City Republic: good news expected from Apple and Nestle
LONDON - It is results season in the US, and Apple, Amazon and Anheuser Busch report today. Nestle is showing a boost in first-quarter sales despite surging raw material costs, reports Stephen Foster.
Results season reassuring for Wall Street
Well it should be, as 60% or more of the 150-odd big companies reporting first quarter figures this week are expected to beat forecasts, indicating that the US economy hasn't fallen off a cliff yet. The Dow Jones index, contrarily, fell 100 points yesterday but should get a boost today when brewer Anheuser Busch, Amazon, Apple and Boeing all report.
Apple's results will be the most keenly anticipated results. Its shares have rocketed over the past couple of years on the back of its stellar raft of new products but there doesn't appear to be another iPod or iPhone on the horizon.
But its computers are finally winning a bigger share of the personal and business markets and export sales should be benefiting strongly from the weakness of the dollar.
Another dollar beneficiary should be Boeing, although its vital 787 Dreamliner replacement for the 747 and 767 is behind schedule.
This could be a massive missed opportunity for the Seattle giant because its only real rival, Europe's Airbus, is struggling with a Euro currency that has risen sharply against the dollar and pound in recent months.
Currency woes dampen Nestle
Kit Kat to Nescafe giant Nestle increased its first -quarter sales to a chunky 25bn Swiss francs (more or less the same in dollars) despite surging raw material costs, with profits up nearly 10%.
This is quite a performance considering that Nestle has been on the receiving end of volatile markets in coffee, flour and cocoa and has also, like Airbus, suffered from US sales declining in value as the dollar has slipped against its main currency, the Swiss franc.
Elsewhere in the food market, the Weston family's Associated British Foods (Twinings, Ovaltine and Kingsmill) managed a 5% increase in first quarter profits, although CEO George Weston said it was getting harder to pass on price rises and so the shares fell.
ABF's value retailer Primark, it emerged, has captured an amazing 10% of the UK clothing market, boosted by last year's takeover of Littlewoods. Marks & Spencer has 11.4%.
The high value of the euro (which the Swiss franc shadows) is proving a severe pain to mainland European companies, who have recently enjoyed something of an export boom, especially in Germany.
There will be mounting pressure on the European Central Bank to rein in the Euro by cutting rates soon. At 4% though, they’re still substantially lower than the UK’s 5%.
Noose tightens on Yahoo!
Yahoo! failed to demonstrate clearly yesterday that Jerry Yang's magic was working for a second time. Although its first quarter profit tripled to $542m, this was largely driven by the $401m sale of a stake in Chinese internet company Alibaba.com.
Company founder Yang, who resumed the reins as CEO last year, is trying to evade a $44bn takeover from Microsoft.
Microsoft CEO Steve Ballmer said yesterday (prior to the results announcement) that the company's offer stood, but only until April 26 when it would mount a hostile bid at a lower price.
So far, the only glimmer of a white knight has been the two-week advertising deal with Google, but Google wouldn't be allowed to buy Yahoo!.
Another potential "saviour", Rupert Murdoch, is choosing instead to spend $580m of News Corporation’s money on New York paper Newsday, so he looks out of the running.
Yang's best bet is to get Ballmer to sweeten the deal a bit, if only for cosmetic reasons.
Shareholders won't want to see the April 26 deadline pass without a deal.
D-Day for RBS' Fred
Will RBS CEO Sir Fred Goodwin survive today's meeting of shareholders, peeved by the bank's record £12bn cash call and annoyed at over-paying for ABN Amro?
Almost certainly, chairman Sir Tom McKillop (a chemicals man, not a banker) will probably be thrown to the wolves instead.
Actually Goodwin's biggest folly was to increase the dividend earlier this year in a display of machismo, trying to show that RBS wasn't worried about the credit crunch.
As it's in the process of writing off a further £5.9bn on dodgy mortgages, it clearly should have been.
Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.
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