Pepsi, Rolls-Royce, Uber: News in brief 28 June 2016

AstraZeneca unveils new 'superbug' killer, Pepsi struggles with health-conscious consumers, Uber and Lyft resolve litigation

Rolls-Royce is on target to meet sales predictions despite Brexit worries (Getty)

• New Pepsi, Old Problem: US Soda Sales Have Lost Their Fizz
• Rolls-Royce says on track to meet guidance
• Ocado profit rises, talks with potential overseas partners continue
• AstraZeneca’s new combination ‘superbug’ antibiotic approved in EU
• Fire after explosion at BP gas plant in Misssissippi
• Government puts sale of RBS, Lloyds stakes on hold after Brexit vote - sources
• Hutchison, Tata Motors Bonds Among Asia’s Biggest Brexit Losers
• Some Deutsche Boerse investors seek better LSE merger terms post Brexit
• Pfizer Bolsters China Presence With $350m Biotech Plant
• Uber, Lyft resolve litigation involving top executives

New pepsi, old problem: US soda sales have lost their fizz

PepsiCo’s moves this week mask a harder truth for the soft-drink industry: Soda sales are down no matter how you sweeten it.

Pepsi said Monday it’s bringing back Diet Pepsi with aspartame. That came after the company replaced the drink with a sucralose version last August. In all, the company will be selling three Pepsi-branded diet drinks — one sweetened with sucralose, two with aspartame.

The US Food and Drug Administration and the European Food Safety Authority say aspartame is safe, and the American Cancer Society says worries about an increased cancer risk are unfounded. Nonetheless, rumors persist, and the consumer push for natural ingredients doesn’t help.

At the same time, sucralose simply didn’t taste good to many Diet Pepsi drinkers.

The churn was unavoidably reminiscent of Coca Cola Co.’s 1980s flirtation with a new recipe, but with an important difference.Per-person soda consumption in the US fell to a 30-year low last year, according to Beverage Digest. And the 2016 numbers don’t look any better.

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The new Rolls-Royce Wraith Black Badge car on display at the Geneva Motor Show on Wednesday (Getty Images)

Rolls-Royce sticks to forecast as no Brexit effect seen

Phil Serafino

Rolls-Royce, the UK’s biggest manufacturer, said business this year is in line with expectations and reiterated that the country’s vote to leave the European Union will have no immediate effect on the company, offering investors a rare bit of good news after days of turmoil in the markets.

Underlying profit before financing charges and tax is expected to be close to break-even in the first half, the London-based maker of jet engines said in a statement Tuesday, reiterating a forecast from May. The outlook for the full year is unchanged, and business will pick up in the second half with increased deliveries of large engines, it said.

The manufacturer told staff earlier this month that a referendum decision for Britain to exit the EU, known as Brexit, would limit the company’s ability to plan and be “unsettling”.

The forecast on Tuesday is all the more reassuring because Rolls-Royce has struggled in recent years, warning investors six times of disappointing profits amid slowing business-jet sales and weak demand at the unit that makes marine engines.

© Bloomberg

Delivery service Ocado's motto is "quality food that doesn't cost the earth"

Ocado profit rises, talks with potential overseas partners continue

British online grocer Ocado reported a 5.7 per cent rise in first-half core earnings and said talks to secure a long awaited overseas deal were continuing.

The firm, whose range includes products supplied by upmarket grocer Waitrose and also has a distribution agreement with Morrisons, Britain's No. 4 supermarket, said on Tuesday it made earnings before interest, tax, depreciation and amortisation (EBITDA) of £40.4m in the six months to May 15.

That compared with £38.2m made in the same period last year.

Analysts see winning international licensing deals in north America and western Europe as the key driver of Ocado's stock market valuation. However, the company missed a target of securing one by the end of 2015 and is still to announce one.

“Discussions with many potential international retailers to adopt the Ocado Smart Platform solution continue,” it said.

