TOP NEWS SUMMARY: BHP mulls oil exit; Daimler warns on chip shortage

(Alliance News) - The following is a summary of top news stories ...

Alliance News 21 July, 2021 | 11:21AM
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(Alliance News) - The following is a summary of top news stories Wednesday.

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COMPANIES

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BHP is considering an exit from the oil and gas business as part of its shift from fossil fuels, Bloomberg reported. The Anglo-Australian miner is currently reviewing its petroleum segment and is considering its options, including a trade sale, the news agency said, citing "people familiar with the matter". Bloomberg said that, should the BHP oil business be put up for sale, it could be worth around USD15 billion. The process is said to still be at an early stage, with no final decision having been made yet.

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Iberdrola said its interim revenue growth was driven by its increased capacity, but profit is still being held back by the pandemic. In the six months to June 30, the Bilbao-headquartered electric utility recorded net profit of EUR1.53 billion, down 19% from EUR1.88 billion a year before. Revenue, however, surged 14% to EUR18.75 billion from EUR16.47 billion. "The group's results and financial strength underpin the company's earnings guidance for 2021, which maintains its profit and dividend expectations for the year," Iberdrola said. For 2021, Iberdrola expects to pay out EUR0.440 in dividends, up from EUR0.422 in 2020.

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Daimler lowered 2021 car sales guidance as the chip shortage is set to affect the company for the rest of the year, even after a jump in sales in the second quarter. Revenue increased 44% year-on-year in the second quarter of 2021, to EUR43.48 billion from EUR30.18 billion. Earnings before interest and tax swung to a profit of EUR5.19 billion from a loss of EUR1.68 billion, in line with the preliminary figure released last month. Unit sales jumped 36% to 736,400 vehicles in the period. The Stuttgart-based company makes cars and vans under the Mercedes-Benz brand, and trucks and buses under the Daimler brand. Full-year revenue and Ebit are expected to be "significantly above" the pandemic-hit 2020 level. For the whole of 2020, revenue was EUR154.31 billion, with net profit at EUR4.01 billion. But Daimler cut its forecast for full-year unit sales of cars, which are now expected to be at the same level as last year instead of "significantly above".

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Clothing and homewares retailer Next said recent sales have been "materially ahead" of internal expectations, resulting in a bump to full-year profit guidance. It also restarted dividend payments, declaring a special payout of 110 pence. It plans to announce another special dividend alongside its Christmas trading statement in January next year, and return to ordinary dividends in the financial year to January 2023. It did not pay out a dividend for its last financial year, ended this past January. The retailer said full price sales in the eleven weeks to July 17 were up 19% on two years ago, ahead of its guidance of 3% growth. It has increased its full-price sales guidance for the rest of the year to 6% from 3%. In addition, Next bumped up its central guidance for full-year pretax profit by GBP30 million to GBP750 million, which is towards the top of its previous guidance. In financial 2021, pretax profit dropped 54% to GBP342.4 million from GBP748.5 million in financial 2020.

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Postal operator Royal Mail said it remains confident on its full-year prospects as it noted that online shopping is holding up even as UK lockdown restrictions ease. For the three months to the end of June, revenue was up 13% on a year ago and 20% higher than two years ago. "The domestic parcel market remains strong. The early signs are that domestic parcel volumes appear to be re-basing at a higher level than pre-Covid as consumers continue to shop online. While domestic parcel volumes decreased 7% year on year, they increased by more than a third, up 35%, compared to pre-Covid levels in 2019-20," the company noted. Royal Mail held its full-year expectations. Chair Keith Williams said: "We continue to expect fluctuations in volumes as we emerge from Covid restrictions, which we will need to manage accordingly. Nonetheless we are encouraged by the revenue performance across Royal Mail and GLS in the first quarter."

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Shares in Bridgepoint rose by 25% Wednesday morning in London, on their first day of trading on the Main Market. The London-based private equity firm, previously known as Atlantic Investments Holdings, priced its initial public offering at 350 pence per share, raising GBP789 million and giving it a market capitalisation on admission of GBP2.88 billion. The stock was quoted at 437.95p early Wednesday, up 25%, raising that value to about GBP3.6 billion. The company will be eligible for inclusion in FTSE UK indices. That is likely to be the mid-cap FTSE 250, as the smallest company currently in the FTSE 100 has a market cap of GBP4.64 billion. Bridgepoint was spun out of what now is called NatWest Group in 2000.

