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Will Precious Metals Shine Through Recovery – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 21:46:25 +0000

Prices of both precious and industrial metals continued to climb during the second quarter, but with economic data gradually improving, sparking investors’ interest in recovery-related assets, precious metals could be losing their appeal. As economic indicators increasingly point to the early stages of a turnaround, investors shift from safe-haven-seeking mode to a recovery-minded approach.Gold and other precious metals pulled in the most commodity-related investments during the year’s first quarter, but inflows to precious metal exchange-traded products were only 800 million during the second-quarter, according to Barclays Capital analyst Suki Cooper. Energy and agriculture sectors were the second quarter’s stand-outs, grabbing 2.8 billion and 1.9 billion, respectively. Furthermore, redemptions of gold exchange-traded products were the second largest in July and inflows to the SPDR exchange-traded fund have stalled since the beginning of the month, said Barclays Capital analyst Natalya Naqvi, who noted that short-term speculative interest has held up and physical demand will likely emerge if gold’s price falls to around 900 an ounce. Lending support to gold’s investment appeal is the recent agreement to limit European central bank gold sales to 400 metric tons a year, reducing the bank’s sales quota by 100 metric tons a year. However, Barclay’s Naqvi notes that the new agreement should only be seen as mildly bullish for gold. Official sales under the current agreement remain low enough that sales could still increase under the new quota-even including the IMF’s intended sale of 403 metric tons of gold. Naqvi also expects gold mine supply to increase in 2009 but said any gains in supply would be offset by the reduction to official sales.On Tuesday, Vancouver Pan American Silver
is expected to report second-quarter earnings of 19 cents a share. During the first quarter, the company reported record gold production of 20,858 ounces-a 206% increase from last year’s first-quarter production. Silver production rose 8% to 4.9 million ounces.
Shares of mining companies closed Monday’s session’s broadly lower as gold futures slumped below the 950 level. Gold for December delivery trading on the Comex division of the New York Mercantile Exchange shed 12.60 to 946.90. The SPDR Gold Trust
exchange-traded fund closed Monday’s session down by 80 cents, or 0.9%, at 92.95. Pan American Silver’s stock shed 14 cents, or 0.7%, to 20.01, and shares of Hecla Mining
were 19 cents lower, or 5.7%, at 3.12. Silver Wheaton
lost 15 cents, or 1.5%, at 9.62 and Silver Standard Resources
was down by 1.09, or 5.5%, at 18.70.
Thomson Reuters contributed to this article.

Applied Materials Weathers Storm – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 20:46:30 +0000

Investors have accepted that 2009 isn’t the year for Applied Materials, making Tuesday’s fiscal-third quarter report an assessment of how well the semiconductor equipment maker has handled the downturn and positioned itself for the future.
In June, Applied Materials
‘ chief executive Mike Splinter warned of more failures in the industry as the number of customers declines. Splinter said that chipmakers are working together to survive weak demand and high development costs, but no such cooperation is occurring among equipment makers like Applied Materials. Splinter said acquisitions in the chip-gear sector are very difficult to conduct, leaving few options for consolidation, other than a company’s outright failure.
Wall Street expects the company to report a loss of 8 cents per share on Tuesday, well off its 14 cents profit recorded in last year’s corresponding period. Since the beginning of the year the company’s market value has risen 32.8%. Peers such as Novellus Systems
and Lam Research
have risen 45.4%, and 36.0%, respectively, over the same period. Meanwhile, the semiconductor industry, as measured by the SPDR S&P Semiconductor
ETF, has gained 56.1%, while the broader Technology SPDR
ETF has risen 27.4%.
The year got off to a rough start. Back in February, Applied Materials reported its first loss in more than five years, thanks to declining semiconductor demand and continued weakness in credit markets. The company also didn’t provide guidance for the rest of the year, only to say sales were expected to fall across its businesses.
Despite the bleak outlook, the company continued to push into the solar energy business. Applied Materials has already moved aggressively into the space over the past three years, but in an interview with Forbes earlier this year, Splinter talked about how he wanted more.

