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Iberia, in ‘Fight for Survival,’ Says It Will Reorganize

November 10, 2012 by Leave a Comment

The planned reductions, equivalent to more than 20 percent of the airline’s work force, came as the company, the International Airlines Group, reported a 24 percent drop in third-quarter net profit and forecast an operating loss of 120 million euros ($152 million) for the full year.

“Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future,” Willie Walsh, the chief executive of I.A.G., said in a statement. Iberia’s unions were given a deadline of Jan. 31 to reach an agreement on the job cuts or face possibly deeper retrenchments.

Labor unions have been bracing for deep layoffs at Iberia for months as the grip of Spain’s recession tightens and I.A.G. gradually shifts operation of many domestic and European flights to its low-cost subsidiary, Iberia Express. On Thursday, I.A.G., which owns 46 percent of Vueling, a rival Spanish low-cost carrier, made a 113 million euro bid for the rest of the airline. It said, though, that it had no immediate plans to merge it with Iberia Express.

“The company is burning 1.7 million euros every day,” Rafael Sánchez-Lozano, Iberia’s chief executive, said in a statement. “Iberia has to modernize and adapt to the new competitive environment, as its cost base is significantly higher than its main competitors in Spain and Latin America.”

I.A.G. said Iberia’s operating losses of 262 million euros for the first nine months of this year had all but wiped out a 286 million euro profit made by British Airways in the same period. I.A.G. was formed by the merger of Iberia with British Airways last year.

The job cuts were the latest retrenchments for Europe’s biggest airlines as they compete with leaner and nimbler rivals like Ryanair, easyJet and Air Berlin in Europe and with rapidly expanding Middle Eastern carriers like Emirates and Etihad on long-distance routes.

Air France said in June that it would eliminate more than 5,100 jobs, or 10 percent of its work force, by the end of next year as part of a 2 billion euro restructuring. Lufthansa announced the elimination of 3,500 administrative jobs in May as it sought 1.5 billion euros in savings over the next three years.

While airlines globally have managed to trim costs and improve operating margins over the last year, the economic slowdown that has accompanied the sovereign debt crisis continues to weigh heavily on European carriers.

Last month, the International Air Transport Association predicted that European airlines would lose a combined $1.2 billion this year, while it forecast global industry profits of $4.1 billion. European losses are expected to shrink to $200 million in 2013, the I.A.T.A. said, while airline profits worldwide are predicted to rise to $7.5 billion.

This article has been revised to reflect the following correction:

Correction: November 9, 2012

An earlier version of this article stated incorrectly that Iberia would reduce its capacity by 25 percent. The airline’s network capacity will be cut by 15 percent, through a downsizing of its fleet by 25 aircraft.

Article source: http://www.nytimes.com/2012/11/10/business/global/spanish-airline-said-to-be-in-fight-for-survival.html?partner=rss&emc=rss

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Earnings at Exxon Mobil and Royal Dutch Shell Helped by Refining

November 3, 2012 by Leave a Comment

The third-quarter results for the two energy giants would have been worse had it not been for strong performances from their refinery operations. Company executives also noted that the international oil business had been hurt by economic distress in Europe and Japan and weakening growth in China.

Energy analysts were not surprised by the results since natural gas prices in the United States were roughly 30 percent lower than the year before. Oil prices were little changed, but both companies have become increasingly dependent on gas production in recent years.

Exxon Mobil reported net income of $9.57 billion in the quarter, down from $10.33 billion a year ago, with revenue of $115.71 billion, nearly 8 percent lower than in the third quarter of 2011. For the first nine months, however, earnings were up 10 percent.

Shell reported net earnings, adjusted for charges, of $6.6 billion, down from $7 billion in the third quarter of 2011. The company was forced to write down $354 million in assets during the quarter, mainly gas fields in the United States. Shell had a $7.14 billion profit in the quarter, up 2.3 percent from last year, after including extraordinary items and inventory changes.

