A round up of some of the week’s most significant corporate events and news stories.
Europe’s largest oil producers rebound with strong results
Strong fourth-quarter results from BP, Total and Statoil showed how Europe’s largest oil and gas companies are leading the recovery from the industry’s deepest downturn in a generation, writes Andrew Ward.
Biraj Borkhataria, analyst at RBC Capital Markets, said the US companies had suffered in comparison to a strong prior quarter, when refining margins were increased by high demand and capacity constraints caused by hurricanes.
European groups also experienced headwinds in their refining businesses during the fourth quarter but overall results showed the benefits of higher oil prices, rising production and falling costs. These trends have allowed companies to repair their balance sheets after three years of pain and begin to refocus on shareholder returns.
Total of France this week committed to increase its dividend by 10 per cent in the next three years and buy back up to $5bn of shares after a 19 per cent jump in fourth-quarter profits.
BP revealed it had repurchased $343m of shares during the fourth quarter after becoming the first of the European majors to launch a buyback scheme since the downturn last October. Its profits more than quadrupled from the year before.
Statoil raised its quarterly dividend by 4.5 per cent after doubling its profits.
Oil prices were almost a quarter higher in 2017 than during the year before and they have since topped $70 per barrel for the first time since 2014, before falling back to about $65 this week. Some producers are generating as much cash at current prices as they were when crude traded above $100 per barrel before the crash, reflecting cost cuts of up to 45 per cent.
However, all the big groups are keeping a tight rein on capital expenditure, citing expectations of further volatility in prices ahead.
Musk launches Falcon Heavy (and a Tesla)
Launch pad 39A at the Kennedy Space Center in Florida is a world away from Complex 1, on a sheep farm in New Zealand. But in less than a month, these very different rocket launch sites have opened up important new frontiers for today’s private space age, writes Richard Waters.
The southern hemisphere launch pad was used last month to send up the first of a new generation of lightweight, low-cost rockets that are set to blanket Low Earth Orbit with micro-satellites.
There could hardly be a starker contrast than with the giant rocket that blasted off this week from Florida’s launch pad 39A, where the mission to land a man on the moon began nearly 50 years ago.
It was the first Falcon Heavy from Elon Musk’s SpaceX, the biggest rocket to leave Earth’s atmosphere in nearly 45 years.
It was also the first of a spate of new heavy-lift rockets that are set to lay the foundation for more intensive human exploration — and exploitation — of space.
The successful launch of the Falcon Heavy also presented another, and very different, contrast.
A day after the rocket had slung its payload — a Tesla Roadster — out towards the asteroid belt, Mr Musk was busy promising shareholders in his electric car company that persistent production delays on the company’s new Model 3 vehicle would soon be overcome.
The big rocket was four years behind schedule.
However, Mr Musk is unlikely to get that much leeway to prove that the company can iron out its own problems.
Wynn Resorts chairman steps down amid sex claims
Steve Wynn, the casino mogul who helped transform Las Vegas and Macau into glitzy gambling centres, stepped down as chairman and chief executive of his eponymous company on Tuesday as he battled allegations that he had sexually harassed employees, writes Ben Bland.
The 76-year-old’s decision to resign from Wynn Resorts, and subsidiary Wynn Macau, is a big blow to a group that he built from nothing.
“In the last couple of weeks, I have found myself the focus of an avalanche of negative publicity,” Mr Wynn said in a statement. “I have reached the conclusion I cannot continue to be effective in my current role.”
The Wall Street Journal reported last month that Mr Wynn had engaged in a pattern of sexual misconduct. In one case he was alleged to have paid a $7.5m settlement to a manicurist at the Wynn Las Vegas who alleged that he had forced her to have sex with him. Mr Wynn has denied the allegations.
Investors are concerned about how the company will fare without its driving force, and what will happen to the 21 per cent stake in Wynn Resorts still held by Mr Wynn and his ex-wife.
Regulators in Nevada and Massachusetts are looking into the allegations against Mr Wynn, while the gaming authority in Macau said it was also “concerned”.
Mr Wynn has been replaced by some of his most loyal lieutenants, including Matt Maddox, who was appointed chief executive of Wynn Resorts, Boone Wayson, who was made chairman of Wynn Resorts, and Allan Zeman, who was made chairman of Wynn Macau.
SoftBank seeks unlikely partner in Swiss Re
In one of the week’s more unlikely pairings, it emerged that SoftBank, the acquisitive Japanese conglomerate, is in talks to buy a minority stake in Zurich-based reinsurer Swiss Re, writes Oliver Ralph.
SoftBank’s ambitious chief executive Masayoshi Son, has often talked about turning his company into an version of Warren Buffett’s Berkshire Hathaway. Ecommerce, telecoms, chip design, energy and even baseball already feature in its portfolio. It also runs a $93bn Saudi-backed tech investment vehicle called the Vision Fund.
Financial services are increasingly taking centre stage though. SoftBank generates management fees from the Vision Fund, and has also bought Fortress, an alternative asset manager, along with stakes in insurance start-ups Lemonade and Zhong-An.
A stake in Swiss Re, which would be bought by SoftBank directly rather than via the Vision Fund, would take its financial investments to another level.
The move initially left bankers and analysts confused— there would be few immediate strategic benefits. But over the long term a stake in Swiss Re would have its attractions for SoftBank. The dividend stream would be useful for paying down debt and making more acquisitions.
And Swiss Re’s underwriting ability and wealth of data could come in useful for some of SoftBank’s other investments. For example, the Vision Fund owns a stake in Uber. The car-booking company is developing driverless cars, which are seen as hugely disruptive to the motor insurance industry.
For Swiss Re, an investment from SoftBank could provide a solid long-term shareholder although analysts said that the last thing the Swiss company does not need is extra investment. The reinsurance industry is awash with capital at the moment, which has been driving both prices and profits down for years.
Samsung chairman charged over taxes after heir’s release
Lee Jae-yong was freed after an appeals court halved the billionaire heir’s sentence to two-and-a-half years and suspended it for four years. He had been charged with a host of graft charges and the case was seen as a test of the government’s efforts to clean up Korea’s corporate sector, which has long been controlled by handful of large family-run industrial groups.
But Samsung was hit again four days later when Samsung’s chairman was charged with tax evasion. Lee Kun-hee, who is incapacitated in a hospital in Seoul, is suspected of evading $7.5m in taxes and using bank accounts in other people’s names that held more than $350m, police said. Mr Lee was also accused of embezzlement but will not face charges because of his medical state.
The turmoil at the top of Samsung has forced it to keep a low-profile in the run-up to the Winter Olympics, held in Pyeongchang, despite the role its leaders played in winning the bid.
The scandal, however, has not hurt the company’s corporate performance. Results released earlier this month showed that robust chip sales drove a 64 per cent rise in its operating profit in the final quarter of 2017 while full-year profit jumped 83 per cent.
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