© Reuters

Woman had reportedly broken her thigh bone while in India years prior to her death (Rex)

AstraZeneca’s new combination ‘superbug’ antibiotic approved in EU

Ben Chapman

Pharmaceutical giant AstraZeneca has announced that its new antibiotic for serious bacterial infections has received EU marketing authorization. approved in EU. The licence for Zavicefta applies to all 28 EU member countries plus Iceland, Norway and Liechtenstein.

“Zavicefta is an important addition to the arsenal of antibiotics in the global fight against antimicrobial resistance. Effective treatment options are rapidly running out for serious Gram-negative infections. Zavicefta helps bridge that gap and allows a broad population of patients across Europe to benefit from this new medicine,” said Hans Sijbesma, managing director of the antibiotics business unit at AstraZeneca.

Ther European Centre for Disease Prevention and Control estimates the cost of antimicrobial resistance at €1.5bn per year as well as being responsible for approximately 700,000 deaths.

The Anglo-Swedish multinational’s share price rose 3 per cent in early trading.

(Getty)

BP gas plant explosion in Mississippi: No injuries say police

Erwin Seba, Brendan O'Brien, Apeksha Nair and Eileen Soreng

Firefighters in Pascagoula, Mississippi were battling a blaze after an explosion at a BP Plc natural gas processing plant early on Tuesday, police said.

No injuries were reported and no evacuations were under way, the Pascagoula Police Department said.

The fire, which erupted after an explosion at about 11:30 p.m. local time, was under control, police said.

The plant processes 1.5bn cubic feet of gas per day gathered from offshore platforms in the Gulf of Mexico.

A BP spokesman was not immediately available to comment on operations at the plant, which a company website describes as among the 10 largest such facilities in the United States.

It handles half of BP's natural gas production from the Gulf.

© Reuters

An employee in the Tata Motors car showroom in Ahmedabad, India, last year (Reuters)

Hutchison, Tata Motors bonds among Asia’s biggest Brexit losers

Lianting Tu

The damage to Asian bonds from Britain’s vote to leave the European Union has been largely limited to issuers with higher exposure to the UK and Europe.

Prices fell for debt of Tata Motors, which makes Range Rover cars, and Indian automobile component supplier Motherson Sumi Systems. Debentures sold by companies founded by Hong Kong’s richest man Li Ka-shing were also among the biggest losers as investors consider the political risks of Brexit, according to Nomura Holdings.

“In the medium term, possible ramifications of this risk include referendums in other European economies on their European Union membership and a potential breakup of the euro,” Nomura analyst Gaurav Singhal wrote in the report on Monday. “We believe such an event would be catastrophic for credit markets and damaging for real economies globally.”

The yield premium on Hutchison Whampoa.’s $1bn 6 per cent perpetual notes over US Treasuries widened 17 basis points on Friday and Monday, the biggest two-day increase in a month.

Shares of CK Hutchison Holdings Ltd., created when Li merged his Hutchison and Cheung Kong units last year, have also plunged more than 10 per cent to be one of the biggest losers among companies on Hong Kong’s benchmark stock index. Li operates Superdrug and Savers stores, ports and the Three phone service.

Tata Motors’ Jaguar Land Rover unit derives 22 per cent of its sales from the UK. Motherson Sumi’s $300m 4.875 per cent 2021 bonds declined 1.4 cents to 98.9 cents. Nearly 60 per cent of its revenues come from Europe, the Nomura report said.

Asian high-yield corporate bonds overall showed stability with yields rising just one basis point on Friday and Monday, according to JPMorgan Chase's indexes.

The yield spread for investment-grade notes issued by Asian companies over Treasuries widened 7 basis points, the biggest two-day jump in four months, to 233. That’s still down from this year’s high of 259 on February 11, when investors were worried over China’s yuan.

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Pfizer bolsters China presence With $350m biotech plant

Bloomberg News

Pfizer will invest $350m in eastern China on a plant for biotechnology drugs, bolstering its presence in the world’s second largest pharmaceutical market despite slowing economic growth in the country and rising pressure on prices for medicines.

