The Week Ahead: Safety failings and output woes take toll on BP
Monday 05 February 2007
BP is likely to steal the corporate limelight this week when it provides a strategy update alongside its full-year results tomorrow. The oil giant had a woeful year in 2006, despite a soaring oil price. BP shares underperformed the FTSE 100 index by 17 per cent, one of its worst performances in a decade.
BP warned on fourth-quarter production volumes last month, when its guidance for 3.8 million barrels of oil equivalent missed market expectations of 4 million. As a result of declining output and lower gas prices, its adjusted-earnings figure in the fourth quarter is expected to decline 22 per cent to $3.87bn (£1.97bn) from almost $5bn in the same period a year earlier.
It has also had to contend with a damning report into its safety procedures in the US. Meanwhile, Lord Browne of Madingley has brought forward his retirement date by 18 months, to July this year, at which time Tony Hayward, the head of exploration, will step up to the chief executive role.
Analysts want to hear a message that will attract investors back to the stock. Tony Eccles, at Investec, said: "BP's management must step up to the plate ... we believe a 'business as usual' approach ... will not be acceptable to a sceptical market." The analyst said a plan to sell mature upstream assets combined with a substantial dividend rise could prove to be the spur needed to kick-start a re-rating of BP's shares.
TODAY: Ryanair reports third-quarter results, with analysts pencilling in a modest increase in profitability as a result of higher passenger numbers and a more stable oil price. The company has been cautious of late but analysts expect the Irish airline to benefit from British Airways' woes over recent months.
Results: Full year - Randgold Resources. First-half: Pace Micro Technology. Trading statement: Ryanair, British Airways
TOMORROW: Insurance giant Aviva is expected to record a 16 per cent rise in full-year sales on the back of strong growth in its pension and investment products. An 18 per cent rise in investment products should offset a weak performance at the company's European division that has lagged its UK progress.
Meanwhile, ARM Holding is expected to buck the trend in the semiconductor design industry by reporting strong annual growth in sales and profits. Despite the weak US dollar exchange rate, the company should benefit from agrowth in mobile phone sales.
Results: Full year - ARM Holdings, Aviva, BP. First half - Dicom Group, Netcall, Regent Inns, Sareum Holdings. Third-quarter - Danka Business Systems
WEDNESDAY: BHP Billiton, the Anglo-Australian mining giant, is expected to report pre-tax profits in excess of $6bn due to booming commodity prices and growth in China. Investors will be eager to hear what plans the world's largest miner has for increasing its dividend payment after rival Rio Tinto upped its annual dividend by 30 per cent.
Results: Full year -SThree. First half - BHP Billiton. Trading Updates: Daily Mail & General Trust, easyJet, Standard Life.
THURSDAY: In a busy day for blue-chip earnings, chemicals company ICI could dominate, given recent takeover speculation. Dutch rival Akzo Nobel has been linked with a bid for ICI, sending its shares to a six-year high.
The UK's largest drugs company GlaxoSmithKline is expected to post a sales increase of 10 per cent, helped by strong performances from its diabetes and cardiovascular drugs. Investors will also be keen to hear about plans for pipeline development as there with several further generic challenges to core products likely this year.
Last week, AstraZeneca announced it is to slash 3,000 jobs worldwide after Pfizer's decision to axe 10,000, and there is now pressure on GSK to throw its hat in the ring.
Yell's annual results are expected to shine. Its shares have underperformed recently, but have received a timely boost after Merrill Lynch upped its rating on the stock in the run-up to the results. Meanwhile, BT Group is likely to report solid third-quarter results, with progress at its Global Services division.
Results from Rolls-Royce, BG Group, Unilever, Reckitt Benckiser and Invensys could also continue a few surprises to keep analysts on their toes.
Results: Full year - Alphameric, BG Group, Fun Technologies, GSK, ICI, Reckitt Benckiser, Rolls-Royce, Smith & Nephew, Unilever. First half - Alumasc, Surface Transforms. First quarter - BOC Group. Third quarter - BT Group, Invensys, Yell.
FRIDAY: Results: Full year - Royalblue, St Mowden. First half - Dickinson Legg, Brightview, McBride.
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