Finance Markets

September 20, 2005

Tesco sees profit rise but warns on future costs

Filed under: Companies, UK
Tesco sees profit rise but warns on future costs

Tesco, the UK’s largest supermarket chain announced on Tuesday that its profits grew by 18.7 percent in the first half of the year.

At the same time, however, it warned that while it had budgeted for rising oil prices, the actual rise in costs might be as much as £60 million ($108 million) higher than what had been budgeted for.

That might well be more than the company could absorb by cost cutting in other areas, according to Tesco’s chief executive, Sir Terry Leahy.

Still, the company says that it will attempt to avoid passing higher costs due to rising oil prices on to consumers through such measures as energy conservation.

Tesco reported that first half sales were up 14.1 percent to £18.8 billion. Operating profit grew by 19.9 percent to £964 million, and international profits added 23.5 percent to £163 million.

Earnings per share were reported to be 8.22p per share in the half, compared with 7.07p per share in the previous reporting period.

Tesco’s board has proposed paying an interim dividend of 2.53p per share, compared to its last dividend of 2.29p.

Tesco’s shares were down 2.3 percent to 319p early in the day on Tuesday in London, and had fallen a total of 4 percent by the end of the day’s trading session.

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September 16, 2005

CNOOC CFO speaks out on US political pressure

Filed under: Oil, Companies, Politics
CNOOC CFO speaks out on US political pressure

The chief financial officer of CNOOC, the Chinese oil company that made an unsuccessful bid to acquire US oil company Unocal earlier in the year, has spoken out about the political pressure brought to bear in the US to block the bid.

Yang Hua’s comments, to journalists in Hong Kong on Thursday, not only revealed resentment about that political pressure but hinted that CNOOC would be looking in different parts of the world for future acquisition targets.

He called the political pressure against CNOOC’s bid for Unocal an infringement of human rights, asserting that such rights include having guaranteed access to energy, saying that it was important for nations such as his own and India to have long-term energy security.

Mr. Yang would not comment on where his company might look for acquisitions in the future, but mentioned that there are many places in the world where China and Chinese companies are welcomed, naming Africa as an example.

He also mentioned oil and natural gas reserves in Western Australia without saying that his company was interested in acquiring those reserves.

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September 15, 2005

S&P warns insurance syndicates face ruin from hurricane

Filed under: Companies, US
S&P warns insurance syndicates face ruin from hurricane

Standard & Poor’s has said that some of the syndicates in Lloyd’s insurance market could be forced to go out of business due to losses from Hurricane Katrina.

The ratings agency was quick to point out that it was much too early to say which of the 62 syndicates might be affected, but that there were 20 which would require close scrutiny.

Four of these syndicates already have S&P’s lowest rating of 1 on a scale of 1 to 5, which denotes that they are at highest risk of going out of business.

S&P also said that no damage was expected to Lloyd’s overall market, although it could suffer a downgraded rating.

Meanwhile another ratings agency, Fitch, announced that it was putting Allstate, State Farm Mutual, and Montpelier Re on watch for possible downgrade due to exposure to claims relating to Hurricane Katrina.

Allstate’s shares have dropped 7 percent, while Montpelier Re has already fallen by over 23 percent since the hurricane hit.

One problem facing the insurers is that they may not be able to raise rates for premiums to help cover their payouts.

Louisiana and Mississippi, two of the states hardest hit by Katrina, are expected to pass legislation barring insurers from raising rates sharply in the short term.

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September 13, 2005

World employers optimistic for Q4

Filed under: Companies, Economy
World employers optimistic for Q4

A survey released by recruitment company Manpower on Tuesday shows that employers plan to hire new employees in the fourth quarter of 2005 at around the same rate they hired at the same time in 2004.

The report shows, however, that employers are somewhat less optimistic about their hiring plans than they were when surveyed three months ago, showing the effect of rising oil prices on the hiring outlook.

The majority of employers in 20 of the 23 countries surveyed plan on hiring more workers in the fourth quarter, and worldwide 13 percent more companies plan to hire during the last quarter than plan to reduce their workforces.

In June, 16 percent more companies worldwide planned to hire than to fire, but the 13 percent figures is the same as a survey taken the same time last year.

Out of all the regions surveyed, India remained the most optimistic with 40 percent more firms expecting to add employees than to cut them. On the other hand, only 5 percent more companies expect to hire than to fire.