“The performance of each company’s exploration and production business lagged expectations,” said Philip H. Weiss, a senior energy analyst at Argus Research Group. “Natural gas prices, particularly in North America, have been weak, driving the underperformance.”

Exxon Mobil, the largest American oil company, became the country’s biggest gas producer three years ago when it bought XTO Energy for $41 billion. The purchase gave Exxon Mobil experienced personnel in exploring and drilling in shale formations, but gas drilling in the United States has become increasingly unprofitable the last couple of years and few analysts expect gas prices to increase much over the next year.

Both companies in recent months have shifted more American production to oil from gas, with Shell acquiring West Texas oil fields from Chesapeake Energy for nearly $2 billion and Exxon Mobil spending $1.6 billion to acquire acreage in the Bakken shale oil field in North Dakota from Denbury Resources.

Shell began drilling in Alaskan Arctic waters over the summer, though equipment problems and thick ice delayed operations. The company had hoped to complete up to five wells but was only able to begin drilling two wells. Nevertheless, the start of drilling culminated six years of legal and regulatory struggles and appeared to assure more exploration next summer.

Exxon Mobil was hurt by production problems in Kazakhstan and the North Sea, while Shell’s oil production was hurt by theft, flooding and political instability in Nigeria.

Exxon Mobil reported a decline of 1.8 percent in oil production for the quarter and a 1.3 percent gas production decline, excluding the impact of divestitures, production-sharing contracts and quotas set by the Organization of the Petroleum Exporting Countries. Shell’s production of oil and gas was down about 1 percent.

David Rosenthal, Exxon Mobil’s vice president for investor relations, said he was not overly concerned by the decline in production. “We are only slightly below” previous expectations, he said, adding: “Most of that production is pretty much back up,” referring to Kazakhstan and the North Sea.

Exxon’s stock price closed at $91.69 on Thursday, a 43-cent increase, while Shell’s price jumped $1.51, to $69.99.

A bright spot for both companies was improving results in their refining businesses. Exxon Mobil’s downstream earnings, mainly from refining, were nearly $3.2 billion, up $1.6 billion from the third quarter of 2011. But Simon Henry, Shell’s chief financial officer, noted in a conference call that improved refining margins were more the result of supply shortages than stronger demand.

“We’re seeing evidence of a weak economy all around us in our downstream, marketing and our chemicals business,” Mr. Henry said, “so the downstream rally over all could be short-lived.”

Quarterly financial results have been mixed in the oil patch. Total, the French oil giant, reported on Wednesday that its third-quarter profit jumped 20 percent, largely because of improved refinery margins. Conoco Phillips reported that its net income fell 30 percent in the quarter, with revenue declining 10 percent.

But many energy analysts say they believe that global oil demand could revive in the coming months, particularly if the Chinese economy strengthens. A Barclays research note this week predicted that in 2013 Chinese oil demand would increase 340,000 barrels a day, based on an expected rebound in manufacturing and truck sales.

Article source: http://www.nytimes.com/2012/11/02/business/energy-environment/earnings-at-oil-giants-helped-by-refining.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: For Groupon, Faint Praise From Its Underwriters

December 15, 2011 by Leave a Comment

8:17 p.m. | Updated

Groupon’s bankers reaped more than $40 million in fees in November, when the daily deals giant went public at $20 a share. Now, Wall Street’s affections have cooled.

Six of the company’s underwriters, which had to wait until Wednesday to initiate coverage, stamped Groupon’s stock with neutral or hold ratings. Five issued bullish, or buy, calls. Their price targets ranged from $21 to $29. The lukewarm reception dragged on Groupon’s shares, as the stock tumbled 3.3 percent to close Wednesday at $22.55.

It is an ominous sign for the many Internet companies waiting to go public, like Zynga, the online game maker that is expected to begin trading on Friday. Despite continuing enthusiasm for new technology offerings, investors have proceeded cautiously amid turmoil in the equity markets and persistent skepticism about the fundamentals of new business models.