Sunocos Slow Quarter – US-FOREX.US

Forex-Publisher — Tue, 04 Aug 2009 22:46:09 +0000

Analysts don’t expect much from Sunoco this quarter.Profit weakness plaguing all U.S. refiners stemming from gasoline overproduction, recessionary summer demand and brimming inventories has already been priced into shares. According to Citi analyst Faisel Khan, these factors have pulled the sector down roughly 30% this year. But while Khan’s expectations that the sector’s second- and third-quarter earnings will be “nothing short of abysmal” have proved correct thus far, analysts advise against fleeing the sector just yet. “Refining earnings do not remain negative for very long,” Khan said. As soon as demand returns, margin pressures will lift as excess inventory is worked off.Until then, refiners-much like nearly every other industry-are focused on cutting costs. Refining and chemicals company Sunoco
, which reports second-quarter results on Wednesday, aims to reduce costs by 300 million this year because it anticipates a challenging market for petroleum and chemical products through 2009. When the Philadelphia-based company reported first-quarter results in early May, it slashed its capital spending budget by 200 million as it deferred construction on its Middletown, Ohio cokemaking plant.Investors will be looking to see how well Sunoco has managed costs throughout the quarter and whether management sees any improvement to the company’s outlook. Analysts polled by Thomson Reuters are projecting a loss of 12 cents a share and a year-end profit of 1.69 a share.
Barclays Capital analyst Paul Cheng anticipates a refining loss of 43 million, compared to the prior quarter’s profit of 23 million and 32 million a year ago. He expects production to be down by 13% year-over-year. Sunoco shares closed Tuesday’s trading session up by 34 cents, or 1.3%, at 25.93. The stock has lost roughly 40% since the beginning of the year.

Summer Wont Cure Big Oil Blues – US-FOREX.US

Forex-Publisher — Tue, 04 Aug 2009 10:46:10 +0000

Norway’s StatoilHydro was the latest oil major to report a slump in second-quarter earnings on Tuesday, with operating profits down 61% and net income at a clean zero. The 40%-50% slump in oil prices over the year has also depressed profitability at heavyweights like BP, Royal Dutch Shell and Total, and forced a cost-cutting drive across the industry. But with oil steadily rising past 70-71 per barrel, will summer bring some respite?The truth is, probably not. Although there is the possibility that stronger oil prices will offset some of the pain seen since summer 2008-when oil hit a high of 147.50 before sinking to below 70 by the end of September-actual demand for oil is not expected to post an annual rise until 2010. Then there’s the problem of natural gas prices, which lag oil by about six months, and are on the way down. On the other side of the balance, in “downstream” operations such as refining, the outlook is not much healthier. “Weak refining is also a drag on earnings,” said Gudmund Halle Isfeldt, an analyst with DnB Nor. He said that gasoline margins in the United States were currently at 15 per barrel, double where they were at the end of June, but that this was mainly driven by financial players and that they would fall again by October.Oil and gas stocks were down 0.8% across Europe on Tuesday morning, with StatoilHydro
down 0.6%, to 133.20 Norwegian kroner , in Oslo, while Royal Dutch Shell
and BP
slipped 0.4%-0.5% in London.StatoilHydro said its profits had taken a hit from lower oil and gas prices, currency volatility and “an unusually high” tax bill from foreign-exchange gains. The company’s net profits were wiped out to zero over the year, but stripping out the tax effects showed only a 48% drop in “adjusted” earnings, to 29.2 billion kroner . Production came in broadly as expected, at 1.7 million barrels per day.The firm kept its capital expenditure projection at 13.5 billion, with half of this figure earmarked for new projects. One-third of the total will go towards investment in existing assets. The aim is to reach annual production of 2 million barrels per day this year.

