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Eni Feels Pinch From Algerian Investigation

April 24, 2013 by Leave a Comment

LONDON — The Algerian investigation into alleged corruption by the Italian oil services firm Saipem is beginning to have an effect on the company’s business, it emerged from financial results reported this week.

Saipem has long been a main contributor to the profit of its parent, the oil giant Eni. But on Wednesday, Eni reported sharply lower earnings in part because of a sharp drop in income at Saipem.

Eni said Wednesday that adjusted net profit for the quarter fell about 42 percent from last year to €1.4 billion, or $1.8 billion.

On Tuesday, Saipem’s chief executive, Umberto Vergine, said the corruption inquiry was causing the Algerian authorities to delay payments to Saipem for oil and gas construction. He estimated the value of the payments at risk at €500 million.

The company said the delays had contributed to a 13 percent increase in net debt during the quarter to €4.8 billion.

“We are having some difficulties to get recent payments, and the worst-case scenario is we won’t get these payments,” Mr. Vergine told analysts on Tuesday.

Mr. Vergine said Wednesday that he was also reviewing and revising low margin bids, including one in Abu Dhabi, potentially leading to some lost business.

“The company highlights continued poor contract terms and, for the first time, ongoing Algerian corruption allegations impacting the speed of invoicing and payment in Algeria,” wrote analysts at Macquarie in London in a note.

Mr. Vergine said media reports on the scandal were complicating discussions with clients about projects in Algeria. He said that he expected this situation to continue but that there was “no significant impact on business from recent events.”

Saipem also said that the company had been informed by the Algerian prosecutor that the investigation might be expanded, though the company said it did not have details. It said that €80 million in company bank accounts in Algeria had been frozen, a move upheld by the Supreme Court of Algiers.

For several years Algerian prosecutors have been investigating alleged illegal payments by Saipem executives to Algerian officials. The focus of the investigation moved to Italy late last year. Saipem’s then chief executive, Pietro Franco Tali, resigned in December.

In February, Milan prosecutors said they were expanding their inquiry into the oil giant Eni, which owns about 43 percent of Saipem, and into Eni’s chief executive, Paolo Scaroni. Both Eni and Mr. Scaroni denied any wrongdoing.

Underlining the company’s close relationship with Eni, Saipem’s chief financial officer, Stefano Goberti, said Wednesday that 92 percent of the company’s financial debt was financed through Eni. “We do go to Eni for any financing needs,” he said.

In January, Mr. Vergine shocked markets by warning that Saipem’s profit this year would be roughly half of what it was in 2012. In line with these forecasts, the company reported a 52.4 percent decline in net profit for the first quarter to €110 million from the year earlier. Revenue of €3.1 billion was only about 1 percent lower.

Saipem blamed the fall in profitability on low margin contracts and said in a lengthy presentation on Wednesday that it was taking measures to avoid undesirable deals, including withdrawing bids from some projects.

The decline in Saipem’s earnings contributed to lower profit at Eni, but so did a 10-day shutdown of its main gas facilities in Libya due to militia violence, as well as disruptions in Nigeria. Eni’s oil and gas production for the quarter was down a hefty 4.9 percent.

Massimo Mondazzi, Eni’s chief financial officer, told analysts that Libyan production was now back to normal though “the situation remains challenging.”

The company also lost €148 million in its troubled gas and power business, largely because of weak demand in Italy and the high cost of gas from suppliers like Russia. Mr. Scaroni, the chief executive, did not take part in the call.

Article source: http://www.nytimes.com/2013/04/25/business/global/25iht-oil25.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Media Decoder Blog: On Vevo, ‘Gangnam Style’ Is the Viral Video That Never Was

December 13, 2012 by Leave a Comment

What was the year’s most popular music video online?

The answer would seem obvious: “Gangnam Style” by the South Korean rapper-clown Psy, which in just a few months has racked up 942 million views, the most of any clip in YouTube’s history, redefining the scale of a viral hit.

Digital Notes

Daily updates on the business of digital music.

But the song is conspicuously absent from one year-end Top 10 list — the one produced by Vevo, a site that uses YouTube as its primary streaming platform and has tried to establish itself as the home of music videos online. Vevo’s list is topped by Carly Rae Jepsen’s “Call Me Maybe,” which has 358 million views and, at least until “Gangnam Style” came along, seemed about as viral as a video could be.

The reason has to do with Vevo’s ownership, and how it gets the videos it plays. It is mostly owned by Sony and Universal, the two biggest record companies, and it does not have video licensing deals with every label. The biggest gap is the Warner Music Group, which includes superstars like Green Day and Bruno Mars. But there are also thousands of small labels and production companies that post videos on YouTube but lack deals with Vevo. The South Korean company that originally released “Gangnam Style” is one of them.

Once Psy got an American record deal through Universal Republic — and found an American manager in Scooter Braun, the social media mastermind behind Ms. Jepsen and Justin Bieber — “Gangnam Style” made it onto Vevo. But that did not help its year-end ranking on the site, where on Thursday afternoon its official play counter read, “0 views.” A spokeswoman for the company attributed that number to a technical error.

Vevo — which, in addition to Sony’s and Universal’s majority shares, is partly owned by Abu Dhabi Media — is in negotiations with YouTube over the licensing deals that will allow the service’s videos to keep streaming through YouTube, which is owned by Google.

Digital Sales Up at Warner Music: At the Warner Music Group, sales of digital music were up over the last year, and “more than offset” the continuing decline in sales of CDs and other physical formats, the company reported on Thursday.

