11th Aug 2022 07:50
(Alliance News) - Stock prices in London are seen opening slightly higher on Thursday, following gains by US and Asian equity markets overnight, after data on Wednesday showed US inflation finally easing from a four-decade high.
Annually, consumer prices were up 8.5% in July, slowing from the 9.1% rise seen in June. Market consensus, cited by FXStreet, had seen inflation easing only to 8.7% for July.
In early company news, Chilean miner Antofagasta fell victim to lower copper prices. Gambling operator Entain reported a drop in first half profit. Soft drinks bottler Coca-Cola HBC took a hit from its Russia exit.
IG futures indicate the FTSE 100 index is to open 1.99 points higher at 7,509.10. The index closed up 18.96 points, or 0.3%, at 7,507.11 Wednesday.
Antofagsta slashed its interim dividend as lower copper prices dented the Chilean miner's interim results.
For the six months to June 30, revenue dropped 30% to USD2.53 billion from USD3.59 billion a year before, due to lower copper and by-product sales volumes and lower realised copper prices.
Earnings before interest, tax, depreciation and amortisation fell 48% to USD1.24 billion from USD2.36 billion, and pretax profit was down 62% to USD679.6 million from USD1.79 billion.
The miner declared an interim dividend of 9.2 US cents, down 61% from 23.6 cents paid out last year.
Looking ahead, Antofagasta reiterated 2022 copper production is expected to be 640,000 to 660,000 tonnes.
Turning to its growth projects, Antofagasta said that following the completion of a detailed review of the Centinela second concentrator project, the capital cost estimate has been revised to USD3.7 billion, up from USD2.7 billion in the 2015 pre-feasibility study.
This estimate includes a new water system, and the increase reflects design changes, inflation, heightened environmental and other regulatory requirements, and the results of advanced engineering and a more detailed execution plan. The decision on whether to proceed with the project is scheduled for early 2023, Antofagasta added.
"Although we have experienced significant challenges over the half year - a volatile copper price as a result of macro developments, the continued drought in Chile, and an incident with our concentrate pipeline at Los Pelambres - the actions we have taken, coupled with the quality of our assets and balance sheet, have meant that we were able to weather the storm," said Chief Executive Ivan Arriagada.
"While the short-term outlook remains uncertain for copper, inflation, global economics and geopolitics, we remain committed to maintaining our operating discipline and cost control, and a strong balance sheet."
Entain said it will pay an interim dividend as the Ladbrokes betting chain owner diversified into Europe.
For the six months to June 30, net gaming revenue was GBP2.12 billion, up 18% from GBP1.79 billion a year before, and revenue was GBP2.09 billion, up 19% from GBP1.77 billion.
Underlying Ebitda was GBP471 million, up 17% from GBP401.1 million. Pretax profit was GBP39.5 million, down 70% from GBP130.6 million last year.
Turning to returns, Entain said it was implementing a new dividend policy. It is proposing a progressive dividend, starting with a total dividend of GBP100 million for 2022, to be paid to shareholders in equal instalments in respect of the first half and annual results. Entain declared an interim dividend of 8.5 pence per share.
Looking ahead, Entain said 2022 Ebitda is expected to be in the range of GBP925 million to GBP975 million, in line with current consensus. Entain noted the economic environment remains "uncertain in many of our markets", but it remains confident that its customer focus, increasing diversification and ability to deliver growth will deliver further progress for stakeholders.
Separately, Entain said it has partnered with EMMA Capital, an investment firm based in the Czech Republic, to establish a new venture, Entain CEE, to drive expansion in Central and Eastern Europe. Entain will own 75% of the economic rights in Entain CEE, with EMMA Capital owning the other 25%. Entain CEE will acquire the SuperSport Group, the gaming and sportsbook operator in Croatia from EMMA for EUR600 million in cash at completion.
Coca-Cola HBC said it achieved strong interim results in the face of macroeconomic and geopolitical uncertainty and expects to generate positive organic revenue growth for 2022.
For the six months to June 30, net sales revenue was EUR4.21 billion, up 30% from EUR3.25 billion last year, and net profit was EUR152.9 million, down 34% from EUR233.1 million.
During the period, the soft drinks bottler incurred non-cash charges of EUR188 million and cash charges of EUR2 million, predominantly related to its withdrawal from business in Russia. Coca-Cola HBC expects to incur further charges in the second half, currently estimated at EUR82 million.
Looking ahead, it reinstated guidance for 2022 and expects to generate comparable earnings before interest and tax in the range of EUR740 million to EUR820 million. Comparable Ebit was EUR462.5 million in the first half, up 32% from EUR350.3 million a year before.
"We delivered strong performance in the first half as we continued to execute our growth strategy with focus and discipline, including making progress on our sustainability commitments," said CEO Zoran Bogdanovic.
"The quality of our 24/7 brand portfolio, revenue growth management capabilities and execution excellence allowed us to take full advantage of post-pandemic recovery across our markets and to continue to gain significant share. I am pleased we achieved strong organic growth, balanced between volume and revenue per case. Pricing, mix and cost efficiencies helped to mitigate input cost increases, underpinning successful conversion of revenue growth into profits and cashflow."
New York ended higher on Wednesday, with the Dow Jones Industrial Average up 1.6%, S&P 500 up 2.1% and Nasdaq Composite up 2.9%.
In Asia on Thursday, financial markets in Tokyo were closed for the Mountain Day holiday. In China, the Shanghai Composite was up 1.5%, while the Hang Seng index in Hong Kong was up 2.2%. The S&P/ASX 200 in Sydney ended up 1.1%.
Fears that the US central bank's monetary tightening drive will send the world's top economy into recession have plagued markets for months, with sentiment darkened as well by Russia's war on Ukraine, supply chain pressures, and worsening China-US relations.
"US markets underwent a strong session with the Nasdaq leading the way higher, after US CPI fell to 8.5% in July, while core prices remained steady at 5.9%, a trend that has continued with strong gains in Asia markets, which look set to translate into a higher European open," said CMC Markets analyst Michael Hewson.
"The bigger-than-expected fall in the headline number, along with the weaker than expected core reading, has prompted the hope that the Federal Reserve may not need to be as aggressive on rate hikes when it meets to raise rates in September," Hewson added.
Meanwhile, Bank of England Chief Economist Huw Pill conceded raising UK interest rates in the fight against inflation will slow economic growth, but maintained it is required to stabilise the economy in the longer term, Bloomberg reported on Wednesday.
"It's very important that we use monetary policy to prevent that high level of inflation from getting ingrained," Pill said in a virtual Q&A. "In the short term higher interest rates means higher mortgage payments. It probably also means some slowing in the economy."
Earlier this month, the BoE raised UK interest rates by 50 basis points to 1.75% from 1.25% - the biggest single hike since 1995. The decision came after the UK inflation rate raced to 9.4% in June, reaching a 40-year high.
Pill maintained that increasing rates will help to "head off that ingrainedness" of rising prices, which is "very disruptive to society" as it makes it harder for businesses to plan, and for investors to save, Bloomberg reported.
The dollar was higher across the board. The pound was quoted at USD1.2201 early Thursday, down from USD1.2253 at the London equities close Wednesday.
The euro was priced at USD1.0295, down from USD1.0349. Against the Japanese yen, the dollar was trading at JPY133.00, up from JPY132.41.
Brent oil was quoted at USD97.45 a barrel Thursday morning, up from USD94.77 late Wednesday. Gold stood at USD1,785.75 an ounce, lower against USD1,799.85.
The economic events calendar Thursday has US producer prices and jobless claims numbers at 1330 BST.
By Arvind Bhunjun; [email protected]
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