News Archive

Siemens infrastructure unit revamp not a priority: CEO

Thu Oct 31, 2013 12:42pm EDT

FRANKFURT (Reuters) – German industrial conglomerate Siemens (SIEGn.DE) has no plan for now to dismantle its Infrastructure Cities division, its new chief executive said in a company newsletter, brushing off a recent press report.

“I have already made it clear, numerous times, that changing the IC Sector structure is not a priority for me,” Joe Kaeser said in a newsletter distributed on Thursday.

Germany’s Manager Magazin reported earlier this month that Siemens planned to dismantle Infrastructure Cities and was reviewing other activities.

The division was set up by Kaeser’s predecessor Peter Loescher in 2011, grouping businesses making products ranging from security systems to high-speed trains and power distribution systems.

It generates annual revenue of about 17.6 billion euros ($24.2 billion) but has been dogged by weak profitability.

“We don’t want to, and we won’t, simply give up on businesses just because they are not performing well. We ourselves have to get things in order again,” Kaeser said in the newsletter.

“And where it doesn’t make sense for reasons of prioritization, we cannot wait so long that we destroy value and that all involved must suffer through long lean periods.”

Kaeser, a 33-year company veteran, was named as CEO at the end of July after Siemens dumped Loescher four years before the end of his contract following a series of profit warnings.

Kaeser now faces the task of overseeing a massive 6 billion euro savings program launched by Loescher in an attempt to close a gap with more profitable rivals such as Switzerland’s ABB (ABBN.VX) and U.S.-based General Electric (GE.N).

($1 = 0.7262 euros)

(Reporting by Maria Sheahan; editing by Peter Dinkloh and Tom Pfeiffer)

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Exxon’s output rises but refining weakness hits profit

Thu Oct 31, 2013 12:31pm EDT

(Reuters) – Exxon Mobil Corp (XOM.N), the world’s largest publicly traded oil company, reported higher-than-expected quarterly results on Thursday as output rose for the first time in more than two years, but refining weakness hurt earnings.

Exxon and other large oil companies struggling to boost production in recent years have spent heavily on new projects. In the first nine months of this year, Exxon alone spent $33 billion.

“This is their first year-over-year (production) increase in more than two years,” said Brian Youngberg, an energy company analyst at Edward Jones in St. Louis. “It does show that they are hopefully making some progress stemming the decline that they’ve shown the last couple of years.”

Exxon last reported a quarterly gain in production in the second quarter of 2011.

Third-quarter oil and natural gas output rose 1.5 percent from a year earlier to 4 million barrels oil equivalent per day, helped by the start-up of new projects, the Irving, Texas, company said.

Natural gas from Australia’s Kipper Tuna Turrum project and accelerated output from projects in Nigeria and Canada also contributed to the higher production.

Profit in the third quarter was $7.87 billion, or $1.79 per share, compared with $9.57 billion, or $2.09 per share, a year earlier.

Analysts on average had expected $1.77 per share, according to Thomson Reuters I/B/E/S.

“Weaker margins, mainly in refining, decreased earnings by $2.4 billion,” Exxon said in a statement.

Oil companies with refining units, such as Exxon and Royal Dutch Shell (RDSa.L), have seen profit hurt in the quarter as demand for fuels like gasoline and diesel waned and global refining capacity grew.

Exxon’s refining unit had a profit of $592 million in the latest quarter, down sharply from $3.2 billion a year earlier.

The company’s shares rose 1 percent to $89.68 in morning New York Stock Exchange trading.

(Reporting by Anna Driver; Editing by Gerald E. McCormick and John Wallace)

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Avocet refinances to buy back hedge

West Africa-focused gold miner Avocet Mining plc took out a US$63 million loan with Ecobank Burkina Faso to close a hedge book that has blighted earnings for the last year.

The loan, which had already been drawn down, was for five years at an interest rate of 8%/y and would result in the entire hedge position being bought back shortly, it said.

David Cather, chief executive of Avocet, said: “It has long been our goal to become an unhedged gold producer and negotiation of the Ecobank loan will enable us to achieve this target.”

The final hedge settlement is expected to total around US$47 million, equivalent to 111,980oz of gold, bought back at US$938/oz, Avocet said.

Avocet also announced a loss before tax of US$25.3 million in the September quarter, compared with a loss of US$20.9 million in the June quarter and a loss of US$323,000 in the same period a year ago.