Warner had revenue just below $2.3 billion from its recorded music division for its fiscal year ended in September, down 3 percent from the year before. Within that total, income from digital music — from download stores like iTunes and streaming services like Spotify — was $864 million, up 13 percent for the year.

That digital music revenue made up for losses from CDs, the company said: in the United States, digital sales represented 53.8 percent of the company’s revenue in recorded music, the first time it was more than half for a full year. But other businesses, like licensing and income from so-called 360 contracts (which let the company earn money from artists’ tours, merchandise and other deals), dragged the recorded music unit down.

Warner’s music publishing division had a 4 percent decline in revenue for the year, to $524 million. Over all, the group’s revenue was $2.8 billion, down 3 percent for the year. Its operating income was up 241 percent, to $109 million, and the company reported a net loss of $112 million, an improvement from its $205 million net loss the year before.

Warner was a publicly traded company from 2005 to 2011, when it was bought for $3.3 billion by Access Industries, a holding company controlled by the Russian-born investor Len Blavatnik. It continues to report its accounts, however, because of its public debt obligations.

Last.fm Scales Back: Last.fm, a music streaming service owned by CBS, is cutting back some of its features around the world “due to licensing restrictions,” the service announced.

In the United States, Britain and Germany, users can still listen to free music (with ads) through Last.fm’s Web site. But its desktop application version, introduced this year, will now only be available by subscription, as the service has already done in Canada, Australia, New Zealand and Brazil. The service will be discontinued in all other countries, with the changes taking effect next month, the company announced on Thursday.

Last.fm, founded in Britain in 2002, was a pioneer in social listening online, by keeping track of what songs users listened to (“scrobbling”) and making those lists available to other users. That feature is integrated with many other streaming services, like Spotify and Rdio, and Last.fm was bought by CBS in 2007 for $280 million.

But in the United States, at least, the cost of music licenses has become a hotly debated issue, with Pandora Media, the leading Internet radio service, pushing for lower royalty rates.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

Article source: http://mediadecoder.blogs.nytimes.com/2012/12/13/on-vevo-gangnam-style-is-the-viral-video-that-never-was/?partner=rss&emc=rss

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Airbus to Delay Delivery of Two A350 Jet Models

June 19, 2011 by Leave a Comment

The new engine would also allow the plane, the 350-seat A350-1000, to compete more aggressively with Boeing’s long-range, twin-engine competitor, the 777-300ER, Airbus said.

In addition, Airbus said, delivery of the smallest plane in the twin-engine A350 family, the 270-seat A350-800, would be postponed by two years, to 2016, so the company could focus on building its top-selling version, the 314-seat A350-900.

The A350-900 is still expected to enter service before the end of 2013, Airbus said.

Airbus, the European rival to Boeing, and Rolls-Royce, the British engine maker, said they would jointly develop the largest version of the wide-body jet with an upgraded engine that could deliver up to 97,000 pounds of thrust at takeoff, making it the most powerful propulsion system ever built for Airbus. The previous design of the engine, the Trent XWB, had a takeoff thrust of 93,000 pounds.

Airbus said the added engine power would increase the maximum takeoff weight of the aircraft and extend its range on one tank of fuel by about 400 nautical miles, to 8,400 nautical miles — the equivalent to about an hour of flight — while burning 25 percent less fuel than Boeing’s 777-300ER, a 365-seat jet with a range of 7,900 nautical miles that entered service in 2004. The revamped plane would also be able to carry 4.5 tons of additional cargo, Airbus said.

Until now, Airbus has struggled to drum up demand for the A350-1000, having secured 75 orders from four airlines in four years. Those carriers — Emirates of Dubai, Etihad of Abu Dhabi, Qatar Airways and Asiana Airlines of South Korea — have urged Airbus to enhance the capabilities and the fuel efficiency of the plane.

John Leahy, Airbus’s chief salesman, said Airbus had consulted with the affected airlines about the delays and did not expect them to seek compensation for the later deliveries.

“Everything so far is consensual,” Mr. Leahy said at a briefing ahead of the Paris Air Show, which begins Monday. “Nobody is pounding the table and saying you’re breaching my contract.”

He said the enhancements would add about $9 million to the A350-1000’s list price of just under $300 million, but declined to say whether existing customers would pay the higher price.

Airline representatives could not immediately be reached for comment.

Airbus’s chief operating officer,  Fabrice Bregier, said that while the delays to the A350-1000 and the A350-800 would free up more engineers to work on the A350-900, the plane maker did not plan to accelerate production of the plane, which is expected to reach an assembly rate of 10 a month by 2018.

 Mr. Bregier said the number of design modifications needed to accommodate the new engines would be limited because Rolls-Royce had managed to enhance their power without increasing the 118-inch diameter of the turbine fan. The changes included a reinforced structure and modifications to the trailing edge of the wing as well as the air conditioning system and landing gear.

 He said he did not expect the changes to significantly affect the plane’s development costs, currently projected at $2.4 billion.

 Rolls-Royce is the only engine supplier to the A350 family of jets. Mr. Leahy said Saturday that Airbus had given Rolls-Royce an exclusive deal to build the engines for the A350-1000, but said the plane maker was still open to offering competing engines on its other A350 models, though none have been developed so far.

Mark King, president of civil aerospace at Rolls-Royce, said his company would absorb the added cost of developing the enhanced Trent XWB engine, though he declined to provide details.

“Clearly this is going to cost more than the 93,000-pound version,” Mr. King said. But he stressed that there was “significant” commonality with the existing design that the risk to Rolls-Royce would be limited.

 

Article source: http://www.nytimes.com/2011/06/19/business/global/19airbus.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,