Company news in brief

24 January 2019 | Business

Subaru faces profit hit as Japan car output halted

Subaru Corp said its sole car factory in Japan accounting for roughly 60% of global production could be out of action for almost two weeks after it discovered a suspected defect in a power-steering component.

The production stoppage, which started from the night shift on Jan. 16 at one of Subaru's only two factories worldwide, was first reported in the Asahi newspaper on Wednesday.

The possible defect affected the Forester, Impreza, and XV models, the automaker said. Production of all other models had also stopped because they are built on the same assembly line, it said.

Subaru is already reeling from stagnant sales growth in the United States and fresh recalls in Japan due to inspection cheating. In November, it slashed its profit forecast by a quarter citing rising recall costs.

The company said it did not yet know what impact the production halt would have on its earnings, which are already on track for a third-straight annual drop. – Nampa/Reuters

Cloud, services fuel IBM's profit beat

IBM Corp beat Wall Street quarterly earnings estimates and also forecast 2019 profit above expectations on Tuesday, in the latest indication that CEO Ginni Rometty's efforts to turn around the technology services company were gaining traction. IBM also posted its first annual revenue growth since 2011.

Rometty, who has been CEO since 2012, has steered the company toward faster-growing segments such as cloud, software and services and away from traditional hardware products, but not without a bumpy journey. The newer areas of focus have sometimes underwhelmed investors.

CFO James Kavanaugh told Reuters that IBM signed roughly US$16 billion worth of contracts in the quarter, its strongest by that measure in a long time.

Underscoring the drive into higher-margin businesses, IBM in October agreed to buy software company Red Hat Inc for US$34 billion, the company's biggest acquisition in its more than 100-year history.

IBM said its gross profit margin, another closely monitored metric, expanded to 49.1% compared with 49% a year ago and it expects to build on that momentum in 2019.

The company forecast adjusted operating earnings for 2019 to be "at least" US$13.90 per share, while analysts on average were expecting US$13.79, according to IBES data from Refinitiv. – Nampa/Reuters

Hedge funds push for overhaul at eBay

Hedge funds Elliott Management and Starboard Value have taken stakes in eBay Inc and are pushing for changes including the sale of some of the e-commerce company's businesses.

In a letter to the company's board, Elliott asked eBay to hive off its StubHub ticket sales business and eBay Classifieds Group as part of a plan the hedge fund says could double the company's value.

Starboard has also taken a significant stake in eBay and been pushing for changes including asset sales in the past few months, a source familiar with the matter said separately. Starboard did not respond to a request for comment.

Elliott, which owns a more than 4% stake in eBay, said the company's share price could reach US$55-US$63 by 2020 if it implemented the hedge fund's restructuring plan.

"While we believe that execution missteps and unclear focus have impaired value, eBay is far from broken, and its future should be bright," Elliott's Jesse Cohn wrote, adding that his mother had built a successful business on eBay by selling jewellery for more than a decade. – Nampa/Reuters

UBS sets gloomy tone for Europe's banks

UBS warned of a tough start to 2019, after reporting an outflow of funds from its flagship wealth management business at the end of last year, sending a shiver through the European banking sector.

UBS is the first major European bank to report fourth quarter earnings, and shares in rivals Credit Suisse and Deutsche Bank fell as investors fretted over similar news from them next month.

UBS's pivot to focus more on managing money for the world's rich and less on volatile areas of investment banking over the past six years or so had made it one of the most stable performers among large European banks.

Overall, UBS generated US$862 million in fourth-quarter pre-tax earnings, missing analyst expectations for US$985 million in the consensus provided by the bank.

The Zurich-based lender, which manages more than US$2 trillion of the world's wealth, posted a 22% dip in fourth-quarter adjusted pre-tax earnings in wealth management as clients reduced risk in their portfolios, traded less and built up their cash positions. – Nampa/Reuters

J&J 2019 revenue forecast misses expectations

Johnson & Johnson on Tuesday forecast 2019 sales that fell short of analysts' estimates as the healthcare conglomerate faces increasing competition for some of its older drugs.

The company's prostate cancer drug Zytiga, an important growth driver, is expected to be pressured by generic competition, while sales of its rheumatoid arthritis drug Remicade has been slipping due to competition from cheaper biosimilar versions.

The company said it expects full-year sales in the range of US$80.4 billion to US$81.2 billion, compared with the average analyst estimate of US$82.69 billion, according to IBES data from Refinitiv.

The company posted net profit of US$3.04 billion, or US$1.12 per share, for the fourth quarter, compared with a loss of US$10.71 billion, or US$3.99 per share, a year earlier, when it recorded a US$13.6 billion charge related to changes to the US tax law. – Nampa/Reuters

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