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Earnings Fall at Shell and Exxon in 2nd Quarter

August 1, 2013 by

Royal Dutch Shell is continuing to struggle with its operations in Nigeria and North America, the company revealed Thursday in announcing earnings that fell below analysts’ forecasts.

Shell’s second-quarter income, adjusted for one-time items, was $4.6 billion, compared with $5.7 billion in the same period a year earlier. Analysts had expected the company to earn $5.8 billion. “This is one of the worst set of Shell results that we can remember,” analysts from Bernstein wrote in a research note.

Shell’s shares were down nearly 5 percent in trading in London.

Exxon Mobil, the largest American oil producer, also disappointed markets on Thursday. It reported second-quarter earnings of $6.9 billion, a 57 percent decline from the same period in 2012. The company said that earnings, excluding divestments and other one-time charges, were down 19 percent for the quarter. The company’s shares were down about 2 percent in trading in New York.

Exxon Mobil said that its results were hurt by lower margins and reduced volumes at its refineries. Production was down 1.9 percent year-on-year for the quarter and 2.7 percent for the half year. Capital and operating expenses were also up 10 percent, to $10.2 billion, for the quarter. Still, “Exxon Mobil’s second-quarter results reflect continued strong operational performance,” its chief executive, Rex W. Tillerson, said in a statement.

Shell’s chief executive, Peter Voser, told reporters that the situation in Nigeria, where Shell normally obtains close to 9 percent of its world production, was worsening. The country has long been a mainstay for Shell, but production there has been dogged by political and environmental issues.

Problems in Nigeria during the quarter had lowered production by about 100,000 barrels a day, or around 40 percent, and had cost the company $250 million, Shell said.

Nigerian output was hit not only by the usual “bunkering,” or sabotage aimed at stealing oil from pipelines, but also by an extraordinary legal dispute between the Nigerian maritime authorities and a liquefied natural gas facility in which Shell is a partner. In the most serious episode, the maritime authorities kept L.N.G. tankers from landing at the plant between late June and mid-July until they received a large payment from the operators.

Mr. Voser said oil theft and disruptions to gas supply were causing widespread environmental damage and could cost the Nigerian government up to $12 billion per year. “We will play our part, but these are problems Shell cannot solve alone, ” Mr. Voser said.

Mr. Voser said Shell was reviewing its Nigeria operations and would sell up to 100,000 barrels a day of production onshore, where most of the problems are, preferably to Nigerian players “to have local stakeholders involved in the production of onshore assets.”

Shell also said it was reviewing its exploration and production portfolio in North America, where it has been losing money. The exercise, the company said, will lead to divestments and a sharper focus on fewer projects.

Over the last five years, the company has invested heavily in shale gas and oil properties, building up a $28 billion portfolio. Based on drilling and exploration results in recent months, Shell is writing off about $2 billion after taxes in the shale oil areas after taking previous writedowns on shale gas acreage. The write-downs drop the book value of the portfolio to about $24 billion.

Mr. Voser said that the write-downs represented a relatively low proportion of the North American shale portfolio, but that they reflected continued problems in the Americas, an important area for Shell. Bernstein estimated that Shell lost $4.54 for every barrel it produced in the Americas, the location of almost one-quarter of its output.

Shell’s overall production was down 1 percent to just over three million barrels a day. Its output for the quarter was slightly less than that of its rival BP if the company’s share of almost 20 percent of output from Rosneft, the Russian state-controlled oil company, is included.

Mr. Voser said this year that he would step down as chief executive in 2014. Shell announced last month that he would be succeeded by Ben van Beurden, a relatively unknown executive who has headed Shell’s large marketing and refining business since January. Mr. Voser described Mr. van Beurden as “a great guy” and said that for the next few months he would continue to run the company while Mr. van Beurden focused on marketing and refining.

Other companies have also posted lackluster results, including BP, which reported earnings on Tuesday, and ENI of Italy, which on Thursday reported a 55 percent decline in profits for the quarter, compared with the period last year. BP, which made substantial divestments after the oil spill in the Gulf of Mexico in 2010, blamed lower oil prices and higher tax rates, especially in Russia, while ENI was hurt by continuing problems at its Saipem engineering and oil services subsidiary, including an investigation into allegations of corruption in Algeria.

Article source: http://www.nytimes.com/2013/08/02/business/global/shell-reports-disappointing-earnings-in-second-quarter.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Nokia Siemens to Cut 23 Percent of Work Force

November 23, 2011 by Leave a Comment

BERLIN — Nokia Siemens Networks, the equipment joint venture of Nokia and Siemens, said Wednesday that it planned to cut almost a quarter of its workforce as it sought to bolster profit in a stagnating market for network gear.

The company said it planned to eliminate 17,000 jobs by the end of 2013 in a wide-ranging austerity program designed to refocus Nokia Siemens on mobile broadband equipment, the fastest growing segment of the market. The reductions will slash the company’s workforce by 23 percent from its current level of 74,000.

