(Alliance News) - The following is a summary of top news stories Tuesday.
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COMPANIES
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Unilever announced significant changes to its business model, which is expected to lead to the cutting of 1,500 jobs at both a senior and junior management level. The London-based consumer goods maker is facing pressure from activist shareholders to improve its performance, following its failed attempt to buy the consumer healthcare business of GlaxoSmithKline. Unilever, which made no mention of the GSK bid in its announcement on Tuesday, said it will shed its current matrix structure and become organised around five business groups: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. Each group will take responsibility for their own strategy and growth; however they will be supported by Unilever Business Operations, which will provide technological support and services. Unilever said that the new organisation model will lead to a reduction in senior management roles by 15% and junior management roles by 5%, equal to 1,500 jobs. However, factory teams are not anticipated to be affected by the changes.
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Rio Tinto said it has reached agreement with the government of Mongolia to ramp up production at the massive Oyu Tolgoi copper mine. Rio said the agreement on funding and power supply will allow the start of underground mining operations at the project, which is expected to be the fourth largest copper mine in the world by 2030. Oyu Tolgoi is expected to produce about 500,000 tonnes of copper per year on average from 2028 to 2036 from the open pit and underground combined, with 350,000 tonnes per year for a further five years. In 2021, Oyu Tolgoi produced 163,000 tonnes of copper from the open pit, which has been in operation for almost 10 years. The Anglo-Australian miner said underground operations, exploiting the most valuable part of the mine, are expected to begin "in coming days", with first sustainable production in the first half of 2023.
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Credit Suisse said it will just break even in the fourth quarter as the Swiss lender's legal bills pile up and Investment Banking revenue slips. For the three months to December 31, Credit Suisse said it expects its financial results to be "approximately breakeven" at the pretax profit level. In the final quarter of 2020, the Zurich-based bank reported a CHF88 million pretax loss on net revenue of CHF5.2 billion, which had been down 16% year-on-year. In the third quarter of 2021, net revenue increased 4.8% year-on-year to CHF5.44 billion, bringing a pretax profit of CHF1.01 billion. The slump in profit in the last three months of 2021 was attributed to rising legal costs and falling fees from its Investment Bank arm.
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Royal Mail said its third-quarter financial performance was in line with expectations but added it intends to restructure and streamline the business moving forward to sustain profitability. The London-based letter and parcel delivery firm said its performance in October to December, its financial third quarter, was in line with expectations. The company said revenue was down 2.4% to GBP3.55 billion from GBP3.64 billion in the same period the previous year. Royal Mail said this was "broadly" in line with its expectations. Revenue was up 17%, however, when compared to the same period in 2019 in which revenue stood at GBP3.04 billion. The company noted that staff absences due to the Omicron wave of Covid-19 peaked at 15,000 within the UK domestic operation in early January.
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IBM shares climbed as its fourth quarter fortunes topped Wall Street estimates, led by growth in its Software arm. The stock was up 2.8% in per-market trading Tuesday. The New York-based technology consultancy said revenue in the fourth quarter of 2021 rose 6.5% to USD16.70 billion from USD15.68 billion a year earlier. Fourth-quarter revenue topped CNN-cited estimates of USD16.1 billion. Quarterly pretax profit jumped to USD2.87 billion from USD1.01 billion. For the whole of 2021, revenue increased 3.9% to USD57.35 billion from USD55.18 billion. Pretax profit rose 88% to USD4.84 billion from USD2.57 billion. Chair & Chief Executive Arvind Krishna said: "We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting."
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Peloton Interactive investor Blackwells Capital is pushing for the removal of the workout bike maker's chief executive and wants the company to explore a sale, it said in a letter on Monday. Blackwells - describing itself as a "significant shareholder" in Peloton without specifying details - sent a letter to the board on Monday setting out its "grave concerns" over the fitness firm's direction and called for the removal of Co-Founder & Chief Executive John Foley in light of "his multiple leadership failures". This comes after Peloton shares tumbled last Thursday, causing trading to be halted, following a report the firm planned to suspend production of bikes and treadmills due to falling consumer demand. Peloton could be a fit for companies involved in the technology, streaming or sportswear sectors, Blackwells said, citing heavyweights such as Apple, Walt Disney, Sony and Nike. Peloton rose 9.8% in New York on Monday but was slightly lower in pre-market activity on Tuesday.
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Verisk Analytics said it has sold its health and safety compliance arm 3E to private equity firm New Mountain Capital. New Mountain will pay up to USD950 million for 3E, which was acquired by Verisk back in 2010 for USD107 million. The New Jersey-based data analytics provider noted the cash consideration includes USD630 million to be paid at closing, USD50 million in earn out payments based on 3E's performance in 2023 and 2024, and up USD270 million in additional deferred payments. The deferred payments are based on New Mountain's future return on its investment. Verisk said it will return proceeds to shareholders through share buybacks.
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Deutsche Lufthansa and Italian shipping company MSC have expressed an interest in acquiring a majority stake in Alitalia's successor ITA Airways, the Italian airline announced. ITA said it received the declaration of interest on Monday and that the proposal stipulated that the Italian state, which owns ITA, would retain a minority stake in the company. Lufthansa and MSC, which is one of the world's biggest container shipping companies, also requested a 90-day period of exclusivity on the negotiations, according to ITA. MSC confirmed the proposal in a statement. Lufthansa also confirmed it was in discussions to acquire the stake with MSC.