In the US and Canada, 20 percent more firms expected to add employees than expected to let employees go.

For their report, Manpower surveyed 45,000 companies in 23 nations. One caveat to the numbers is that the survey was completed before Hurricane Katrina hit the Gulf Coast of the United States.

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August 22, 2005

Acambis accused of stealing trade secrets

Filed under: Companies, US, UK
Acambis accused of stealing trade secrets

British biotechnology firm Acambis has been accused by a rival firm of stealing trade secrets in order to develop a vaccine and win the $1.9 billion contract to supply the US with the vaccine.

Danish biotechnology firm Bavarian Nordic has filed suit in a US court alleging that Acambis used information gained from their research and their technology in order to develop their own version of the vaccine.

Bavarian Nordic is the only other company that is developing a weakened smallpox vaccine. Bavarian Nordic has also filed a complaint with the International Trade Commission in Washington, D.C., claiming that Acambis’s vaccine infringes on Bavarian Nordic’s patents on its vaccine.

Bavarian Nordic further alleges that copies of the strain of virus that it used to develop its vaccine was given to Acambis by an American government agency in February of 2003.

Analysts have said that gaining the contract is important to Acambis’s future due to losses after the end of other contracts to produce other kinds of smallpox vaccine.

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August 18, 2005

Qantas raises profits but to cut staff for big fuel bills

Filed under: Companies, Australia
Qantas raises profits but to cut staff for big fuel bills

Even though Qantas announced Thursday that it had an unexpectedly high 18 percent rise in profits in the first half of 2005, it also said that it will cut jobs and raise fuel levies on tickets next year to compensate for the rise in fuel prices.

There was no announcement of how many of its 38,000 workers mightlose their jobs, but it was estimated that fuel levies would rise by A$10 to A$20 per journey leg.

Qantas said that 30 percent of their operating costs next year would go to buying fuel, while last year that was only 19 percent of costs.

The airline reported an after-tax profit to June 30 of A$763.6 million, A$155.2 million higher than the same period last year, but it expects to pay A$1.2 billion for fuel alone next year.

Chief financial officer Peter Gregg justified the job cuts and higher fuel levies by saying that the airline couldn’t be expected to absorb the higher fuel prices.

Meanwhile, Virgin Blue announced Thursday that it was reducing its profit estimate for 2004-2005 to between A$90 million and A$100 million, down from A$159 million last year. It also blamed the reduction on climbing fuel prices, saying that its fuel bill next year will be A$150 million higher than it was this year.

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August 2, 2005

CNOOC abandons Unocal bid

Filed under: Oil, Companies, US, China
CNOOC abandons Unocal bid

CNOOC has withdrawn its bid for Unocal, citing “unprecedented political opposition” as its reason for not upping its bid to challenge Chevron’s bid to take over the California-based oil company.

The withdrawal of its bid on Tuesday came a day after Institutional Shareholder Services, a shareholder advisory firm, backed Chevron’s bid, saying that the CNOOC offer wasn’t large enough to compensate for the political uncertainties it carried with it.

ISS said that the six months minimum that it would take to close the CNOOC offer, should it have been accepted, would have reduced the value of its offer by 5 percent. This assessment did not take into consideration extra political interference in the acceptance process, which was likely to occur during the process of government approval of any deal.

A provision of the energy bill just passed by Congress contained a provision that would have delayed an acquisition of Unocal by CNOOC by at least 120 days.

After the announcement of CNOOC’s withdrawal of its bid for Unocal, Unocal shares were down in the New York Stock Exchange, but CNOOC’s shares had gained almost 6 percent in late morning trading.

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July 28, 2005

Unocal and Chevron face investors

Filed under: Oil, Companies, US, China
Unocal and Chevron face investors

Unocal and Chevron began an effort on Thursday to convince shareholders that Chevron’s lower bid for the California-based Unocal is the best thing for both companies and shareholders.

Unocal argued that while CNOOC’s bid is higher, Chevron’s bid is superior because of the inevitable delays that would accompany an acceptance of the Chinese oil company’s bid.

It said that an acceptance of the CNOOC bid would lead to delays in the approval process as well as only limited possibilities for the recovery of damages if the deal were to fall through.