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Clayton Dubilier & Rice is considering a new takeover offer for Wm Morrison Supermarkets, The Times reported. The newspaper said the New York-based private equity firm is "understood" to be arranging a financing package for a new offer with JP Morgan, Goldman Sachs and BNP Paribas. Goldman Sachs is CD&R's adviser, the Times noted. Back in June, Bradford, West Yorkshire-based Morrisons rejected a GBP5.5 billion offer from CD&R, saying it was too low. The price of 230 pence per share later was trumped by a GBP6.3 billion, 254p per share total offer - accepted by the Morrisons board - from a group of investors comprising Softbank Group-owned Fortress, Canada Pension Plan Investment Board and Koch Real Estate Investments.

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Video streaming provider Netflix reported growth in revenue in the second quarter of 2021 as the number of paid membership subscriptions grew. Revenue for the three months to June 30 increased 19% year-on-year to USD7.34 billion, from USD6.15 billion. Operating income rose 36% to USD1.85 billion from USD1.36 billion. Netflix said it finished the quarter with over 209 million paid memberships, slightly ahead of its forecast, and up from 193 million paid memberships the year prior. The company noted that Covid has created some "lumpiness" in its membership growth. It expects slower membership growth in 2021 compared to 2020. Netflix added 1.5 million paid memberships in the second quarter, slightly ahead of its 1.0 million guidance forecast.

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Nidec reported surging profit in the first quarter, as it booked record quarterly sales following a strong performance from its appliance, commercial & industrial unit. In the three months to June 30, the Kyoto, Japan-based manufacturer and distributor of electric motors recorded attributable profit of JPY33.45 billion, about USD304 million, up 67% year on year from JPY20.06 billion. Net sales rose 33% to JPY447.47 billion from JPY336.88 billion, a quarterly record for Nidec.

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Microchip manufacturer ASML Holdings said demand remained high despite reporting a drop in net sales and profit in the second quarter. Veldhoven, Netherlands-based ASML reported net sales of EUR4.02 billion in the second quarter that ended June 30, up 21% year-on-year from EUR3.33 billion but down 7.9% from EUR4.36 billion in the first quarter of 2021. The semiconductor supplier's gross margin on net sales fell to 51% from 54% the previous quarter, but remained above the 48% result from the same period a year before. Similarly, net income fell in the second quarter, down 22% to EUR1.04 billion from EUR1.33 billion the previous quarter, but up 38% from EUR751 million year-on-year.

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MARKETS

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Major equities markets, with the exception of Hong Kong, were continuing to rebound from a negative start to the week. In Europe, London's FTSE 100 index was outperforming, led by retailer Next, up 7.5% after a positive trading update. Travel-related stocks Rolls-Royce, IAG and Compass were up 7.0%, 6.0% and 5.0%, respectively. Meanwhile, BHP was up 2.0% in London. Daimler was down 0.8% in Frankfurt. Wall Street was called higher, with the tech-heavy Nasdaq Composite index lagging.

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CAC 40: up 1.3% at 6,429.19

DAX 30: up 0.9% at 15,346.94

FTSE 100: up 1.7% at 6,994.41

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Hang Seng: closed down 0.1% at 27,224.58

Nikkei 225: closed up 0.6% at 27,548.00

S&P/ASX 200: closed up 0.8% at 7,308.70

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DJIA: called up 0.6%

S&P 500: called up 0.4%

Nasdaq Composite: called up 0.1%

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EUR: up at USD1.1775 (USD1.1764)

GBP: up at USD1.3622 (USD1.3602)

USD: up at JPY110.01 (JPY109.91)

Gold: flat at USD1,808.40 per ounce (USD1,808.34)

Oil (Brent): up at USD70.23 a barrel (USD69.14)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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US President Joe Biden named a prominent Big Tech critic to head the Justice Department's antitrust division in another sign of aggressive moves to counter the dominance of major Silicon Valley firms. Jonathan Kanter, a lawyer who has represented firms challenging tech platforms, would if confirmed head up the division to handle an array of cases expected against the largest tech firms for alleged monopoly abuses. The Kanter nomination follows the appointment Lina Khan, an advocate of breaking up the biggest tech firms, to head the Federal Trade Commission, which is also involved in antitrust enforcement.