The cuts follow Nokia Siemens’s $1.2 billion purchase of Motorola’s mobile network equipment business in July 2010, which added staff. Rajeev Suri, the Nokia Siemens chief executive, said the reduction would help the company trim annual operating expenses by €1 billion, or $1.35 billion, by the end of 2013 from its level at the end of this year.

“As we look towards the prospect of an independent future, we need to take action now to improve our profitability and cash generation,” Mr. Suri said in a statement. “These planned reductions are regrettable but necessary. It is our goal to make them in a fair and responsible way, providing the support we can to employees and communities.”

Nokia and Siemens, equal partners in the business created in 2006, have been looking to sell all or part of the venture, which has suffered from competition from low-cost Chinese rivals like Huawei and ZTE. In September, Nokia and Siemens injected a combined €1 billion into the venture to support its operations. In the statement, Mr. Suri did not address the search for new investors.

Hakan Wranne, an analyst at Swedbank in Stockholm, said the personnel reductions were a signal from Nokia Siemens that the company would no longer be a global equipment vendor, but would focus on limited parts of the market. In remarks to analysts on a conference call this afternoon, Mr. Suri said Nokia Siemens would remain a “European” company.

Nokia Siemens had been reporting quarterly losses for most of the past two years. In the third quarter, the company reported a €6 million operating profit, following a €116 million loss a year earlier, as sales rose 16 percent to €3.4 billion. It was the fifth consecutive quarter of sales growth for Nokia Siemens.

Mr. Suri said Nokia Siemens planned to revamp its operation, eliminating overlapping management and seeking cost savings by consolidating offices and other sites, and by centralizing activities in global delivery centers.

The company, which is based jointly in Espoo, Finland, and in Munich, did not say where it planned to eliminate the jobs. Most of the employees work in Finland and Germany.

Shares of Nokia rose 1.2 percent in Helsinki trading to €4.23 a share, while shares of Siemens were little changed at €69.51 in Frankfurt.

In his remarks on the conference call, Mr. Suri said the networking equipment business had matured and was no longer experiencing “jaw-dropping” rates of sales and profit growth.

“At Nokia Siemens, we believe the future of our industry is in mobile broadband and services,” Mr. Suri said.

Article source: http://feeds.nytimes.com/click.phdo?i=abc69473c705e5d4ef048ad044f4e247

Filed Under: Business News Tagged With: , ,

Yale Endowment Posts Return of 21.9%

September 29, 2011 by Leave a Comment

The endowment of Yale University turned in a much improved performance in its latest year, though still not as strong as the broad stock market.

After two years of unusual weakness, the endowment, run by David Swensen, posted a return of 21.9 percent for the fiscal year ended June 30. It edged out the 21.4 percent posted recently by the Harvard University endowment, which remains a bit bigger.

The double-digit gains came in a strong year for the United States stock market. For example, the Wilshire 5000 Total Market Index had a total return of 31.99 percent in the same period. Yale’s gain helps make up some lost ground. The endowment posted a return of 8.9 percent a year ago, even as many endowments generated returns of 9 percent to 14 percent. The previous year had been an even bigger setback. In 2009, Yale’s endowment, with considerable investments in real estate, commodities and timber, fell 24.6 percent.

For the moment, Yale has outperformed other universities over 10 years, with an average annual return of 10.1 percent. Harvard now has a 9.4 percent annualized return over 10 years. Some other stellar performers, including Princeton and Columbia, have yet to report.

Mr. Swensen is the pioneer of the concept of institutional diversification into assets like timber, hedge funds and private equity, and the Yale endowment is considered a barometer of the effectiveness of that approach.

The average annual return for endowments and foundations with more than $1 billion in assets was 19.38 percent, according to data compiled by the Wilshire Trust Universe Comparison Service. Over 10 years, the average was 5.99 percent.

After subtracting operating expenses, the value of Yale’s endowment is now $19.4 billion.

Led by Mr. Swensen for 26 years, the Yale endowment has maintained its diversified portfolio despite the strong headwinds in the financial markets in the last few years.

Its domestic stock holdings gained 24.5 percent last year, or 7.4 percentage points less than the broad Wilshire 5000 index. But the endowment had just 7 percent of its holdings in domestic stocks.

The endowment said it had a bigger gain from its foreign equity holdings, which represent 9 percent of its assets. Foreign equities generated a return of 40.7 percent, exceeding its benchmark index.

After a year of losses, the private equity portion of Yale’s portfolio generated a return of 30.3 percent. Private equity is the biggest asset class, representing 34 percent of Yale’s portfolio. Real estate, the next largest asset class, accounts for 20 percent of Yale’s holdings.