Can Grocers Serve Up Profits – US-FOREX.US

Forex-Publisher — Mon, 03 Aug 2009 21:46:09 +0000

Commodity costs are much cheaper than a year ago, so you’d think the food sector would have an easier time pleasing the Street with higher profits. But it’s not that simple: Consumers remain a challenge as companies vie for a bigger portion of their limited spending.
Whole Foods Market
has seen its number of shoppers dwindle amid the global economic slowdown. Although the company increased its store-label offerings and emphasized its price comparability to regular grocery stores, not as many consumers are currently able to pay extra for naturally-grown produce and minimally-processed food.Analysts are optimistic, however, about the Austin, Texas-based supermarket’s third-quarter earnings report, due out Tuesday. “The company is doing a good job of reducing expenses and bringing them more in line with current sales trends. It has also become more disciplined about the cost of building new stores and their size/location to ensure that returns are adequate,” said Barclays Capital analyst Meredith Adler. Whole Foods’ shares have more than doubled since January, but Adler remains cautious on the stock, as market expectations are high. Adler also said store expansion would have to be extremely limited to uphold the company’s aim to fund capital expenditures with internally generated cash and to generate free cash flow this year and beyond. Analysts polled by Thomson Reuters are expecting the company to report third-quarter earnings of 19 cents a share and sales of 1.9 billion. Popular brand companies like Kraft Foods
, which also reports on Tuesday, face similar difficulties in the current environment since shoppers often seek out store labels when searching for bargains. In response, Kraft said it would use cost savings to strengthen its key brand products. The Northfield, Ill.-based company is behind major labels like Oreo, Ritz and Jell-O.
According to Barclays analyst Andrew Lazar, promotional spending appeared to have paid off with improved volume and market share compared with the previous two quarters. “We estimate that, if current heightened promotional levels persist, Kraft would only offset about half of the potential margin favorability it faces from lapping higher year-over-year costs,” Lazer said. Companies with a strong presence in the dairy case-like Kraft and Dean Foods
-are expected to have an especially robust second quarter, according to UBS analyst David Palmer, who said dairy prices have been near historic levels. He warned that margin gains will likely peak in the second quarter and could substantially increase in the early part of next year. Palmer raised second-quarter estimates for both companies on Monday in anticipation of “significant gross margin gains.”Kraft is reporting second-quarter earnings on Tuesday, and analysts polled by Thomson Reuters are expecting profit of 54 cents on sales of 10.4 billion. Investors will be looking to see whether the company upholds year-end earnings guidance for 1.88 a share.Dean Foods, which reports second-quarter earnings on Wednesday, is anticipated to post a profit of 42 cents a share on sales of 2.8 billion. Lower diesel prices are expected to be another boon for the company, which uses the fuel for its refrigerated distribution system, Palmer said.Oilseed and grain processor Archer Daniels Midland
also reports fourth-quarter results on Tuesday. The company has suffered weak demand for its products in its previous quarter and although other oilseed processing and agribusiness companies like Bunge
and Corn Products International
recently reported estimate-beating profits, oilseed product volumes remain low. Analysts anticipate fourth-quarter earnings of 45 cents a share and sales of 15.2 billion.

Big Oil Slick – US-FOREX.US

Forex-Publisher — Fri, 31 Jul 2009 13:46:04 +0000

Taking stock can sometimes lead to taking profit, especially for the oil industry. Total and Eni were the last of the big European majors to report quarterly earnings on Friday-with the exception of StatoilHydro-and the industry-wide pattern of slumping profits, falling production levels and crumbling refining margins were all on display. After a week of similarly lackluster results, investors headed for the exit.Oil and gas stocks were down 3% across Europe on Friday afternoon, and Eni
led the sector downwards with a share-price drop of 6.3%, to 16.58 euros , in Milan, after the company cut its dividend. Total
was down 2.9%, to 38.85 euros , in Paris, while Royal Dutch Shell
and BP
-which both reported results earlier this week-were down around 1% in London.The near-50% drop in oil prices over the year has led to similar falls in profit for big oil companies, as they struggle with a weaker demand environment and less profitable refining operations. Eni and Total’s earnings announcements still disappointed expectations, though: Italy’s Eni reported a 75.8% drop in profits, to 830 million euros , while Total’s profits were halved over the year, to 2.2 billion euros .”The refining segment of Total was very weak,” said Gudmund Halle Isfeldt, an analyst with DnB Nor. Operating income from Total’s refining, or “downstream,” operations came in 73% lower over the year, to 156 million euros . Total’s overall earnings before interest and tax of 2.9 billion euros came in some 8% below consensus forecasts.BP, Royal Dutch Shell and ExxonMobil
have all reported profit falls of 50%-70% this week. The atmosphere for the industry now is one of caution and cost-cutting as commodity demand remains weak. BP proved its mettle earlier in the week by raising its savings target for the year to 3 billion, from 2 billion, while Shell Chief Executive Peter Voser said more jobs were expected to go to help turn the company into a more efficient enterprise.
This has led to fears that the majors will have to squeeze dividend payouts. Eni announced a cut to its six-month dividend to 50 euro cents , from 65 euro cents , on Friday. Total said it was fully focused on cost-cutting efforts on Friday, but kept its dividend steady.