Even so, Unocal did not completely rule out acceptance of CNOOC’s offer if it were to include compensation for the increased risks and complexities inherent in its offer.

Speculation is high that CNOOC will indeed make a higher offer for Unocal. It is believed, however, that CNOOC is waiting until after the US Congress begins its August recess this Friday before deciding whether to raise its bid in any way.

CNOOC’s current offer stands at $67 per share, but it has the approval of its board of directors to raise the bid to $69 per share if necessary.

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July 27, 2005

Consumers in China push fast food expansion

Filed under: Companies, Countries & Regions, US, China
Consumers in China push fast food expansion

According to a United States Department of Agriculture report dated July 14 and released on Wednesday, the demand for frozen French fries in China will grow by 20 percent per year for the next five years as Western-style fast food restaurants expand in that Asian nation.

Additionally, French fries are becoming more popular on hotel menus in China, the report says. China will import 83,000 tonnes of frozen French fries in 2005, significantly higher than the 69,548 tonnes that were imported last year.

While China is increasing its own production of frozen French fries, it has not been able to keep up with the demand, said to be in excess of 100,000 tonnes. More than two-thirds of that amount are imported. Leading the expansion of the foreign presence in the fast-food sector in China, are Kentucky Fried Chicken, with 1,200 restaurants there at the end of 2004 and expectations of double digit growth.

McDonald’s has around 600 restaurants in China and is planning an aggressive campaign of expansion. According to the USDA report, the only factor that might slow down the exploding demand for French fries in China is a recent report from the World Health Organization that found the presence of a carcinogen, acrylamide, in both French fries and potato chips.

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July 25, 2005

Outcome of Unocal vote uncertain as CNOOC bid remains

Filed under: Oil, Companies, US, China

According to a timeline filed with the US Securities and Exchange Commission on Monday, Unocal was close to accepting CNOOC’s takeover bid despite its political risks until Chevron came through with a rise in its own bid for the California-based oil company.

The filing shows that Unocal’s chief executive, Chuck Williamson, told Chevron on July 17 that it was inclined to reverse course and support CNOOC’s bid unless Chevron would raise its bid.

That notification came after CNOOC’s chairman declined a request from Williamson to raise their bid after Williamson had told CNOOC that an increase in its bid would likely result in Unocal’s support for that bid.

The filing is part of a revised proxy statement filed by Unocal in advance of a scheduled shareholder vote on August 10 concerning the Chevron bid.

Even though Unocal is backing the Chevron bid, the outcome of the vote is uncertain, especially since the release on Sunday of a letter from the head of an asset management company that holds over 1 million Unocal shares.

That letter demanded that Unocal consider the CNOOC bid and warning that shareholder damages could run in the billions of dollars if it does not do so.

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July 20, 2005

WTO returns to Boeing and Airbus dispute

Filed under: Companies, US, Europe, Politics
WTO returns to Boeing and Airbus dispute

The World Trade organization returned to look into the complaints brought by the EU and the US that subsidies paid by the other to the private companies are not allowable under WTO rules.

The EU says that US government subsidies gives Boeing an advantage, while the US claims that subsidies from European governments unfairly aids Airbus.

The WTO investigation is automatic, as it is the second complaint on the matter by both parties. However, a spokesman for the US Trade Representative said from Washington that the US would prefer a negotiated settlement to the dispute, while a EU spokesman said that it remains open to talks toward settlement.

The first complaints came in October of 2004, followed by an agreement to postpone litigation in favor of negotiation.

However, with no settlement forthcoming, both parties returned to the WTO earlier this year to seek a ruling.

A decision from the WTO will not come soon, though, as it is expected to take up to two months to even decide who is to sit on the panel considering the dispute.

A decision is not likely to be reached until the end of next year.

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Unocal endorses Chevron bid

Filed under: Oil, Companies, US, China
Unocal endorses Chevron bid

US oil company Unocal has endorsed Chevron’s bid to buy the California-based company over a higher bid from Chinese company CNOOC.

Conventional wisdom is that Unocal is sticking with the Chevron deal at least partly because of concerns that the US government would not approve a deal with CNOOC.

The move by the Unocal board came after Chevron raised its bid from $60 per share to $63.01 per share, or $17 billion dollars.

This sets the stage for CNOOC to raise its from its current $67 dollars per share in an effort to get Unocal to change its mind.

