for over a third of industrial production volumes the slowing in the rate of decline is welcome. However, the data is provisional and volatile and we remain cautious on whether the 'cliff' has been successfully negotiated."

Conall Mac Coille of Davy commented - - "Markets regained some poise yesterday as positive corporate earnings data helped sentiment, with investors still worried by political events in southern Europe. Irish industrial production data showed a rebound in December, but output is still down 4.4% quarter-on-quarter in Q4 2012, and 7.1% year-on-year. The industrial sector should reduce Irish GDP growth by 1% in Q4, a similar negative contribution to the economy as in Q3."

Justin Doyle, Investec Bank Ireland, said today:

  • The Dell $24bn LBO seemed to perk up the equity markets after a torrid day previously, U.S. and Asian markets both closed strongly with Europe opening in the black also;
  • The big winner overnight was the Japanese Nikkei index, posting a gain of 3.8% following the news that BoJ Governor Shirakawa will step down three weeks before the end of his five year term. The Japanese yen weakened by close to 3% against yesterdays highs of close to 124.00;
  • Up today we have a relatively quiet calendar ahead of us, with factory orders in Germany will be the main release in Europe as the markets await the ECB and Mr. Draghis monthly rate statement and Q&A session tomorrow afternoon.

US Markets

In New York Wednesday, the Dow rose 99 points or 0.71% to 13,979.

The S&P 500 added 1.04% and the Nasdaq advanced 1.29%.

Asia Markets

The MSCI Asia Pacific Index rose 1.3% in Tokyo Wednesday.

The Nikkei 225 jumped 3.77%; China's Shanghai composite index rose 0.06%; South Korea's Kospi fell 0.10%; Australia's S&P/ASX 200 gained 0.78%; in Mumbai, the Bombay Stock Exchange's Sensex 30 dipped 0.10%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 gained 0.25% in morning trading Wednesday.

In Dublin, the ISEQ  has risen 1.56%.

Aer Lingus is up 0.78%; Elan has jumped 10.67%; DCC is up 3.05% and Smurfit Kappa has climbed 1.89%.


Ryanair slid 1.19%.

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 $1.3527 and at £0.8641.

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 fell 6 points  or 0.81% to 739 - -  the BDI is up 5.72% in 2013.

Crude oil for March 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $96.11 down 53 cents from Tuesday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $116.27. The North Sea benchmark accounts for two-thirds of the global market.

Bloomberg reports that for the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.

Daily trading in Brent jumped 14% to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17% to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg. The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.

Brent, produced in the North Sea, is gaining favour among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past two years, reflecting everything from war in Libya to the embargo on Iran. WTI, the main grade in the US, has risen 9% as the nation, which prohibits crude exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point for Nymex futures.

Gold spot price

The spot price of an oz of gold is trading in New York at $1670.00, down $3.20 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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