Shell CEOs Baptism Of Fire – US-FOREX.US

Forex-Publisher — Thu, 30 Jul 2009 09:46:00 +0000

It’s not easy taking the helm of a company in the midst of an industry slump, but that’s exactly what Peter Voser did a month ago at Royal Dutch Shell. And now the pressure is on for him to expand his cost-cutting drive, after the oil major announced a 70% drop in second-quarter profits on Thursday and said that demand remained “weak.” Shell is one month into Voser’s program, called “Transition 2009,” which has already claimed the scalp of 20% of senior management positions. The new CEO said on Thursday that this would be only the beginning, adding that “substantial” staff reductions were likely to follow. “We are not banking on a quick recovery,” said Voser. “We must do more.”More is clearly what investors will be pushing for. Shell said it had reduced operating costs by 700 million in the first six months of 2009, and is aiming to cut 2010 capital expenditure by over 10%, excluding currency volatility and one-offs. But rival BP
has already achieved an impressive 2 billion in cost savings for the first six months, and promised earlier this week an extra 1 billion in cuts for the rest of the year. Shares of Royal Dutch Shell
ticked up 0.1%, or 2 pence , to 15.90 pounds , during morning trading in London. BP was up 0.7%, while Total
was trading flat in Paris.”The new CEO means Shell will have a new momentum,” said Gudmund Halle Isfeldt, an analyst with DnB Nor, who rates the company a top pick along with BP and StatoilHydro. “There’s potential upside for an investor.”Shell said on Thursday that its second-quarter earnings, on a current cost of supplies basis, had fallen 70%, to 2.3 billion. This was mostly due to the drop in oil prices over the year, down some 50%, but Shell was also hurt by weak natural gas prices, weak refining margins and militant attacks on its operations in Nigeria. Shell’s production levels fell to 2.96 million barrels per day, whereas DnB Nor’s Isfeldt had expected 3.1 million.
But there was some good news at Shell’s marketing and trading division, which reported higher earnings from natural gas and power over the year. “It seems to be that basically the business-to-business trade, within marketing, was quite resilient,” said Isfeldt.

Exxon Chevron Next Up – US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 21:45:59 +0000

Steep second-quarter profit declines aren’t over yet for the oil sector as Exxon Mobil reports second-quarter results on Thursday and Chevron releases its second-quarter report on Friday. By now the market is well-versed in the difficult year-over-year comparisons plaguing oil companies so far. During 2008′s second quarter crude oil traded at 125 a barrel, about twice this year’s prices. Refining margins have been hampered by high gasoline inventory levels and weak fuel prices. On Wednesday, integrated oil company Hess
posted an 89% second-quarter profit pitfall and ConocoPhillips
reported a 76% drop in second-quarter earnings on the heels of the 53% earnings slump posted on Tuesday by BP
. Despite deteriorated profits, results have largely met analysts’ lowered expectations for the sector.Analysts polled by Thomson Reuters expect Exxon Mobil
to report a second-quarter profit of 1.02 a share on sales of 71.3 billion on Thursday and Chevron
is projected to post earnings of 95 cents a share on sales of 33.4 billion. Ahead of the releases, both companies assured investors that dividends would remain intact with Chevron boosting its quarterly payout by 4.6% to 68 cents a share. Exxon retained its 42-cent quarterly dividend.Investors will be looking to see how the companies are using capital during the period of weak commodity prices.Shares across the oil sector closed Wednesday’s trading session lower as the U.S. energy department reported an unexpected increase in crude stocks, which rose 5.2 million barrels to 347.8 million barrels in the week ended July 24. Crude oil lost 3.88, or 5.8%, to settle Wednesday’s session at 63.35 a barrel. The Energy Select Sector
exchange-traded fund shed 1.17, or 2.3%, to close at 49.44. Exxon’s stock finished down by 1.54, or 2.1%, at 70.35 and Chevron closed Wednesday’s trading session 1.76 lower, or 2.6%, at 66.58.
Thomson Reuters contributed to this article.