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Chinese real estate firm Shimao Group is looking to sell around USD12 billion in assets, according to Chinese news outlet Caixin, as the developer seeks to raise funds to combat its liquidity problems. China's property firms have struggled in the wake of Beijing's drive in recent years to curb excessive debt in the real estate sector as well as rampant consumer speculation, putting massive pressure on the wider economy. Among the most prominent developers facing a liquidity crisis is Evergrande, which has been teetering on the brink for months because of its trouble in servicing a debt pile topping USD300 billion. Developer Shimao Group is now looking to offload 34 projects in 17 cities including Beijing, Shanghai and Hangzhou, Caixin reported.
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MARKETS
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Asia and Europe on Tuesday responded differently to the see-saw trading on Wall Street on Monday. Amid worry about war in Ukraine and aggressive policy tightening by the US Federal Reserve, Asian markets closed unmistakably lower, but European markets were showing more confidence. In London, Rio Tinto was up 0.8%, while Unilever was down 0.2%. Stock indices in New York were pointed to open slightly lower. They had closed up 0.3% to 0.6% on Monday, despite having been down by as much as 4% on Monday morning.
"Yesterday's vertiginous equity drop and discombobulating bounce, won't be the last of current market volatility," commented Kit Juckes of Societe Generale. He added: "The biggest issue is still the challenge of putting inflation back into its box. Ever since the start of this millennium, the 'Fed Put' has supported a 'buy the dip' mentality for risky assets...Unless they duck the issue, the FOMC will have to stay on course to tighten policy significantly this year."
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 GMT.
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CAC 40: up 1.4% at 6,882.87
DAX 40: up 1.1% at 15,175.68
FTSE 100: up 1.0% at 7,372.16
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Hang Seng: closed down 1.7% at 24,243.61
Nikkei 225: closed down 1.7% at 27,131.34
S&P/ASX 200: closed down 2.5% at 6,961.60
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DJIA: called marginally lower, down 8.00 points
S&P 500: called down 0.5%
Nasdaq Composite: called down 0.9%
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EUR: down at USD1.1288 (USD1.1312)
GBP: up at USD1.3480 (USD1.3451)
USD: up at JPY114.06 (JPY113.88)
Gold: up at USD1,838.62 per ounce (USD1,833.82)
Oil (Brent): up at USD87.52 a barrel (USD85.51)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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Moscow accused the US of ratcheting up tensions over Ukraine after Washington put several thousand troops on alert for possible deployment to boost NATO. The West is accusing Russia, which has massed 100,000 troops on the Ukrainian border, of preparing a potential invasion of its pro-Western neighbour. The troop build-up has sparked the biggest crisis in East-West ties since the Cold War, with US President Joe Biden holding a long call with European leaders on Monday. Biden said there was "total unanimity" on how to deal with Russia, as the Pentagon said 8,500 US troops were being put on standby and NATO said it was sending ships and jets to bolster eastern Europe's defences. In Moscow, President Vladimir Putin's spokesman Dmitry Peskov said these actions were only adding to an already tense atmosphere.
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The UK government borrowed less than expected in December, figures from the Office for National Statistics showed, as the Treasury strives to contain the pandemic-fuelled rise in national debt. UK public sector net borrowing - excluding public sector banks - was estimated to have been GBP16.8 billion in December, higher than GBP14.7 billion in November. The latest figure was lower than the market forecast of GBP18.5 billion but was the fourth-highest December borrowing since monthly records began in 1993. "Public sector net borrowing in December was broadly in line with the Office for Budget Responsibility's forecast from last October. But, with inflation set to keep pushing higher until April, borrowing is likely to return to overshooting the OBR's forecast in the coming months," said Capital Economics economist Bethany Beckett.
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UK Prime Minister Boris Johnson was facing fresh allegations of breaking coronavirus rules after it emerged a gathering to wish him a happy birthday was held inside Number 10 during the first lockdown. Downing Street said staff "gathered briefly" in the Cabinet Room after a meeting, in response to a report from ITV News which suggested up to 30 people attended what it described as a birthday party. But the broadcaster suggested the prime minister's wife, Carrie Johnson, had organised the surprise get-together complete with a chorus of "happy birthday" on the afternoon of June 19, 2020, when indoor social mixing was banned. Interior designer Lulu Lytle admitted attending while carrying out the lavish and controversial work to their flat above No 11 Downing Street, but insisted she was only present "briefly" while waiting to talk to Johnson.
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Double-vaccinated travellers will no longer need to take a coronavirus test when arriving in the UK as the policy has "outlived its usefulness", the Transport Secretary has said. Grant Shapps said post-arrival lateral flow tests will no longer be required as restrictions were "firmly placed in the past". He told the Commons the move would help the aviation industry to "take back to the skies". Shapps told MPs that the definition of fully vaccinated as "two doses of an approved vaccination or one dose of a Janssen vaccine" would remain for now. But that the rules for those who did not count as fully vaccinated would change too. Earlier, the prime minister said the rules could be lifted because the country was "moving through the Omicron wave".
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There was no winner in the first round of voting of the presidential election in Italy on Monday after the major governing parties announced in advance that its lawmakers would submit blank ballots. It was already considered impossible that a successor for Sergio Mattarella would be chosen on the first day of voting. No one achieved the required two-thirds of the votes from 1,009 electors. The centre-left and centre-right parties have not agreed on a joint candidate. Similar results are expected in the second and third rounds on Tuesday and Wednesday respectively. Only after the fourth round of voting, scheduled for Thursday, will an absolute majority be enough to win. There are traditionally no official candidates in the race, but the current prime minister, Mario Draghi, has long been considered the favourite for the role.
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By Tom Waite; thomaslwaite@alliancenews.com
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