Week in Review, October 25

A round up of some of the week’s most significant corporate events and news stories.

Pouyanné takes Total reins after plane crash kills chief

Patrick Pouyanné was appointed as the new chief executive of Total SA this week after former head of the French oil and gas major Christophe de Margerie was killed in a plane crash, writes Michael Stothard in Paris.

De Margerie’s business jet caught fire at Moscow’s Vnukovo airport after striking a snowplough late on Monday. Russian authorities said the driver of the snowplough was drunk, a claim refuted by his lawyer.

It took 48 hours for Total, the world’s fifth-largest listed oil and gas company, to call an emergency board meeting and choose a replacement, appointing the 51-year-old head of refining and chemicals Mr Pouyanné.

The company also appointed Thierry Desmarest, the Total chief executive from 1995 to 2007, as chairman to provide a steady hand in the boardroom.

Mr Pouyanné has spent more than 17 years at Total. He started out in exploration, moving to the downstream chemicals and refining division. Here he proved himself an adept cost-cutter, restructuring the business.

In his new role, he is expected to come under shareholder pressure to execute further cost-cutting partly because of lower oil prices. There are also geopolitical issues to consider, with western sanctions against Russia having halted Total’s joint venture with Lukoil to explore shale oil in western Siberia.

In Russia, an investigation into the crash is under way. The director-general of Moscow’s Vnukovo airport and his deputy resigned, while investigators detained four employees, in addition to the snowplough driver.

Yahoo bolsters case that strategic plan is working

For the last two years, it did not really matter what Marissa Mayer did. Yahoo’s chief executive primped and preened its products, bought a boat load of companies and rolled out a completely new set of advertising options, writes Hannah Kuchler in San Francisco.

Person in the news

Ginni Rometty, IBM’s ninth – and first female – chief executive officer, has reached a career defining moment. “This time in this industry is different,” she declared this week

Continue reading

Investors simply were not looking. They just viewed Yahoo stock as a way to get a piece of Alibaba – the US group had a 24 per cent stake in the fast-growing Chinese e-commerce group, some of which was sold in September’s initial public offering.

But suddenly, all eyes are on Yahoo’s core business. Alibaba went public last month and a week later, activist shareholders started to plead with Yahoo to take drastic action, including one suggestion it should tie-up with AOL.

Ms Mayer used Yahoo’s third-quarter earnings announcement this week to fight back and her case for sticking to her original strategic plan was helped a little (but not a lot) by better than expected earnings.

She also spilled the figures to defend the company against allegations that it cannot be trusted with the money it received from the Alibaba IPO.

Ms Mayer argued she has spent far more on buybacks (what shareholders want) than deals (which they are worried will not boost revenue), that some deals are necessary and she has hired tax experts to help reduce how much of the money goes to the government.

She also pointed to what she sees as signs of hope in the main business – increased mobile revenue and growth at Tumblr, the blogging platform.

● Related Lex note: Everything on display at Yahoo

Tesco chairman bows to pressure as profits tumble

Tesco faced fresh turmoil this week as profits sank more than 90 per cent and Britain’s biggest retailer admitted it had been overstating profits for longer than previously thought, writes Andrea Felsted in London.

Sir Richard Broadbent, chairman, bowed to investor pressure and said he would step down in an effort to draw a line under the affair.

His resignation came as Tesco said it could no longer provide full-year guidance, pushing the shares to an 11-year low. Since the beginning of the year the group has issued three profit warnings, and its market value has more than halved.

Tesco said profits had been overstated by £263m, against a previous estimate of £250m a month ago.

Dave Lewis, new chief executive, refused to comment on whether the overstatement had been the result of error or deliberate action. He said, however, there was “evidence that no one made any financial gain from the situation”.

The accounting discrepancy arose from the way it recognised income from suppliers. Some £118m of the shortfall related to the first half of this year, with £70m related to last year and some £75m to previous years. Restating the numbers meant that trading profit in the six months to August 23 fell from £1.59bn to £937m.

Tesco announced a month ago that a £1.1bn forecast of pre-tax profit released just weeks earlier had been overstated, and called in accountants Deloitte and lawyers Freshfields to investigate.

Mr Lewis said that severance payments – together worth millions of pounds – to Philip Clarke, ousted as chief executive in July, and Laurie McIlwee, who resigned as finance director in April, were being withheld until the conclusion of an inquiry by the Financial Conduct Authority.

● Related Lex video: Tough times at Tesco

Brussels closes Libor cartel probes with flourish of fines

Another chapter in the long-running Libor rate rigging saga closed this week when Europe’s main antitrust body ended its cartel probes with a round of multimillion euro penalties, writes Daniel Schäfer in London.

The European Commission fined a number of global banks a combined €94m for participating in two distinct cartels – one of them connected to Libor – involving interest rate products denominated in Swiss francs.

JPMorgan Chase received the highest penalty, €61.6m, for its participation in a cartel aimed at influencing the Swiss franc Libor interbank lending benchmark, a rate widely used to price mortgages and other financial products.

Royal Bank of Scotland was the second lender involved but it escaped a €115m fine after receiving immunity for revealing the existence of the cartels to Europe’s top competition authority.

The EU’s settlements marked the latest in a series of large fines for Libor manipulation handed out by authorities in the US and Europe in the past two years. It has taken the total tally for benchmark rigging to more than $6bn, a sum that is expected to increase further as regulators conclude investigations and as private lawsuits – up to 50 in the US alone – stack up.

In December last year, the commission issued a record €1.7bn fine to six banks for colluding to manipulate the Japan-focused yen-Libor benchmark and its European sister Euribor.

This week, it also revealed the existence of another cartel that colluded to set bid-ask spreads charged on Swiss franc interest rate derivatives. In this case, UBS, JPMorgan and Credit Suisse paid a collective fine of €32.3m.

And finally …the lighter side of the news

● Everyone has a need for speed these days. To meet this desire for acceleration German engineers at ThyssenKrupp have developed an airport travelator using magnetic train technology that can double an average pedestrian’s walking pace. Now you can add velocity into the toxic mix surrounding the murderous perambulations of spatially challenged buffoons blithely dragging heavy cases behind them, scything through crowds at airports leaving a trail of battered shins and crushed feet.

● The powers that be at a certain Cupertino-based technology group must be kicking themselves. While they were focusing on phablets, Fujifilm was diversifying into pharmaceuticals and a more old-fashioned form of tablet. Set aside the goodwill to be gained by solving modern medical challenges with an eye to design – the publicity for the drugs would write itself: ‘An Apple a day keeps the doctor away.’

● US farmers need to drag themselves into the vanguard of the consumer era as harvested grain is left in fields because of freight congestion. In this digital age when the customer is king, the way to motivate a tardy company is with a social media firestorm. Commuters need only be delayed by nanoseconds before the tweets start to fly. Perhaps it is time for the agricultural industry to raise a digital pitchfork against epic rail fails.

● The team that put the wheeze into Caterham Formula One’s racing cars have called in the safety car and are trundling towards the pits. It could have been the utter lack of points in five years of competing in Grands Prix, or the embarrassment of being overtaken by a Toad driving a jalopy and shouting: ‘Poot! Poot!’ Administrators are racing to scrutinise the books before lawyers start stripping the group for parts.