- Wed, 2020-08-05 02:40
BP cuts its dividend for the first time in a decade after a record $6.7 billion second quarter loss, when the coronavirus crisis hammered fuel demand, and it sought to win over investors by speeding up its reinvention as a lower carbon company.
Its shares rose more than 7 percent on Tuesday after BP unveiled earlier than expected a plan to reduce its oil and gas output by 40 percent and boost investments in renewable energy, such as wind and solar, over the next decade.
All major oil companies suffered in the second quarter as lockdowns to contain the new coronavirus limited travel and oil prices fell to their lowest in two decades.
Several, including Royal Dutch Shell and Norway’s Equinor, cut their dividend in response.
BP CEO Bernard Looney, who took the helm in February, avoided a dividend cut in the first quarter despite worsening market conditions and as rivals reduced their payouts. But Tuesday’s 50 percent cut by BP to 5.25 cents per share, which was larger than the 40 percent forecast by analysts, became inevitable given a large debt pile, the collapse in oil and gas demand and growing expectations for a sluggish global economic recovery.
BP’s net loss was in line with analysts’ expectations and was largely a result of the company’s decision to wipe $6.5 billion off the value of oil and gas exploration assets after it revised its price forecasts.
BP recorded total impairments of $17.4 billion, at the upper end of its previous guidance.
“These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to re-imagine energy and reinvent BP,” Looney said in a statement.
“In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact.”
The loss, based on BP’s current accounting definition, is the first recorded on Refinitiv Eikon data. Looney called it the “toughest quarter in the industry’s history.”
As the investment climate turns away from carbon-intensive fossil fuel, Looney had planned to unveil BP’s new strategy in September. Instead, the company announced details on Tuesday.
It said it would increase its low-carbon spending tenfold by 2030 versus current levels to $5 billion a year out of a total budget of around $15 billion and boost its renewable power generation to 50 gigawatts. Over the same time frame, it plans to shrink its oil and gas production by at least 1 million barrels of oil equivalent per day compared with 2019.
To hone its portfolio, BP targets divestments of $25 billion between 2020 and 2025, around $12 billion of which are already lined up.
It will retain its 19.75 percent stake in Russia’s Rosneft, it said.
While oil and gas are dominant, Redburn’s equity analyst Stuart Joyner said the strategic shift was encouraging.
“There will be inevitable questions over profitability of new low carbon investments,” he said. “But BP is now firmly leading the sector in terms of transitioning its business to a lower carbon future.”
Debt and dividend
BP, which paid out a total of $7.2 billion in dividends last year, became the largest dividend payer on the London FTSE stock exchange after Royal Dutch Shell cut its dividend for the first time since the 1940 earlier this year.
BP last reduced its dividend in 2010, when it was suspended for three quarters following the deadly Deepwater Horizon rig explosion.
It holds $40.9 billion in net debt after raising $19 billion in new debt in the second quarter, more than any of its peers.
Its debt-to-equity ratio, known as gearing, at 33.1 percent exceeds its own target and places it at risk of a downgrade by rating agencies.
BP said it aimed to “reset a resilient dividend” of 5.25 cents per share per quarter and to return at least 60 percent of future surplus cash as share buybacks.
Posted: by Arab News
- ID:1596532544197929500Tue, 2020-08-04 09:01
OAKLAND, California: Alphabet’s Google Cloud unit is poised for a surge in fourth-quarter sales from US retailers, as they brace for record online shopping during the holidays because of COVID-19 lockdowns.
Cloud technology, used to host websites and store data, is a key part of many retailers’ e-commerce operations. As fees are often pegged to site traffic, a jump in activity will drive up revenue for the unit.
Carrie Tharp, vice president of retail and consumer at Google Cloud, said that her team had this year tossed out its linear growth model to predict how many servers it will need to process web orders for retailers around Black Friday.
“We’re planning for peak on top of peak,” she said on Monday. That could be a boon for Google Cloud, which has generated about 30 percent of its revenue during the fourth quarter the last two years.
Stores such as Kohls Corp. and Wayfair Inc. lean on Google months in advance to ensure it has enough servers to withstand increased shopping during holiday discount days such as Black Friday and Cyber Monday in November and December.
This year, Black Friday-style demand has flooded shops since March, when the United States began lockdowns, Tharp said.
Holiday shopping is expected to boost demand further, as retailers including Target Corp. and Walmart Inc. have said they will reduce in-store hours because of coronavirus concerns.
Tharp said the pandemic has already benefitted Google Cloud, with some retailers adopting its predictive algorithms years ahead of plan to help them work out the most efficient way of fulfilling orders.
Electronics retailer Best Buy Co., for instance, announced on Tuesday a multi-year deal to centralize customer and product data with Google Cloud to improve its loyalty program and online ad campaigns.
The companies declined to elaborate on the deal, but Tharp said she hopes it leads to Google eventually powering Best Buy’s web ordering system.
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Posted: by Arab News
- Tue, 2020-08-04 03:48
LONDON: HSBC on Monday reported a 69-percent slump in net profit, joining a number of major banks whose earnings have been slammed by the coronavirus fallout.
HSBC announced earnings of $3.1 billion compared with almost $10 billion in the first 6 months of 2019, as spiraling China-US tensions also hurt the British-based but Asia-focused lender.
