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The following is a summary of top news stories Wednesday.
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COMPANIES
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Philip Morris International said it has made a $16.0 billion offer for Swedish Match. The tobacco firm made an offer to tender all shares in Swedish Match at a price of SEK106 per share in cash, around $10.56. This gives the offer a total value of SEK161.2 billion or $16.0 billion. The price represents a premium of 39% compared to Swedish Match's closing price of SEK76.06 on Monday. Swedish Match makes a range of smoke-free products, including snus, nicotine pouches and chewing tobacco. Its largest markets for smoke-free products are the US and Scandinavia. Directors of the Swedish Match board have recommended for shareholders to accept the offer.
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Toyota Motor posted increased full-year net income, aided by strong sales, but cautioned on supply chain disruption related to Russia's invasion of Ukraine and Covid-19 moving forward. The Japanese auto maker reported a net income of JP¥2.874 trillion, around $22.06 billion, in the year ended March 31. This represented a 26% increase against the previous year's figure of JP¥2.282 trillion. Revenue rose 16% to JP¥29.073 trillion from JP¥25.077 trillion.
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Kao reported a notable drop in first quarter income as the company said it had been hit by rising raw material costs and fluctuating exchange rates. The Tokyo-based chemical and cosmetics company posted net income of JP¥18.77 billion in the three months ended March 31, around $140.2 million. This represented a 28% drop against the previous year's figure of JP¥26.23 billion. During the quarter, Kao said it experienced negative impacts from hikes in raw materials, rapid exchange rate fluctuations, the Russia-Ukraine conflict and the Covid-19 pandemic. Sales declined 14% year-on-year in Asia with sales in Japan specifically declining 2.5% as a result of a delayed recovery, primarily due to the spread of the Omicron Covid-19 variant.
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UK television broadcaster and programmer producer ITV said it had a ‘strong’ first quarter, with revenue growing across the business. In the three months to March 31, total external revenue was up 18% to £834 million, with ITV Studios revenue up 23% to £458 million. Media & Entertainment revenue was up 13% to £545 million, aided by total advertising revenue rising 16%. Looking ahead, ITV noted its second and third quarters face tough advertising comparatives as a result of the European Championships last summer. Advertising revenue is expected to fall about 6% in the second quarter from a year prior, with June in particular to see a 9% drop.
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Contract caterer Compass announced a £500 million share buyback and said it has achieved an ‘important milestone’ with run-rate revenue topping pre-virus levels. In the six months to March 31, pretax profit jumped to £632 million from £133 million the year before, as revenue rose 36% to £11.5 billion from £8.4 billion. Compass noted its underlying revenue in the second quarter of financial 2022 was double the year prior, and it maintained a run rate above its pre-Covid levels. Compass said the first-half revenue surge was driven by ‘notable’ volume recovery in its Business & Industry and Education businesses. Compass declared a 9.4p per share dividend, having not paid an interim payout a year prior. It is the company's first half-year dividend since the pandemic began, though it had paid a 14p final dividend for financial 2021. Compass also announced a £500 million buyback for calendar 2022.
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Holiday operator Tui said it expects to return to ‘significantly positive’ underlying earnings before interest and tax in its current financial year, amid a ‘more normalised’ travel environment. Tui reported a pretax loss of €871.0 million for the financial half year that ended March 31, halved from €1.54 billion a year before. The Anglo-German company said it currently has €3.8 billion in available liquidity, even after starting to pay back some of the German state support that it received during the pandemic.
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Airtel Africa reported a sharp increase in full-year profit and revenue due to healthy customer base growth. The telecommunications and mobile money services provider generated a pretax profit of $1.22 billion in the year ended March 31, up 75% versus $697 million the year prior. This was on revenue growth of 21% to $4.71 billion from $3.91 billion. Airtel Africa said it delivered strong double-digit growth across all its key services. It credited this to customer base growth of 8.7% to 128.4 million and growth in average revenue per user of 15%.
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E.ON reported a fall in its first quarter profit as sales surged, citing a difficult market environment and high energy prices. For the first quarter of 2022, the Essen, Germany-based electric utility company saw net income drop 4.9% to €969 million from €1.02 billion the previous year. Quarterly sales surged to €29.51 billion, rising 55% against €19.52 billion in 2021. The Customer Solutions segment recorded growth of 61% against the first quarter of 2021. E.ON said this was as a result of increases on commodity markets despite narrow margins.
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Apple on Tuesday put out word it is no longer making iPods, the trend-setting MP3 players that transformed how people get music and gave rise to the iPhone. Late Apple co-founder Steve Jobs introduced the devices nearly 21 years ago with his legendary showmanship flare, and the small, easy to operate players helped the company revolutionize how music was sold. It packed ‘a mind-blowing 1,000 songs’ the company said at the time, and together with Apple's iTunes shop established a new distribution model for the music industry. Industry trackers and California-based Apple itself have long acknowledged that the do-it-all iPhone would eat away at sales of one-trick devices such as iPod MP3 players.