The loss included the negative impact of accelerated hedge delivery and change in the mark-to-market of hedge position during the September quarter (in aggregate around US$14 million), Avocet said.

It produced 30,987oz at cash costs of US$1,195/oz from its Inata gold mine in Burkina Faso in the three month period, down slightly from 31,245oz at US$1,238/oz in the June quarter and 33,067oz in the same period a year earlier.

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Sirius fast-tracks exploration with A$83.5m fund raising

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Exclusive: China securitization plan expanded to include foreign banks

Thu Oct 31, 2013 4:48am EDT

HONG KONG (Reuters) – Chinese regulators have expanded a pilot plan allowing banks to package loans into tradable securities to include foreign banks, sources said.

Chinese policymakers see securitization as a tool to shift risk away from the banking system to reduce the chances of a financial crisis as economic growth slows and bad loans rise.

Securitization would also help satisfy voracious investor demand for alternatives to the chronically weak stock market and frothy property sector.

Chinese Premier Li Keqiang told a cabinet meeting in late August that China would aggressively expand the securitization of credit assets.

The central bank launched a pilot program in 2005 to allow banks to package loans into bond-like securities known as collateralized loan obligations (CLO), but growth has been slow.

The expansion will be limited to small-scale deals, two sources with direct knowledge of the plan said. Recent deals by domestic banks have ranged from 1-to-10 billion yuan ($164 million to $1.64 billion).

The expanded program is open to all of the 42 foreign banks with locally incorporated branches in China, a grouping that includes HSBC Holdings PLC (HSBA.L) (0005.HK), Standard Chartered PLC (STAN.L) and Citibank (C.N).

“Our company is preparing a plan for (securitizing) financial leasing (assets),” an executive at a foreign bank said. The sources declined to be identified because the expansion of the pilot program has not been officially announced.

Securitization is unlikely to significantly boost foreign bank profits in the near term, but their participation could held China’s broader securitization drive.

“If Standard Chartered or HSBC issued a CLO product, its underlying credit assets would probably come mainly from foreign firms, so the asset pool would be more transparent,” said a foreign bank executive who previously participated in early CLO deals at a Chinese bank.

Such products would likely be attractive to investors and would therefore serve as a model for domestic lenders to follow, the executive said.

However, foreign banks controlled 1.9 percent of total Chinese banking assets at the end of 2011, according to accounting firm PwC, indicating they have only a limited pool of loans available to create CLOs.

Market participants have previously said lack of transparency of underlying assets is a key barrier to faster growth of securitization in China. Investors are wary of buying assets if they lack the information necessary to assess risks.

That is critical given concerns that the banking system is struggling with an overhang of bad debt from the state-backed lending binge unleashed to help China weather the global financial crisis.

Market participants widely suspect the true scale of the bad debt problem is far larger than the official, system-wide non-performing loan ratio of under 1 percent.


About 90 billion yuan ($14.8 billion) of CLO products have been issued in China’s interbank market since 2005, according to Reuters calculations based on central bank statements.

That is a tiny fraction of the 70 trillion yuan in local currency loans outstanding at the end of September.

Securitization deals were halted during the financial crisis. The pilot resumed in 2011.

Under the expansion, regulators have asked foreign banks to submit preliminary plans for securitization, the sources said. Once they have received feedback on the preliminary plans, the banks can formally apply for permission to execute the deals.

Banks will be able to choose whether to issue the securitized assets into China’s interbank market, where more than 95 percent of all domestic bonds trade, or on the stock exchange, where a small minority of bonds also trade.

Securitization in China has also been hindered by the existence of three separate pilot programs, each controlled by different regulators.

In addition to the CLO program, the China Banking Regulatory Commission overseas an asset management pilot, while the National Association of Financial Market Institutional Investors, overseen by the central bank, is in charge of a program for asset-backed notes.

(Reporting by Zhao Hongmei; Additional reporting and writing by Gabriel Wildau; Editing by Neil Fullick)

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BOJ raises GDP forecast, holds line on inflation

Thu Oct 31, 2013 3:43am EDT

TOKYO (Reuters) – The Bank of Japan stopped short of officially forecasting it could raise inflation to 2 percent in two years after a review on Thursday, but said it was on track to reach its target and would maintain its massive stimulus as long as needed.

The central bank did revise up its economic growth forecast for the 2014 fiscal year beginning next April to 1.5 percent, judging the world’s third-largest economy could keep growing above its potential despite a sales tax increase next year.