Big Oil Aint What It Used To Be – US-FOREX.US

Forex-Publisher — Tue, 28 Jul 2009 09:46:03 +0000

A year ago, the world’s major oil companies were at the peak of a commodities boom-fueled by volatility in other areas of the financial marketplace-that had pushed up the price of black gold to nearly 150 per barrel. The recession put paid to that particular bubble, and on Tuesday BP revealed its second-quarter profits had halved over the year, to 3.1 billion, more or less in line with the 50% decline in oil prices over the year.Strangely enough, it wasn’t all doom and gloom in the earnings report, which actually came in ahead of estimates. Reported quarterly production was 4% higher than last year, at 4 million barrels a day, mostly helped by gas; the company said it had achieved its target of 2 billion in cost cuts by mid-2009; and it also maintained its dividend at 14 cents per share.But even BP
boss Tony Hayward was in a bearish mood, saying the firm saw “little evidence” of any demand growth in the near future. “[We] expect the recovery to be long and drawn out,” he said.Shares of BP slumped 1.6%, to 510.95 pence , during morning trading in London, while rival Royal Dutch Shell
ticked up 0.2% and Total
slipped 0.6%. The industry is in cost-cutting mode as it attempts to cope with the economic downturn: The International Energy Agency predicts global demand for oil will drop 2.9% this year, to 83.3 million barrels per day.DnB Nor analyst Gudmund Halle Isfeldt said BP had delivered a “straightforward set of numbers,” and recommended the stock as his top sector pick along with Royal Dutch Shell and StatoilHydro. Although Isfeldt said BP had suffered slightly in the quarter from a weak American gas market, he added the company’s increased cost-cutting guidance and decent refining margins made it “ahead of the curve” relative to competitors.BP was also positively singled out by Deutsche Bank analyst Lucas Herrmann earlier this month, though he listed weak demand, faltering gas markets, “collapsed” refining margins and feeble petrochemical profits as the drivers behind an expected 66% quarterly earnings drop for the industry.

Valero Energy Holds Up Amid Widespread Weakness – US-FOREX.US

Forex-Publisher — Mon, 27 Jul 2009 21:48:45 +0000

High gasoline inventory levels and pricing pressures have been hitting refiners during the second quarter as the market will see when Valero Energy reports results on Tuesday. “While gasoline cracks mostly improved quarter-over-quarter, very depressed distillate cracks and lower crude differentials have taken a heavy toll on refining profitability: almost all refiners are expected to lose money in 2009′s second quarter,” said Credit Suisse analyst Mark Flannery. “Benchmark refining margins so far in 2009′s third quarter have failed to show improvement over second-quarter levels,” Flannery said, adding, “At this rate, third-quarter earnings may turn out to be worse than second-quarter numbers.”Analysts polled by Thomson Reuters are expecting Valero Energy
to report a second-quarter loss of 50 cents a share on sales of 15.2 billion. The estimated loss is in line with the company’s own projection, provided in early June. Valero said second-quarter results were negatively affected by weak sour crude oil discounts, declining diesel margins and extended downtime at two of its refineries. The company also said that it planned to invest 2 billion in growth investments in 2009. Investors will be eager to hear management’s comments regarding the outlook for the industry as well as for the company. JPMorgan analyst Michael LaMotte holds a neutral rating on Valero because relative to other companies in its peer group, the risk of low demand is balanced by a solid financial position.”As a stock investment, Valero’s geographic diversity and the number of refineries in its system also reduce investors’ exposure to event risk,” LaMotte said in a note to clients last month.
Valero shares closed Monday’s trading session up by 46 cents, or 2.5%, at 18.77. Larger competitor ExxonMobil
reports earnings on Thursday and Chevron
reports Friday. Results from those super-majors will offer clues as to global demand expectations and about production capabilities in Western Africa. Oil trading on the NYMEX for delivery in February 2010 is 73.75 a barrel suggesting that commodities traders believe there will be a pickup in demand but only moderately so.