The Week Ahead: BP comes close, but no cigar, in the race for gusher profits
Sunday 05 February 2006
But amid the corporate frenzy, the Bank of England meets once again to decide on the direction of British monetary policy. While only the dreamers believe that the central bank will cut interest rates now, this week's meeting may reflect growing dissent among the members of the Monetary Policy Committee about when to make the move.
Riding the commodities boom, BP's full-year result will be big, very big - one of the biggest in UK corporate history. Analysts at Citigroup are predicting a $32.5bn (£18.5bn) pre-tax profit, representing a healthy 44 per cent improvement on 2004, though that won't be enough to break the record set by Shell last week. The profit would have been stronger but for the $1bn lost in the fourth quarter due to the Gulf of Mexico hurricane season and the closure of the Texas City refinery. Tuesday promises to be an important day, with BP management holding a strategy briefing in their first public outing for two years.
Another company benefiting from soaring commodity prices and a dash of takeover speculation is BG Group, where Deutsche Bank analysts are forecasting a 71 per cent rise in pre-tax profit to £2.6bn. The booming fourth-quarter result will have been aided by BG's decision to sell gas on the open market - a windfall that Deutsche warns investors not to extrapolate into 2006.
Scottish Power's third-quarter results on Wednesday are a sideshow to takeover speculation. The Scots rejected a 570p-a-share cash approach from E.ON in November 2005, but they now have a new chief executive and the German group remains keen on expanding in the UK market.
Fellow takeover target BOC posts its first-quarter result this week. A flat consensus estimate of around £130m, dampened by accounting changes and the sale of Afrox Healthcare, may weaken the board's dismissive stance on rival Linde's 1,500p offer. Despite British chemical company's words of defiance, some believe the Germans' approach will prove to be only the first salvo in an extended acquisition negotiation. "You may even see BOC make a counter-bid for Linde. The German company is smaller, inherently less attractive and more easily able to be broken up," said one analyst.
For rival ICI, analysts at ING Wholesale Banking predict a full-year pre-tax profit of £443m, a 5 per cent increase on the previous year. ICI Paints will be closely watched after a strong result from US rival Sherwin-Williams. "The rising cost of raw materials will probably feature strongly in the group report, and crucially in the outlook, which we expect to be guarded," said ING.
Few surprises are expected from BT, with analysts predicting a third-quarter profit of around £490m - versus £550m last year. "The sector has seen several pieces of bad press in the last few months and investors are seeking comfort from BT that it's not all stormy waters", said Morten Singleton of stockbroker WestLB, referring to rising broadband competition and fears over the impact of VoIP, which allows people to make phone call free through their computers.
Healthier news is expected from Reckitt Benckiser. Credit Suisse analysts expect the manufacturer of Finish and Lemsip to post a pre-tax £868m profit - a 15 per cent rise on 2004. Given that Reckitt completed its £1.9bn acquisition of Boots Healthcare International last month, management may provide an update on merger strategy.
In contrast, Unilever lurched through 2005. Only one year into its European restructuring, the group is relying heavily on the growth in its developing markets business. Analysts at Credit Suisse are forecasting a pre-tax profit of €4.9bn, with fairly flat margins for the year.
The market has already priced in a good 2005 result from Glaxo- SmithKline due to the strength of the company's drugs pipeline and productivity gains. At £6.8bn, Deutsche Bank analysts are at the upper end of market expectations for full-year pre-tax profits.
And finally, after spending last week attempting to sweet-talk politicians, Lakshmi Mittal will turn his attention to Arcelor's shareholders.
The eponymous boss of the steel giant Mittal unveiled an unsolicited €18.6bn (£12.7bn) approach last month for his Luxembourg-based rival - which has rejected the offer. Undeterred, he will now visit major shareholders across Europe, including the Luxembourg government - a 5 per cent holder.
Aditya Mittal, Lakshmi's son and Mittal's president, spent last week contacting various consultants - to help with the integration should its tilt at Arcelor be successful. Meanwhile, Arcelor spent most of last week talking to its own shareholders and will now focus on its full-year results, due in a fortnight, and its defence.
UK RESULTS: (final) Autonomy, Randgold Resources; (interim) Albemarle & Bond, Netcall; (1Q) Cambridge Antibody Technology
UK RESULTS: (F) Amvescap, BP, Dobbies Garden Centres, Quantica, XP Power; (I) Diacom, PZ Cussons, Regent Inns; (3Q) Danka Business Systems, Yell
UK RESULTS: (F) Alphameric, GlaxoSmithKline, Reckitt Benckiser, Sthree; (1Q) BOC, Intec Telephone Systems; (3Q) Scottish Power
UK RESULTS: (F) BG Group, ICI, Rolls-Royce, Smith & Nephew, Unilever; (I) Alumasc, Avingtrans, McBride; (3Q) BT Group
UK RESULTS: None scheduled
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