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Elon Musk said that as owner of Twitter he would lift the ban on Donald Trump, contending that kicking the former US president off the platform ‘alienated a large part of the country.’ Musk's endorsement of a Trump return to the global messaging platform triggered fears among activists that Musk would ‘open the floodgates of hate.’ ‘I would reverse the permanent ban,’ the billionaire said at a Financial Times conference, noting that he doesn't own Twitter yet, so ‘this is not like a thing that will definitely happen.’
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Electronic Arts reported a rise in fourth-quarter earnings as the video game publisher raised its guidance for the next financial year. For the three months to March 31, EA generated revenue of $1.83 billion, up from $1.35 billion in the fourth quarter last year. EA posted fourth-quarter net income of $225 million, or $0.80 per diluted share, up sharply from $76 million, or $0.26 diluted EPS, the year before. For financial 2022, net revenue was $6.99 billion, up from $5.63 billion the year before.
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MARKETS
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Stock prices were higher on Wednesday, while the dollar was giving back some recent gains, ahead of key inflation data from the US, due at 1230 GMT. The dollar remains close to a 20-year high. ‘The release of US inflation data for April...may lead to further dollar gains but is unlikely to trigger any substantial losses,’ said Ricardo Evangelista, a senior analyst at ActivTrades. ‘A number surprising to the upside will increase market bets on a 0.75% rate hike and increase demand for the dollar, while a figure below expectations is unlikely to change the Feds plans for the months ahead.’
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CAC 40: up 2.0% at 6,236.75
DAX 40: up 1.0% at 13,667.14
FTSE 100: up 1.1% at 7,322.05
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Hang Seng: closed up 1.0% at 19,824.57
Nikkei 225: closed up 0.2% at 26,213.64
S&P/ASX 200: closed up 0.2% at 7,064.70
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DJIA: called up 0.9%
S&P 500: called up 1.1%
Nasdaq Composite: called up 1.3%
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EUR: up at $1.0569 ($1.0533)
GBP: up at $1.2380 ($1.2300)
USD: down at JP¥129.68 (JP¥130.38)
Gold: up at $1,851.10 per ounce ($1,846.88)
Oil (Brent): up at $105.65 a barrel ($104.75)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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China's consumer inflation rose at its quickest pace in nearly half a year, official data showed, reflecting the growing costs of the country's zero-Covid curbs and high commodity prices. The damage from Beijing's strict zero-Covid strategy has been increasingly reflected in economic data, as lockdowns in key cities such as Shanghai snarled supply chains and pushed up transportation prices. April's consumer price index, a key gauge of retail inflation, rose more than expected at 2.1% on-year, picking up pace from 1.5% in March, said the National Bureau of Statistics. This was due to ‘factors like the domestic epidemic and continued rise in international commodity prices,’ the bureau's senior statistician Dong Lijuan said in a statement.
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China's censors scrambled to wipe out online debate over its zero-Covid strategy on Wednesday after the World Health Organisation criticised the country's hardline approach to crushing the virus. China is the last major economy glued to a zero-Covid policy and enforces some of the most stringent virus controls anywhere in the world. On Tuesday WHO chief Tedros Adhanom Ghebreyesus urged China to change tack, saying the approach ‘will not be sustainable’ in the face of new fast-spreading variants. The intervention prompted China's army of internet censors to race to snuff out his comments. Searches for the hashtags ‘#Tedros#’ and ‘#who#’ on the popular Weibo social media platform displayed no results, while users of the WeChat app were unable to share an article posted on an official United Nations account.
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Consumer price inflation in Germany ticked to a new record high in April, as expected, data from the Federal Statistical Office showed. The annual inflation rate accelerated to 7.4% in April from 7.3% in March. The rise in the consumer price index was in line with market consensus cited by FXStreet. Versus the previous month, consumer prices were 0.8% higher in April, matching March's 0.8% rise from February.
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US President Joe Biden acknowledged the pain felt by Americans from the highest inflation in four decades but said it is his ‘top domestic priority’ and being addressed by the Federal Reserve. ‘The Fed should do its job and it will do its job,’ Biden said in a speech at the White House. ‘I believe that inflation is our top economic challenge right now and I think they do too.’ Price rises are at their steepest rate since the start of the 1980s, dampening economic optimism as the US emerges from the Covid pandemic shutdown and badly denting Biden's approval ratings.
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UK Foreign Secretary Liz Truss has said the UK ‘will not shy away’ from taking action on the Northern Ireland protocol after Prime Minister Boris Johnson indicated the situation was ‘now very serious’. Truss said some proposals put forward by the EU during months of discussions on the post-Brexit treaty would ‘take us backwards’ as she argued against introducing ‘more checks, paperwork and disruption’. The Foreign, Commonwealth & Development Office said that, under EU proposals suggested in October, trading arrangements could worsen and everyday items could disappear from shop shelves in Northern Ireland.
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