CNOOC had been “comfortable” with its current bid of $18.5 billion, as CNOOC had expected Chevron to raise its bid by more than it did.

There is some concern that if it raises its bid, CNOOC would be eliminating any advantage to shareholders, and especially to minority shareholders, that the deal might bring. One fund has already sold its stake in the company as a result of these worries.

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July 18, 2005

Infineon faces up to personel corruption scnadal

Filed under: Companies, Europe
Infineon faces up to personel corruption scnadal

Shares in Infineon Technologies AG, Europe’s largest chipmaker, fell 1.2 percent to €8.31 on Monday on the news that Andreas von Zitzewitz, the head of the company’s core memory-chip unit had resigned over the weekend after news broke that he is under investigation for taking kickbacks in return for arranging sports sponsorship deals with a public relations agency.

Another ex-manager for Infineon and the president of the Swiss public relations agency BF Consulting are also being investigated in the matter.

Infineon itself is not a target of the investigation, the company said, and is cooperating fully with the investigation.

The Munich state prosecutor said that investigation, which included raids on 15 properties in Germany and Switzerland, had confirmed that Mr. Von Zitzewitz had in fact received *259,000 (US$313,000) for his participation in the scheme.

This is the second resignation of a top German executive over allegations of corruption in just a few weeks, as Volkswagen AG’s chief of personnel quit last month as he took responsibility for misconduct among his staff.

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July 14, 2005

LSE suggests making acquisitions of its own

Filed under: Companies, Markets, UK
LSE suggests making acquisitions of its own

The London Stock Exchange, target of takeover bids by Deutsche Börse and Euronext, might instead be looking to make acquisitions of its own.

At a shareholder meeting on Wednesday, the chairman of the LSE indicated that such acquisitions are a possibility.

In response to a question posed by a shareholder, Chris Gibson-Smith said that the LSE would only make an acquisition when it would be of value to shareholders, but that the exchange might one day surprise everyone.

He would not elaborate further. He did say that the exchange was keeping “an open mind” about a deal with the groups that had made bids for the LSE, but that any deal would have to be of benefit to both the LSE and its shareholders.

Meanwhile, the LSE reported that in the quarter ending June 30 had upped turnover by 13 percent to £67.7 million.

It said that it was the biggest equity exchange, judging by value, in Europe, twice as large as Euronext, and that it had hosted 80 percent of all the initial public offerings in Europe.

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July 13, 2005

BAT relocates production from UK to Asia

Filed under: Companies, Asia, UK
BAT relocates production from UK to Asia

British American Tobacco announced on Wednesday that it would close that plant and another in Dundalk, Ireland and relocate production that takes place in those facilities to Asia

BAT cited the fact that most of the 24 billion cigarettes made at its Southampton plant every year are exported to Asian markets as a main cost cutting consideration.

Last month, BAT had said that it would move 25 percent of its production at the Southampton plant to Singapore and Korea.

The closures will result in a loss of around 600 jobs, about 530 at Southampton and 66 at Dundalk.

BAT, which makes the Dunhill and Lucky Strike brands of cigarettes, hopes that profits will rise as a result of the relocation of the jobs and the cost cuts that move will bring.

The company’s position is that it makes economic sense to produce its product closer to where most of it is sold.

BAT sold 853 billion cigarettes in 2004, with especially strong performance in Russia, Pakistan, India, and Turkey.

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Thunder Horse platform lists after storm

Filed under: Oil, Companies, US
Thunder Horse platform lists after storm

A spokesman for BP said on Wednesday that it is too early to tell how the damage to it’s Thunder Horse drilling platform from Hurricane Dennis will impact the schedule for getting the new platform into production.

Before the mishap, BP expected the platform to begin production late this year and to produce up to 240,000 barrels of oil daily.

The spokesman would not venture a guess as to how long it might take to right the platform, which was discovered to be listing by 20 degrees by a passing ship on Monday.

Crews were able to board the platform on Tuesday to restore power and send data from on-board recorders to shore to begin the determination of just what happened and how long it will take to repair.

Robots were used to examine the hull of the rig, which was found not to have any damage.

The company also said that there was no sign of pollution in the water.

The platform, which was evacuated ahead of the arrival of Hurricane Dennis on Friday, is located in 6000 feet of water in the Gulf of Mexico around 150 miles southeast of New Orleans.