Groupon, which offered less than 10 percent of its stock, has fluctuated wildly in recent weeks, falling as low as $14 a share. Jive Software, an enterprise social network service, rose 25 percent on its first day of trading this week but was virtually flat on Wednesday. Nexon fared worse; the company, a rival of Zynga based in Tokyo, slipped 2 percent on its Wednesday debut, despite robust profits and a base of about 77 million monthly users.

On Wednesday, Groupon’s analysts echoed the longstanding concerns about the three-year-old service, including competitive pressures, the unproved business model and limited upside opportunity. Two underwriters, Citigroup and Deutsche Bank Securities, even led with the same pun — “waiting for a better deal.”

Critics, in part, are skeptical that Groupon can sustain its aggressive growth trajectory. The company recorded revenue of $1.1 billion for the first nine months of the year, but also splurged on online advertising, spending about $613 million on marketing in that period.

Two of its lead underwriters, Morgan Stanley and Credit Suisse, expressed optimism for Groupon’s outlook but still issued neutral ratings. Morgan Stanley initiated coverage at equal weight, with a $27 price target. It praised Groupon for its “prime mover status and scale,” but warned investors to “wait for a better entry point to build a position.” The firm also pointed out that Groupon’s competitive advantage might be eroded as merchants became more sophisticated on the Web and rivals attacked its market share.

“Groupon’s competitive advantage of sales-driven leads, deal execution strategy and high-quality customer service is not rocket science,” Morgan Stanley said, “but has proven difficult to replicate at scale.”

Credit Suisse, which was even more cautious, with a $25 target, also noted risk factors, including low barriers to entry and a new business model where “58 percent of the voting shares are controlled by insiders.” Deutsche Bank, the most bearish of Groupon’s underwriters, predicted a slight pullback in its report, to $21 a share.

“Our near-term neutral stance on Groupon shares rests largely in the nascency of the business model in the service/product shift, along with a transition from aggressive growth via marketing to improved profitability,” the bank said.

Although a so-called Chinese Wall separates the banks’ underwriting businesses from their equity research arms, investors typically expect favorable analyst reports from a company’s underwriters — at least for the first round. In June, LinkedIn’s bankers unleashed a wave of positive reports. Morgan Stanley, its lead underwriter, put an overweight rating on stock and gave an $88 price target, calling it a rising “standard utility” for recruiters. LinkedIn fell 2 percent on Wednesday, closing at $65.95.

Still, there were some kind words for Groupon. Five underwriters, including the co-lead, Goldman Sachs, issued buy or outperform ratings.

Goldman, one of the most optimistic, initiated coverage at $29 and praised the company as “the key to unlocking the massive local advertising market with which the Internet has long struggled.”

Article source: http://feeds.nytimes.com/click.phdo?i=1a55a44eaa033d3eb626f53905017310

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Higher Oil Price Lifts Profits at Exxon and Shell

October 27, 2011 by Leave a Comment

Exxon Mobil,  the largest U.S. oil company, also said that its capital and exploration expenditures of $26.7 billion for the first nine months of the year represented a record, as the company attempted to take advantage of the nearly 50 percent rise in oil prices from a year ago.

Profits so far have been strong across the oil patch, but it may be difficult to sustain the improvement in the next quarter over last year. Oil prices have eased since the spring, when turmoil in Libya took 1.3 million barrels of crude off world markets.

Now that Libya’s rebels have taken power, exports from that country are beginning to flow again. Prices for oil and natural gas in the coming months will depend on the strength of the world economy, which remains uncertain.

Exxon Mobil reported that its net income rose to $10.33 billion in the three months through September, from $7.35 billion a year earlier, helped by the increase in oil prices.

“We continue pursuing new opportunities to meet growing energy demand while supporting economic growth, including job creation,” said Rex. W. Tillerson, ExxonMobil’s chairman, in a statement.

Net income at Shell, the biggest oil company in Europe, rose to $6.98 billion in the three months through September from $3.46 billion in the same period a year earlier.