The new facility in eastern Hangzhou city is expected to be completed in 2018 and will manufacture biologics, or complex medicines made from living organisms, as well as cheaper copycat versions known as biosimilars for patients in China and across the world, Pfizer said in an e-mailed statement Tuesday.

These products will address major public health concerns such as cancer, the New York-based drugmaker said. Biologics are underutilized in China, accounting for 4 per cent of medicines prescribed in the country, compared with 22 per cent in the US, according to the company.

A government-led campaign to reduce prices damped sales in China’s pharmaceutical industry and the nation’s economy has also slowed, leading to weaker sales growth in the country for drugmakers from Pfizer to the UK’s GlaxoSmithKline Plc and AstraZeneca Plc last year. Still, multinationals including Novartis AG continue to invest in China, where a rising middle class is boosting spending on healthcare.

“China is one of the fastest growing pharmaceutical markets in the world and the ongoing China health-care reform will continue to drive the expansion of China’s pharmaceutical industry, including research and development,” Pfizer said in a separate e-mail.

The new Pfizer facility will be its first biotechnology center in Asia and third globally, the company said. Novartis unveiled a $1bn campus in Shanghai this month, after Merck opened a new research and development center on the outskirts of Beijing in April.

A slow approval process in China has delayed the entry of some cutting-edge new medicines by foreign drugmakers. The Chinese regulator recently began taking steps to ease the problem, pledging to fast-track some much-needed therapies such as new drugs for hepatitis C, although it hasn’t given any firm timelines.

“We are glad to see that the Chinese authorities have recently issued a series of new policies to address this so called ‘drug lag,’ such as encouraging international multi-centered clinical trial application and supporting simultaneous native and international clinical trials,” Pfizer said.

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Jack Wilshere reacts to England's defeat by Iceland to eliminate them from Euro 2016 (Getty)

Euro 2016 boosts supermarket sales as football fans stock up on booze

Ben Chapman

Euro 2016 helped supermarkets to their first sales increase in over a year, new monthly data shows.

Sales of beers, wines and spirits jumped 6.2 per cent for the four weeks to 18 June, whilst crisps & snacks rose 4.2per cent, according to June figures from retail analysts Nielsen.

Delicatessen sales also rose 3.9 per cent, in part due to the warm end to May, while general merchandise was up 2.9 per cent. Overall the value of sales was up 0.4 per cent compared to the same period a year ago; only the third genuine year-on-year sales rise since the start of 2014.

“It remains a tough trading environment for the big supermarkets but changes made over the last year in lowering prices, less promotions, edited ranges and improved customer service seem to be having an impact, alongside the drop in shoppers buying cheaper grocery brands to save money,” says Mike Watkins, Nielsen’s UK head of retailer and business insight.

Watkins believes that shoppers will continue to benefit from a price war that has brought prices 1.5 per cent lower over the last year.

The effects of the EU referendum decision are less clear.

“Whilst the Brexit decision is unlikely to change shopper behaviour in the short term, we can expect some change in consumer sentiment and, possibly, a return to low inflation next year – should sterling’s depreciation continue and global commodity prices strengthen. However, for now, the battle for market share continues and shoppers will benefit from falling prices at food retailers due to price cuts and the deflationary environment,” Watkins said.

The biggest gainers continued to be discount chains, Aldi and Lidl, whose combined market share hit a record high of 10.5 per cent.

The London Stock Exchange (PA)

Some Deutsche Boerse investors seek better LSE merger terms post Brexit

Andreas Kroner and Jonathan Gould

Some Deutsche Boerse shareholders are urging the exchanges group to seek more favorable terms in its planned merger with the London Stock Exchange Group (LSE) after Britain's vote last week to leave the European Union.

The two companies spelled out details of their agreement earlier this year, which would give Deutsche Boerse shareholders 54 per cent of the combined company. They have said the provisions cannot be altered and a decision by Britain to quit the EU would not alter the logic of the deal.

