20th Aug 2020 07:51
(Alliance News) - Stock prices in London are seen opening sharply lower on Thursday after the latest policy meeting minutes from the US Federal Reserve highlighted a bleak outlook for the world's largest economy.
In early company news, Irish building materials firm CRH maintained its dividend after reporting "resilient" half-year results, but Chilean copper miner Antofagasta almost halved its interim payout, as it was hurt by lower copper prices. Mike Ashley's Frasers Group reported a drop in profit as lockdown restrictions hit store sales.
IG futures indicate the FTSE 100 index is to open 78.58 points lower at 6,033.40. The blue-chip index closed up 35.36 points, or 0.6%, at 6,111.98 on Wednesday.
CRH said it delivered a robust performance in a challenging environment brought about by the coronavirus crisis.
For the half-year ended June 30, revenue fell 5.0% to USD12.22 billion from USD12.85 billion the year before, and pretax profit declined 18% to USD518 million from USD717 million.
Earnings before interest, tax, depreciation and amortisation was USD1.6 billion, which was 2% ahead of 2019 on a like-for-like basis.
CRH said that, in light of the resilient first-half performance and despite the disruption of Covid-19, it has decided to maintain its interim dividend at 22.0 US cents per share.
Looking ahead, CRH said the near-term outlook for economic and construction activity across its markets remains uncertain and is dependent on an improving health situation.
"Based on recent trading trends we expect like-for-like sales in the third quarter to be slightly behind the same period in 2019, with Americas Materials slightly behind, Building Products broadly in line, while Europe Materials is expected to be behind prior-year levels. Overall EBITDA for the third quarter is expected to be in line with the third quarter in 2019. There is limited visibility for the fourth quarter of the year and as a result, the group is not in a position to provide full-year guidance at this time," CRH said.
Antofagasta said that due to the outbreak of the coronavirus and its damage to consumer markets, the realised copper price was 13% lower compared with the same period last year and this was felt in lower revenue and profit.
For the half-year ended June 30, revenue fell 15% to USD2.14 billion from USD2.53 billion last year and pretax profit by 49% to USD387.5 million from USD763 million.
Antofagasta declared an interim dividend of 6.2 cents, down 42% from 10.7 cents paid out last year. It noted that this was in line with its dividend policy of paying out 35% of underlying net earnings.
Looking ahead, Antofagasta said its annual copper production guidance is for the lower end of its original 725,000 to 755,000 tonnes range. The miner added that its prospects for the remainder of the year depend largely on the effects of Covid-19 on global consumption.
Frasers Group said the Covid-19 crisis had a significant effect on business performance in March and April and has continued to do so due to the shuttering of retail stores.
For the financial year ended April 26, revenue rose 6.9% to GBP3.96 billion from GBP3.70 billion in financial 2019, while pretax profit fell 20% to GBP143.5 million from GBP179.2 million.
The company, which owns the Sports Direct chain, said no dividend was paid during the year and has decided not to declare a final dividend in respect of this financial period to "to preserve financial flexibility".
The retailer said it now intends to invest in excess of GBP100 million in its digital elevation strategy and is confident in achieving between a 10% and 30% improvement in underlying EBITDA during 2021.
"The Covid-19 impact has created uncertainty and we consider that it will be some time before the country and indeed the world recovers. However, Frasers Group itself has always taken a long term approach to its strategy and this has helped us, and will continue to help us, through these unprecedented times. We believe our business is strong as is our balance sheet. We will continue with the elevation strategy and the expansion of the new store format supported by our talented and loyal staff and we consider we are well placed for the future," the company said.
The Japanese Nikkei 225 index ended 1.0% lower. In China, the Shanghai Composite is down 0.9%, while the Hang Seng index in Hong Kong is down 2.0%.
The US Federal Reserve reiterated, in the minutes of its most recent Federal Open Market Committee meeting, that the path of the US economy will depend significantly on the course of the coronavirus which continues to rage across the country.
Fed Chair Jerome Powell has led repeated calls for more government support for the economy.
In the minutes, released Wednesday, the Fed said its members observed that "uncertainty surrounding the economic outlook remained very elevated".
The central bank said: "Several risks to the outlook were noted, including the possibility that additional waves of virus outbreaks could result in extended economic disruptions and a protracted period of reduced economic activity.
"In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near-term and was posing considerable risks to the economic outlook over the medium term."
The pound was quoted at USD1.3088 early Thursday, down from USD1.3190 at the London equities close Wednesday.
On Tuesday, the European Union reiterated that a post-Brexit trade agreement between the UK and the EU must be achieved "in October at the latest", as talks continue.
A spokesman for the EU Commission said the EU wants an "ambitious and fair partnership with the UK", but a deal must be achieved by the end of October for it to be ratified in time.
The euro was priced at USD1.1838, down from USD1.1896. Against the yen, the dollar was trading at JPY106.07, up from JPY105.73.
In commodities, Brent oil was quoted at USD45.01 Thursday morning, lower than USD45.26 a barrel Wednesday evening. Gold was trading at USD1,944.35 an ounce, down from USD1,958.00.
In the economics calendar Thursday, eurozone construction output due at 1000 BST, with US initial jobless claims at 1330 BST.
By Arvind Bhunjun; [email protected]
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