Article source: http://feeds.nytimes.com/click.phdo?i=8a935d76b26b8977529f3f9693b0f3d0

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Nokia and Ericsson Accelerate Cost-Cutting Plans and Revamping

July 22, 2011 by Leave a Comment

Nokia, the largest seller of mobile phones by volume, said it planned to cut more than the 1 billion euros ($1.43 billion) it had previously planned to trim from its operating expenses by 2013. The company, based in Espoo, Finland, did not specify a new target.

It announced the new plan as it reported a loss of 368 million euros in the second quarter.

Ericsson, the largest maker of telecom networking equipment, said it took a restructuring charge of 1.3 billion Swedish kronor ($202 million) in the quarter, more than some investors had been expecting, to pay for layoffs in Sweden.

The separate announcements created heavy trading in shares of both companies in Europe.

Ericsson’s shares fell nearly 10 percent, even though the company, based in Stockholm, reported a 59 percent increase in profit and a 14 percent rise in sales.

Nokia’s shares rose 2.5 percent as investors welcomed the handset maker’s intention to increase its austerity measures. Nokia said its sales fell 7 percent in the second quarter, to 9.275 billion euros from 10 billion euros a year earlier.

Pete Cunningham, an analyst at Canalys in Reading, England, said Nokia’s sales decline stemmed from its difficulty selling smartphones that use its Symbian operating system in China. Nokia said in February that it planned to progressively replace Symbian with Microsoft’s Windows phone software starting later this year.

“This is obviously not good news from Nokia,” Mr. Cunningham said. “I think the appetite for Symbian devices has fallen away very quickly since Nokia made the announcement about moving to Microsoft in February. This shows they definitely need those Windows phones as soon as possible.”

Stephen Elop, the Nokia chief executive hired from Microsoft last year, said Nokia had replaced key sales executives, reduced inventories in China, revamped its handset-pricing strategy and refocused its retail marketing programs to compensate for the downturn.

“The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011,” Mr. Elop said in a statement. “However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business.”

Mr. Elop, in a conference call with analysts, reiterated that Nokia planned to sequentially introduce the first Microsoft devices later this year in various national markets. He did not say how many devices Nokia would introduce, or in which markets.

Nokia’s sales fell in all regions of the world except the Middle East and Africa during the quarter. The greatest percentage decline was in North America, where sales fell 61 percent, to 88 million from 223 million a year earlier.

Ericsson shares fell even as the company, which faces competition from the Chinese companies Huawei and ZTE and its French rival Alcatel-Lucent, reported a 59 percent increase in second-quarter profit, to 3.2 billion kronor from 2 billion kronor a year earlier.

Sales at Ericsson rose 14 percent, to 54.8 billion kronor from 48 billion.

During an interview, Hans Vestberg, Ericsson’s chief executive, said the company’s restructuring charge in the second quarter had been greater than expected but was part of the current adjustment of its global business to meet the economic conditions.

“If you look at our numbers today, this is one of the strongest quarters of growth we’ve ever had,” Mr. Vestberg said. “We had a higher restructuring cost than expected but we did that to improve the profitability of the company going forward.”

Mr. Vestberg said demand for mobile networking equipment remained strong globally during the quarter, especially in Russia, China, Brazil and India. Sales rose by 70 percent in Russia, 96 percent in China, 17 percent in Brazil and 107 percent in India, as operators built high-speed mobile broadband networks for growing populations.

Sales of networking equipment in North America fell 6 percent in the quarter, which Mr. Vestberg attributed to the appreciation of the Swedish currency against the dollar. Mr. Vestberg said Ericsson planned to report about $300 million in restructuring charges this year.

With the announcement on Thursday, the company was two-thirds of the way to its goal, he said.

Article source: http://feeds.nytimes.com/click.phdo?i=4f7a38abaef36e6db4c71d85f85ee7fe

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Is It Better to Buy or Rent?

April 3, 2011 by Leave a Comment
Buying

Purchase costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and typical closing costs.

Yearly costs are recurring monthly or yearly expenses. These include mortgage payments, condo fees (or other community living fees), renovation costs, maintenance costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller.

Lost opportunity costs are tracked for the initial purchase costs and for the yearly costs. The former will give you an idea of how much you could have made if you had invested the down payment instead of buying your home.

Selling costs are the costs you incur when you go to the closing for the home you are selling. This includes the broker’s commission and other fees, as well as the remaining principal balance that you pay to your mortgage bank. “Proceeds from home sale” is the money that you receive from the person who is buying your home. This amount is equal to the value of the home that year and is shown as a negative number since it is not something that you spend money on, but rather, it is money you receive.

If your cumulative buying total is negative, it actually means you have done very well: you made enough of a profit that it not only covered the cost of your home, but also all of your yearly operating expenses.

Article source: http://feeds.nytimes.com/click.phdo?i=8d6bda5f6014671a3bd7a4ed55e279d7

Filed Under: Your Money Tagged With: , ,