Alongside HSBC results, top French bank Societe Generale on Monday announced a second quarter loss of more than €1 billion as the pandemic forced it to set aside more provisions against bad loans. UK banks Barclays, Lloyds and NatWest all last week reported huge financial hits linked to the pandemic’s fallout.
But there have been some bright spots, with French bank BNP Paribas weathering the coronavirus storm in the second quarter with only a small dip in net profits thanks to a surge in investment banking.
Credit Suisse meanwhile saw net profit jump almost a quarter in the April-June period, also on investment banking gains.
“HSBC has done little to lift investors’ spirits as it brings the curtain down on what has been a costly half-year reporting season for banks in general,” noted Richard Hunter, head of markets at Interactive Investor.
Even though banks “are much better prepared for this economic onslaught than during the financial crisis of over a decade ago … the immediate outlook is bleak,” he added.
HSBC said that its pre-tax profit slid 64 percent to $4.3 billion in the first half while revenue was down 9 percent at $26.7 billion.
The figures missed analyst forecasts and the bank also raised its estimate for 2020 loan losses to $13 billion from $8 billion.
CEO Noel Quinn described the first 6 months of the year as “some of the most challenging in living memory.” He added: “Our first-half performance was impacted by the COVID-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”
Even by the standards of the current economic maelstrom engulfing global banks, HSBC has had a torrid time.
Before the coronavirus crisis it was beset by disappointing profit growth, ground down by US-China trade war uncertainties and Britain’s departure from the European Union.
The London-headquartered bank embarked on a huge cost-cutting initiative at the start of the year, including plans to slash about 35,000 jobs as well as trimming fat from less profitable divisions, primarily in the United States and Europe.
The coronavirus upended some of that cost-cutting drive with banks hammered by market volatility and the economic slowdown caused by the pandemic.
But HSBC has a further headache — geopolitical tensions via its status as a major business conduit between China and the West.
HSBC makes 90 percent of its profit in Asia, with China and Hong Kong being the major drivers of growth.
As a result it has found itself more vulnerable than most to the crossfire caused by the increasingly bellicose relationship between Beijing and Washington.
The bank has tried to stay in Beijing’s good graces. It vocally backed a draconian national security law that Beijing imposed on Hong Kong in June to end a year of unrest and pro-democracy protests. The move sparked criticism in Washington and London but analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line.
But that has not shielded it from Beijing’s wrath. Quinn referenced the bank’s growing political vulnerability in Monday’s results statement.
“Current tensions between China and the US inevitably create challenging situations for an organization with HSBC’s footprint,” he said.
“However, the need for a bank capable of bridging the economies of East and West is acute, and we are well placed to fulfil this role,” he added.Tags:
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Posted: by Arab News
- ID:1596524406527670600Tue, 2020-08-04 06:57
DUBAI: Kuwaiti aircraft leasing company Alafco will buy fewer aircraft from Boeing after reaching an agreement to end its legal claim over a canceled 737 MAX order, it said on Tuesday.
Alafco was suing the US planemaker for $336 million over accusations it wrongly refused to return advance payments on a canceled order for 40 of its troubled 737 MAX planes.
The Kuwaiti lessor will now buy 20 aircraft from Boeing, instead of 40, with new delivery dates, it said in a bourse filing.
Additional details of the agreement could not be disclosed due to confidentiality clauses, it said.
Alafco said it was “looking forward to a long-lasting and mutually beneficial relationship with Boeing.”
Alafco and Boeing did not immediately respond to emailed requests for comment.
Boeing suspended deliveries of its narrow-body 737 MAX jet in March last year, when the Federal Aviation Administration grounded the aircraft after the deaths of 346 people in crashes of two 737 MAX planes operated by Lion Air and Ethiopian Airlines.
The crisis over the grounding of the once top-selling 737 MAX has cost the US planemaker more than $19 billion, slashed production and hobbled its supply chain, with criminal and congressional investigations still ongoing.
Alafco’s owners include Kuwait Finance House, Gulf Investment Corporation and state airline Kuwait Airways, according to its website.
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Posted: by Arab News
- ID:1596541532098304400Tue, 2020-08-04 11:32
THE HAGUE: Online travel agency Booking.com said Tuesday it will cut up to a quarter of staff worldwide due to the ongoing coronavirus pandemic, leading to thousands of job losses.
The Amsterdam-based booking site, which employs around 17,500 people around the world, declined to give an exact number of posts that will be slashed, saying details would become clearer “in the coming weeks and months.”
But it warned that “up to 25 percent” of employees could go in what it called an “extremely difficult step.”
“The Covid-19 crisis has devastated the travel industry, and we continue to feel the impact as travel volumes remain significantly reduced,” the company said in a statement sent to AFP.
“While we have done much to save as many jobs as possible, we believe we must restructure our organization to match our expectation of the future of travel,” it added.
Booking.com’s Amsterdam headquarters was expected to be among the sites affected, Dutch media reports added.
Hard-hit by the slowdown in international travel resulting from the lockdown, Booking.com follows in the footsteps of other digital travel sites such as Airbnb and TripAdviser, which have also laid off around 25 percent of their workforce.
Booking.com applied in April for state support.
Last month it received some 61 million euros ($71.8 million) from the Dutch state, making it the third-largest recipient of support behind flagship airline KLM and Dutch Rail (NS), the ANP national news agency reported.
Founded in 1996, Booking.com has some 28 million listings on its website which is available in 43 languages.
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Posted: by Arab News