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The US said it was near a deal with Germany over concerns on Nord Stream 2, the nearly complete pipeline from Russia that Ukraine and others fear will embolden Moscow. German Chancellor Angela Merkel on a visit last week to Washington acknowledged differences with Biden but said that both agreed that Ukraine must remain a transit point for Russian gas even as Nord Stream 2 opens shortly in the Baltic Sea. "The Germans have put forward useful proposals and we have been able to make progress on steps to achieve that shared goal...to ensure that Russia cannot weaponize energy flows," State Department spokesman Ned Price told reporters.

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Chancellor Angela Merkel's cabinet will huddle Wednesday to approve a massive relief package to rebuild German regions destroyed in historic flooding and better protect them in future. A week into the region's worst flooding disaster in living memory, which has killed at least 169 people in Germany and 200 in Europe, the right-left "grand coalition" government will unblock aid for demolished homes, businesses and vital infrastructure. With the damage estimated in the billions of euros, Merkel told reporters on a visit to the badly hit medieval town of Bad Muenstereifel on Tuesday that Berlin would come through to help in the short and long term. "This was flooding that surpassed our imagination when you see the destruction it wrought," Merkel told reporters after touring what the Bild daily called the "apocalyptic" wreckage of the 17,000-strong community in North Rhine-Westphalia state.

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French Health Minister Olivier Veran said Tuesday that new Covid-19 infections were increasing at an unprecedented rate due to the Delta variant, after 18,000 cases were reported for the previous 24 hours. Referring to the latest figures while speaking in parliament, Veran said: "That means we have an increase in the spread of the virus of around 150% in the last week: we've never seen that, neither with Covid [the original form], nor the British variant, nor the South African or the Brazilian one." The level of infections is the highest since mid-May, when the country was emerging from a third nationwide lockdown. France, which is bracing for a fourth wave of infections because of the spread of the Delta variant, has been racing to get as many people vaccinated as possible.

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UK government borrowing eased in June, though the figure was still the second-highest for the month on record. Public sector net borrowing was estimated to have been GBP22.8 billion in June. While this was the second-highest June borrowing since monthly records began in 1993, the Office for National Statistics said, it was GBP5.5 billion less than in June 2020, during the first wave of the coronavirus pandemic. Public sector net debt was GBP2.218 trillion at the end of June, or around 99.7% of gross domestic product, the highest ratio since the 102.5% recorded in March 1961. The ONS said public sector net borrowing in the financial year ended March was estimated to have been GBP297.7 billion, revised down by GBP1.5 billion from last month's provisional figure but still the highest borrowing since records began in 1946.

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Passengers from green and amber list countries may no longer face Covid checks when arriving into England. Leaked instructions to Border Force staff, first reported by the Guardian, said border and customs officials will no longer routinely verify if returning travellers tested negative before departure or completed a passenger locator form. The change, which the Immigration Services Union said came into effect on Monday, is aimed at reducing queue times at airports. Under the current rules, all passengers into the UK must provide a negative Covid test taken before departure, regardless of where they are travelling from. They must also carry out another test two days after their arrival, and complete a passenger locator form with details such as an address. Lucy Moreton, professional officer for the ISU, which represents border immigration and customs staff in the UK, said the leak is accurate.

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The UK government, after threatening to look at "all options" to fix a Brexit impasse with Brussels over Northern Ireland, said it plans to present new proposals on Wednesday. In a phone call Tuesday, Prime Minister Boris Johnson told his Irish counterpart Micheal Martin that the so-called Northern Ireland Protocol was "causing significant disruption", according to Downing Street. "The prime minister said that the UK government would outline its approach on the Northern Ireland Protocol to parliament tomorrow," it said, declining to comment further on the plan's contents. While stressing the UK's commitment to peace in Northern Ireland, Johnson also demanded the EU "show pragmatism" on its side.

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Bridgepoint Group PLC When Issue 470.00 GBX -0.84 -
Morrison (Wm) Supermarkets PLC 285.40 GBX 0.11
BHP Group PLC 1,989.20 GBX -0.14
Daimler AG 83.65 EUR 0.52

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