As widely expected, the BOJ had earlier kept intact its intense monetary stimulus launched in April, under which it aims to double base money via asset purchases to meet its target of lifting inflation to 2 percent in roughly two years.

It decision came after the U.S. Federal Reserve maintained its own massive bond-buying program.

In its semi-annual outlook report, the BOJ kept its forecasts for core consumer inflation in fiscal 2014 and 2015 at 1.3 percent and 1.9 percent respectively, excluding the increase in the sales tax, a sign it is on track to meet its goal.

Even though it did not formally forecast inflation reaching 2 percent, economists worry the BOJ is expecting too much from government stimulus designed to offset the impact of the rise in the 5 percent sales tax rate to 8 percent next April.

Some in the BOJ are known to share the market’s doubts.

“The BOJ is being too optimistic given there will be a sales tax hike and could be forced to downgrade these numbers later,” said Takuji Aida, chief economist at Societe Generale Securities.

“The BOJ may have to ease policy again in the second quarter of next year, around the time of the tax hike.”


The economy expanded for a third straight quarter in April-June as Prime Minister Shinzo Abe’s stimulus policies boosted business sentiment and household spending.

Manufacturing activity grew at the fastest pace in more than three years and factory output grew at the fastest pace in almost four years in October, a survey showed, a sign of firm domestic demand ahead of the sales tax increase.

The BOJ revised up growth for the 2014 fiscal year to 1.5 percent from the current 1.3 percent, reflecting the expected boost to the economy from a 5 trillion yen ($51 billion) package planned by Abe to cushion the impact of the tax hike.

And it maintained its fiscal 2015 forecast for 1.5 percent growth.

But a slump in exports has cast doubt on the central bank’s view that global growth will pick up in time to offset an expected downturn in household spending when the tax rate rises.

Wage earners’ total cash earnings rose just 0.1 percent in the year to September, data showed on Thursday, reflecting the slow progress in achieving big increases in wages needed to end 15 years of deflation.

(Additional reporting by Stanley White and Tetsushi Kajimoto; Editing by John Mair)

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Total profit falls as European refining hurts

Thu Oct 31, 2013 3:26am EDT

PARIS (Reuters) – French oil company Total (TOTF.PA) reported a 19 percent drop in third-quarter adjusted net profits to 2.7 billion euros ($3.72 billion) on Thursday, hit by low refining margins in Europe and higher exploration costs.

The economic slowdown has hit European oil demand, leaving European refineries with overcapacity and with margins shrinking. Total said earlier this month margins had dropped to a near four-year low.

“Refining margins are extremely weak, we still have this endemic problem,” Chief Financial Officer Patrick de La Chevardiere told reporters on a conference call.

The French major, Europe’s second-largest oil company after Royal Dutch Shell (RDSa.L), said a $400 million rise in its exploration bill compared to the previous year had also weighed on profits.

The CFO said he expected oil and gas output to grow this year, depending on production at the Kashagan field in Kazakhstan. He declined to reiterate a previous goal for output growth of 2-3 percent for 2013.

The Paris-based group said production had reached 2.299 million barrels a day, while revenue dropped 6 percent from the same period a year ago to 46.7 billion euros.

The group said it would pay a quarterly dividend of 0.59 euros per shares, unchanged from the previous quarter.

Asked why the group did not raise its dividend this quarter, as its British rival BP (BP.L) did earlier this week, the CFO said: “It’s not because there are expectations that we have to dance to the market’s tune.”

“Nonetheless, we have good fundamentals and we have room to raise the dividend in the future,” he said.

Analysts on average expected adjusted net profit of 2.78 billion euros on revenue of 43.8 billion euros with a dividend of 0.51 euros per share, according to Thomson Reuters I/B/E/S.

(Reporting by Michel Rose; Editing by James Regan and Jane Merriman)

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Sony posts quarterly loss, cuts outlook as TVs slip back into red

Thu Oct 31, 2013 2:50am EDT

TOKYO (Reuters) – Sony Corp cut its full-year profit targets and posted a net loss for the September quarter as its struggling TV operation fell back into the red, highlighting the difficulties it faces restoring its electronic hardware operation to profit.

Sony posted a net loss of 19.3 billion yen ($196.65 million) for its second quarter. Its TV operation flipped from a 5.2 billion yen operating profit in the first quarter to a 9.3 billion yen loss.