However, one top 20 investor in Deutsche Boerse told Reuters the ownership ratio must be revised following a sharp fall in sterling and the 15 per cent drop in the LSE's share price since the “Brexit” vote.

“Otherwise the deal is not advantageous for Deutsche Boerse shareholders,” a portfolio manager at the investor said.

Some shareholders also said German regulators might not accept the companies' plan to make London the legal base for the combined group in the light of the British referendum result.

“Deutsche Boerse's leadership must take another critical look at the merger plan up to now and either make massive adjustments or bury it altogether,” said Klaus Nieding, an executive at Germany's DSW association of small shareholders.

The market watchdog in the German state of Hesse, where Deutsche Boerse is headquartered, can block mergers that threaten the development of the Frankfurt exchange and may do so unless the city gets more favorable terms, he said.

Deutsche Boerse and the Hesse watchdog declined to comment. An LSE spokesman reiterated the merger terms remained the same.

LSE shareholders are due to vote on the deal at a meeting on July 4, while Deutsche Boerse shareholders can tender their shares until July 12.

“Strategically, the merger still makes sense from our point of view but we are hoping for better terms that will allow us to back the deal without pain,” he said.

A special committee created by the exchanges to deal with the referendum will meet in the coming weeks to discuss the implications, including for the merged company's base.

“The choice of London as the sole headquarters of the holding ... would have to be reviewed,” Deutsche Boerse's chairman Joachim Faber told a newspaper earlier this year.

Sources close to the deal expect LSE shareholders to approve the merger and say Deutsche Boerse also has a good chance of reaching its target 75 per cent shareholder acceptance threshold.

German and EU regulatory approval, which the exchanges hope to gain to close the deal early in 2017, is seen as a major hurdle, though, particularly in light of the British vote.

Bankhaus Lampe analyst Neil Smith said he put the chances of the merger succeeding at just 20 per cent.

Additional reporting by Huw Jones

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Uber, which is opposed by established taxi drivers, currently serves more than 100 cities in 37 countries (Getty)

Uber, Lyft resolve litigation involving top executives

Dan Levine

Rival ride services Uber and Lyft have settled high stakes litigation involving two of their top executives, court filings show, in advance of a trial that could have aired sensitive details about both companies.

Lyft and its former chief operating officer Travis VanderZanden ended litigation in a California state court in which Lyft accused VanderZanden of breaking his confidentiality pledges when he went to work for Uber.

Uber also withdrew a subpoena on Monday in separate litigation over a data breach at Uber, which had targeted an Internet address assigned to Lyft's chief technology officer (CTO), according to a court filing.

Last year Reuters reported that the US Department of Justice was pursuing a criminal investigation of a May 2014 data breach at Uber, including an examination of whether any employees at competitor Lyft were involved.

Lyft has said it found no evidence that any employee was involved in the breach. It is unclear what impact the civil settlements will have on that probe.

A Lyft spokesman confirmed the settlement with VanderZanden on Monday but declined to disclose the terms. An Uber representative could not immediately be reached for comment.

VanderZanden served as Lyft's chief operating office until August 2014, when he expressed disagreement with the company's leadership and approached two board members about taking over as chief executive, according to court filings.

Lyft accepted VanderZanden's resignation instead, and he eventually became vice president of international growth at rival Uber.

Lyft sued him in November 2014. In a sworn affidavit submitted in court earlier this year, VanderZanden said Lyft sued him in bad faith.

According to VanderZanden's filing, Lyft surmised he had told Uber that Lyft's CTO, Chris Lambert, had discovered a method to “hack into Uber's computer systems and gain access to Uber confidential information.”

Uber revealed last year that as many as 50,000 of its drivers' names and their license numbers had been improperly downloaded, and filed a lawsuit in a San Francisco federal court in an attempt to unmask the hacker.

As part of its investigation, Uber determined that an Internet address potentially associated with the breach could be traced to Lambert. However, Lambert's attorney told Reuters Lambert “had nothing to do” with the breach, which was launched from a different Internet address.

The trial in the VanderZanden case had been scheduled to begin in August.

© Reuters