Company news in brief

29 April 2020 | Business

BP hikes debt, keeps dividend

BP's first-quarter profit tumbled by two thirds and its debt climbed to its highest in at least five years as the coronavirus crisis hammered oil demand, but the energy major kept its dividend despite warning of exceptional uncertainty.

BP reported an underlying replacement cost profit, its definition of net income, of US$800 million, beating the US$710 million forecast by analysts in a company-provided poll. The company reported US$2.4 billion profit a year earlier.

But BP, whose net debt climbed to its highest since at least 2015, kept its dividend of 10.5 US cents per share and said it had repurchased shares worth US$776 million in the quarter.

BP's debt rose to US$51.4 billion in the first quarter and its debt-to-capital ratio, or gearing, rose to 36%, significantly higher than its target of keeping it below 30%.

BP held US$32 billion in liquidity at the end of the first quarter after it raised extra funds. Cash flow slumped to US$1 billion in the quarter, the lowest in at least six years, compared with US$5.3 billion last year.

Diageo to raise billions from debt offering

Diageo, the world's largest spirits maker, launched a US$2.5 billion bond offering yesterday, weeks after suspending its share buyback programme in response to the coronavirus crisis.

The Johnnie Walker whisky maker said the offering will be in three tranches: US$750 million at a fixed rate of 1.375% due 2025, US$1 billion at 2% due 2030 and another US$750 million at 2.125% due 2032.

It plans to use the proceeds for general corporate purposes. – Nampa/Reuters

Nissan sees operating loss

Nissan Motor Co yesterday said it expected to post an operating loss for the year that ended in March, as an ongoing decline in sales is exacerbated by the coronavirus outbreak.

In a statement, the Japanese automaker said that it expected an annual operating loss of as much as 45 billion yen (US$419.7 million) from a previous forecast announced in February for an operating profit of 85 billion yen.

It expects to post a net loss of as much as 95 billion yen, compared with a previous forecast for 65 billion yen profit. – Nampa/Reuters

HSBC Q1 profit halves

HSBC Holdings PLC's first-quarter profit nearly halved from a year-ago, missing estimates, after boosting provisions against bad loans as the coronavirus pandemic hits borrowers worldwide.

Europe's biggest bank by assets said profit before tax came in at US$3.21 billion for January-March, down from US$6.21 billion a year ago and below an average analyst forecast of US$3.67 billion compiled by the bank.

The bank increased its expected credit impairment charges by a hefty US$2.4 billion to US$3 billion due to the impact of Covid-19 and weakening oil prices as well as "a significant charge related to a corporate exposure in Singapore", it said.

HSBC warned the impact of the pandemic on the global economy would mean a rise in bad loans, and sustained pressure on its revenues as customer activity declined and lower central bank interest rates squeezed margins.

It also said a rise in fraudulent activity could lead to "potentially significant" credit losses. – Nampa/Reuters

Tesla's stock recovers

Tesla Inc chief executive Elon Musk is on the cusp of a roughly US$750 million payday as the electric carmaker's stock recovers from a slump caused by the coronavirus, which led the company to close its factories and furlough workers.

Shares of Tesla surged 10% on Monday ahead of the company's quarterly report this week, and in anticipation it could soon reopen its Fremont, California, plant after it was shuttered because of the pandemic.

Monday's rally put Tesla's market capitalisation at US$145 billion. Importantly for Musk, its stock market value reached a six-month average of US$96 billion. Hitting a six-month average of US$100 billion would trigger the vesting of the first of 12 tranches of options granted to the billionaire to buy Tesla stock as part of his two-year-old pay package.

Each tranche gives Musk the option to buy 1.69 million Tesla shares at US$350.02 each. Taking Monday's Tesla closing stock price of US$798.75 as an example, Musk could sell those shares for a profit of US$758 million. – Nampa/Reuters

Wealth revamp helps UBS

The world's largest wealth manager, UBS, reported a 40% rise in quarterly profit yesterday, with its core business enjoying its best three months since 2008, thanks to a restructure and rich clients reshuffling portfolios to respond to the coronavirus outbreak.

The bank booked net profit of US$1.595 billion, slightly ahead of its previous guidance of around US$1.5 billion. It reported strong operating growth across all but one of its business divisions, even after accounting for the risk of increased defaults resulting from the virus.

The bank recorded US$268 million in credit loss expenses for the quarter, saying it was primarily exposed to credit related to wealth management clients and within Switzerland, noting its credit book was "of high quality".

UBS' core business managing money for the world's wealthy saw invested assets decline sequentially to US$2.339 trillion on the back of falling asset valuations, while revenue grew across all main lines, helping operating income rise 14%. – Nampa/Reuters

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