“Shell did a lot better than expected, but Exxon came roughly in line,” said Fadel Gheit, senior oil analyst at Oppenheimer Co. “Shell had higher than expected production and better than expected refining and chemical results. Exxon had lower than expected production, and lower refining and chemical results.”

Shell’s chief executive, Peter Voser, said in a statement, “We are making good progress against our targets, to deliver a more competitive performance.

Mr. Voser said Shell was moving ahead with its plan to focus on its most valuable assets and invest in new projects to ensure continued production. Shell has completed $6.2 billion of assets sales so far this year, $1.8 billion of that in the third quarter, when the company sold the Stanlow refinery in Britain for $1.2 billion. Shell had planned to raise $5 billion from asset sales this year.

New project starts in Qatar and Canada helped production levels, Shell said. The projects are part of more than 20 new operations planned until 2014 as part of a $100 billion investment program.

The earnings for Shell beat forecasts of an average $6.61 billion of a group of analysts polled by Reuters.

On Tuesday, BP reported earnings that also beat analyst expectations and said it expected production to grow.

Article source: http://feeds.nytimes.com/click.phdo?i=4429263bbf374a673717d1c592f3ed6a

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BP Earnings Slip 3.7% on Lower Production

October 25, 2011 by Leave a Comment

Earnings adjusted for one-time items were $5.3 billion in the three months that ended in September, compared with $5.5 billion in the same period a year earlier. Analysts polled by Reuters had forecast earnings of $5.03 billion on average.

BP said it planned to sell another $15 billion worth of assets by the end of 2013 in addition to the $30 billion it has already announced. Net income excluding one-time items rose to $4.9 billion in the third quarter from $1.8 billion in the same period a year earlier on lower costs to cover the company’s response to a disastrous oil spill in the Gulf of Mexico in 2010.

BP’s chief executive, Robert Dudley, has spent the past year repairing BP’s reputation and safety record after an accident on an offshore rig caused the oil spill, while also seeking new exploration projects. BP plans to increase investments in exploration and focus on areas such as operations in the deep water and the management of giant oil fields. Some analysts have questioned whether that would be enough to restore BP’s share price to the level before the accident. The company’s shares traded Tuesday morning in London around 457 pence, or $2.85; they closed at 655.40 pence on April 20, 2010, the day of the explosion.

“This company has been steadied, turned around and now, this month, with high-margin assets returning onstream, we have reached a clear turning point,” Mr. Dudley said in a statement. “Our operations are regaining momentum and we are facing the future with great confidence.”

Mr. Dudley said he expected investments in new exploration projects and the end of payments to the Gulf of Mexico Trust Fund to increase cash flow by about 50 percent by 2014. The forecast is based on a oil price of $100 per barrel, compared to an average oil price for the first nine months of this year of about $112 per barrel.

Production levels improved particularly from Angola, the North Sea and the Gulf of Mexico, Mr. Dudley said. In a first sign that BP would be allowed to continue drilling in the gulf, the Obama administration last Friday approved BP’s plan for four exploration wells off the Louisiana coast.

It is still unclear how much BP will end up paying for costs related to the 2010 explosion on the Deepwater Horizon oil rig that killed 11 people and leaked billions of barrels of oil into the ocean. BP so far has put aside $41 billion to cover costs.

BP was the first major oil company to report third-quarter earnings this week. Royal Dutch Shell and Exxon Mobil are set to report figures on Thursday, followed by Chevron on Friday.

Also on Tuesday, BP named Brian Gilvary, 49, to become chief financial officer at the beginning of next year. He will replace Byron Grote, 63, who had been in the job since 2002. Mr. Grote is to remain on BP’s board as executive vice president of the corporate business activities. Mr. Gilvary is currently deputy group finance chief.

Article source: http://www.nytimes.com/2011/10/26/business/global/bp-earnings-slip-3-7-on-lower-production.html?partner=rss&emc=rss

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