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July 12, 2005

CNOOC considers changing bid for Unocal

Filed under: Oil, Companies, US
CNOOC considers changing bid for Unocal

The board of directors of CNOOC will meet on Wednesday to consider changes to its bid for US oil company Unocal.

Besides looking to alter its bid to conform to conditions Unocal has set down before it will consider CNOOC’s bid, such as maintaining pension benefits for all of Unocal’s employees and promising to dispose of Unocal’s US assets if regulators require such a move.

The Chinese company is also said to be considering raising its offer to more than its current bid of $67 per share in cash.

CNOOC and Unocal have been in talks since the Chinese company made its bid public in June to determine how CNOOC might alter its bid to make it more attractive to Unocal.

Meanwhile, Unocal’s board of directors will also meet on Wednesday to consider whether to continue to support Chevron’s bid or to transfer their support to the higher CNOOC bid. It is possible, however, that Unocal will decide not to make a decision on the issue right away.

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Shell settles lawsuit after reserves scandal

Filed under: Oil, Companies, US
Shell settles lawsuit after reserves scandal

Royal Dutch/Shell Group has agreed to settle a lawsuit filed by its U.S. employees after the company overstated its reserves of gas and oil by 41 percent.

The settlement will cost Royal Dutch/Shell around $90 million, less than two days’ profits for the company, which netted $18.5 billion last year.

The settlement brings to around $240 million the amount that the overstatement has cost the company all together in defending itself from lawsuits and criminal investigations.

If the settlement is approved by the federal court in New Jersey, where it was filed, it will pay the settlement plus at least $1 million in legal fees.

The company earlier agreed to pay $151 million in penalties to bring to a close regulatory inquiries in the US and the UK related to its overstatements.

The US attorney in New York has said that criminal charges will not be pursued against the company because it would not serve the public interest.

However, Royal Dutch/Shell still faces inquiries by the Euronext stock exchange and by Dutch financial markets regulator AFM as well as another class-action lawsuit brought by stockholders.

Shell is also negotiating settlement with current and former unnamed directors and officers, whom it is suing in connection with the overstatements.

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EC raids Intel on antitrust claims

Filed under: Companies, Europe
EC raids Intel on antitrust claims

Investigators from the European Commission raided the offices of Intel EMEA on Tuesday, looking for evidence that the chipmaker has violated European Union antitrust laws.

Intel confirmed that two offices, one in Munich and the other in Swindon, were entered as part of an ongoing investigation into Intel’s business dealings.

The investigation is also looking at Intel’s distribution partners as well as at PC makers which use Intel’s chips.

An Intel spokesman said that the company is cooperating with the investigation, but that it believes its activities are fair and legal.

The investigation into whether Intel has tried to eliminate competition for its product - which was begun after a complaint by Intel competitor AMD - began in 2001 but was suspended earlier in the year when no evidence of wrongdoing was found.

In March, however, investigators in Japan found that Intel had in fact engaged in anticompetitive behavior by offering rebates to several PC makers if they would refrain from buying chips from AMD.

Intel denied that it had done anything wrong in Japan, but AMD re-filed its accusations with the EC, spurring the re-opening of the investigation there.

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July 5, 2005

Chevron increases political pressure on Unocal bid

Filed under: Oil, Companies, US, China
Chevron increases political pressure on Unocal bid

Chevron is calling on the United States government to reconsider its policy on the takeover of US-owned companies by foreign investors in the wake of CNOOC’s bid for Unocal.

The vice-chairman of Chevron has called loans by the Chinese government to CNOOC state subsidies and CNOOC’s bid a government attempt to purchase a company for a price higher than its commercial value.

Beijing, meanwhile, has criticized attempts by the US House of Representatives to block CNOOC’s bid by asking that the bid only be reviewed by the Bush administration if Unocal agrees to accept it.

China’s foreign minister called CNOOC’s bid for Unocal a “normal commercial activity” that should not be subject to political interference.

CNOOC, which is getting a loan of US$7 billion from its parent company, insists that the loans are not subsidized by the Chinese government.

Chevron’s position is that the loans amount to government subsidies because CNOOC is a state-owned company and because the loans are low- or no-interest in nature.

Meanwhile, Chevron once again said that it’s offer for Unocal is superior and that it expects that it will prevail in a stockholder vote on August 10.

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