Its operating profit forecast for the year to next March was cut to 170 billion yen from 230 billion yen, below the average of 221 billion yen expected by 22 analysts surveyed by Thomson Reuters I/B/E/S.

Sony also cut its full-year goal for TV sales, but Chief Financial Officer Masaru Kato said the company was sticking to its target of a full-year profit for its electronics division.

Japan’s consumer electronics makers including Panasonic Corp and Toshiba Corp have been hobbled by losses from their TV operations, hit by stiff competition from Asian rivals.

(Reporting by Sophie Knight; Editing by Edmund Klamann and Ryan Woo)

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Asia markets take glancing hit from Fed, BOJ softens blow

Thu Oct 31, 2013 2:37am EDT

SYDNEY (Reuters) – Asian markets suffered a glancing blow on Thursday after the U.S. Federal Reserve’s latest policy outlook was deemed less dovish than some had wagered on, lifting both bond yields and the dollar.

The damage was mostly superficial with MSCI’s index of Asia-Pacific shares outside Japan .MIAPJ0000PUS off just 0.6 percent. Shares in Shanghai lost 0.6 percent .SSEC, while Australian markets held steady .AXJO.

European stocks were also seen pulling back from five-year highs when they open on Thursday.

Financial spreadbetters expect Britain’s FTSE 100 .FTSE to open 14 to 22 points lower, or as much as 0.3 percent, Germany’s DAX .GDAXI to open 35 to 47 points lower, or as much as 0.5 percent, and France’s CAC 40 .FCHI to open 11 to 17 points lower, or as much as 0.4 percent.

In Asia, sentiment was helped by the Bank of Japan’s decision to stick with its massive stimulus program that has shown tentative signs of breaking the grip of deflation.

There was also upbeat news from Australia where approvals to build new homes surged to their highest since early 2010, concrete evidence that record-low interest rates were working to support economic growth.

These factors helped lessen the drag from Wall Street, which had slipped after the U.S. central bank kept its $85 billion-a-month stimulus plan intact but did not sound quite as alarmed about the state of the economy as some had anticipated.

Given U.S. shares had reached record highs this week, the resulting profit-taking came as no surprise.

The Dow Jones industrial average .DJI fell 0.39 percent and the SP 500 .SPX lost 0.49 percent. The MSCI world equity index .MIWD00000PUS showed even less damage, easing 0.3 percent from a high not seen since January 2008.

Dealers said the market had talked itself into expecting the Fed would make dovish changes to the statement, so it was somehow considered “hawkish” when those did not materialize.

“We interpreted the statement as neutral and balanced and think the Fed is essentially in a holding pattern,” said analysts at Australia and New Zealand Bank.

“If anything, the assessment section was a touch softer, suggesting the Fed are not trying to give the impression that it is setting up for a December move.”


Much of the market is still not pricing in a start of tapering until March, when the Fed policy meeting will include new economic forecasts from officials and a news conference by the Fed Chairman.

It was notable that Fed funds futures barely budged on the statement, showing investors still did not expect any increase in official rates until well into 2015.

Likewise, short-dated Treasury yields stayed well anchored while the longer end moved up only modestly. Yields on the 10-year note were steady at 2.53 percent, and far below the 3 percent peak hit in early September.

Currency moves were also moderate, with the U.S. dollar edging further away from recent lows. The dollar index .DXY edged fractionally higher on the day to 79.867.

The euro dipped to $1.3696, losing gains made Wednesday after data showed a jump in euro zone sentiment in October. The dollar fared better against the yen to reach 98.30, a move that failed to support Japanese stocks.

There was more action in the New Zealand dollar which bounced after the country’s central bank said increases in interest rates were still likely to be needed next year, putting it well ahead of most other developed economies in tightening.

The currency rallied as much as half a U.S. cent in reaction, though the central bank also noted that a strong currency meant it might be able to wait longer before having to raise rates.

In commodities, spot gold faded after rising the most in a week at one stage on Wednesday. Gold fetched $1,338.73 an ounce, down from a high of $1,359.16.

Brent crude eased 25 cents to $109.61 a barrel but that followed gains on Wednesday as export disruptions in Libya continued to cut supplies to Europe and Asia.

The benchmark U.S. contract was off 22 cents at $96.55 a barrel after a bigger-than-expected increase in inventories in the United States.

(Addtional reporting by Vidya Ranganathan; Editing by Eric Meijer)

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