AstraZeneca to return billions to shareholders

Cash-rich drugs giant to keep investors happy with another huge buyback worth up to $5bn
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The Independent Online

AstraZeneca, the FTSE 100 pharmaceuticals giant, will announce an estimated $3bn (£2bn) extension to its share buyback programme this week.

A hugely cash generative business, AstraZeneca has been keeping investors happy over the past two years by purchasing $2.1bn of shares in 2010 and around $4bn in 2011. The group will confirm another round of share buybacks in its full-year results this week, with the consensus expectation $3bn and analysts at UBS expecting as much as $5bn.

Savvas Neophytou, analyst at Panmure Gordon, said he had a "conservative" forecast – this still came to $1.5bn – as he felt that AstraZeneca might hold back some cash for acquisitions. He added: "The share buyback programme will be extended for sure. There are also a number of opportunities for the company to invest in."

However, AstraZeneca, whose chief executive is David Brennan, right, has faced some disappointments recently in its drug pipeline. For example, its latest blockbuster drug (those likely to have sales of more than $1bn) is expected to be the diabetes treatment Dapagliflozin, but the US Food and Drug Administration has demanded more clinical trials before giving approval. The UBS analysts expect fourth-quarter sales to be fractionally down on the previous year at $8.611bn.

Michael Mitchell, healthcare analyst at Seymour Pierce, said that there was a "question over whether a better use of money" would be investing in new drugs or buying companies with strong research and development records.

AstraZeneca is one of a number of big-name firms reporting in what looks to be the busiest week for the City since the new year. Royal Dutch Shell is expected to do particularly well, with analysts at Charles Stanley predicting a $1.2bn increase in annual net income to $5.3bn.

In contrast, the strike-hit conglomerate Unilever, which also reports this week, has been described by one Bank of America Merrill Lynch analyst as one of the "most expensive" consumer stocks and believes its premium rating was "unsustainable".

Slowing sales growth is to blame, despite growth in many overseas markets. This month Morgan Stanley and Bank of America-Merrill Lynch downgraded the stock, but its usually solid dividend will continue.

The consumer goods giant, which employs 7,000 in the UK, angered staff this month with plans to close its final salary pension scheme. It is instead offering a hybrid plan which will see some 80 per cent of the UK workers receive pensions based on their average salary.

Bernard Arnault, France's richest man, is set to reveal just how resilient the global luxury goods sector is this week. LVMH, the champagne to leather handbags brand house he heads, will report full-year results after the Paris stock exchange closes on Thursday. LVMH has been focusing on markets in China where growth is far stronger than in the European and US markets.