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Caterpillar fourth-quarter results take a hit, but outlook above estimates

CHICAGO Caterpillar Inc (CAT.N) on Thursday reported results that showed a continued slump across most of its businesses, but forecast earnings above estimates for 2016, sending shares up nearly 3 percent.

The world’s largest construction and mining equipment maker has been restructuring aggressively to cut costs because of slower growth in markets including China and Brazil and plunging commodity prices that have hurt customer demand.

The company warned that 2016 would be another grim year, but said its focus on costs was paying off.

“Cost management, restructuring actions … are helping the company while sales and revenues remain under pressure from weak commodity prices and slowing economic growth in developing countries,” Chief Executive Doug Oberhelman said. “We are benefiting now and expect to even more in the future when markets rebound.”

The Peoria, Illinois-based company said its outlook for 2016 “does not anticipate improvement in world economic growth or commodity prices.”

Caterpillar sees 2016 revenue within a range of $40 billion to $44 billion. The midpoint of that range, $42 billion, is around $3.5 billion below its forecast in October.

Caterpillar expects full-year 2016 earnings of $4.00 per share, excluding restructuring costs, compared with the average estimate of $3.48 per share, according to Thomson Reuters I/B/E/S. Including restructuring costs, Caterpillar said it expects 2016 EPS of $3.50.

Full-year earnings per share in 2015 were $4.64.

Morningstar analyst Kwame Webb said he thought the company’s earnings estimates were too optimistic given the poor construction outlook in China and Brazil. Caterpillar said it expected its construction revenue would be down 5 to 10 percent this year.

“Caterpillar will see downward pressure due to construction and they will probably have to get a little more conservative,” Webb said. “This remains a company in a very tough position.”

Caterpillar said in September it would cut as many as 10,000 jobs through 2018.

The company said on Thursday that 2015 restructuring costs were higher than expected at $908 million. Caterpillar anticipates further restructuring costs of about $400 million in 2016.

Total sales and revenue fell to $11.03 billion in the fourth quarter, from $14.24 billion a year earlier.

Caterpillar reported a quarterly loss of $87 million, or 15 cents per share, compared with a profit of $757 million, or $1.23 per share, a year earlier.

Excluding restructuring costs, Caterpillar earned 74 cents per share, compared with the average analyst estimate of 69 cents.

Caterpillar shares were up 2.5 percent at $59.78.

(Additional reporting by Ankit Ajmera in Bengaluru; Editing by Jeffrey Benkoe and Matthew Lewis)

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Johnson Controls revenue misses as automotive unit sales tumble

U.S. auto parts maker Johnson Controls Inc (JCI.N) reported lower-than-expected first-quarter revenue, largely because of lower sales in its automotive seating and interiors business.

Revenue fell to $8.93 billion in the quarter through Dec. 31 from $9.62 billion a year ago, missing analysts’ forecasts for $9.29 billion. Net income dropped to $490 million, down 5 percent from a year earlier.

Excluding items, the company earned 82 cents a share, as analysts expected.

The company said it expects a second-quarter profit of 80-83 cents a share and full-year profit of $3.70-$3.90.

Sales in its automotive unit, which makes car seats and interiors for companies such as Toyota Motor Corp (7203.T) and General Motors Co (GM.N), fell 19.9 percent to $4.23 billion in the first quarter, from a year earlier.

The automotive unit accounted for 47 percent of the company’s sales in the quarter, compared with 55 percent a year ago.

Johnson Controls, which agreed to buy Ireland-based Tyco International Plc (TYC.N) on Monday, has been preparing to spin off its automotive seating and interiors operations, and refocus on buildings, fire security and batteries.

The company said the spinoff of the automotive business – named Adient – was on track for October 2016.

The automotive unit revenue fell primarily due to “the deconsolidation of the interiors business,” including the formation of an interiors joint venture in July 2015 with China’s Yanfeng Automotive Trim Systems, the company said.

Net income attributable to Johnson Controls fell to $450 million, or 69 cents per share, in the quarter ended Dec. 31, from $507 million, or 76 cents per share.

Shares were down slightly in premarket trading at $35.13.

(Reporting by Radhika Rukmangadhan in Bengaluru and Paul Lienert in Detroit; Editing by Bernadette Baum)

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Deutsche Bank scraps board bonuses after record loss

FRANKFURT Deutsche Bank (DBKGn.DE) scrapped board bonuses this year after posting a record loss for 2015 on Thursday, with Chief Executive John Cryan urging investors to be patient with his revamp of Germany’s largest lender.

“We all know that restructuring can be very challenging. It takes time, resolve and patience,” Cryan said, as Deutsche reported fourth-quarter earnings. They included a 1.2 billion euro ($1.30 bln) loss in its investment bank, hit by legal costs and weak bond trading.

Cryan acknowledged that the bank had lost ground in equities and pledged to invest in its research and sales units to recover market share.

The bank’s supervisory board had decided Wednesday that the executive board will not receive any bonus for 2015, he said.

Deutsche Bank shares hit a seven-year low after the lender flagged the loss last week, adding to a near 40 percent drop in the share price since Cryan took the helm in July.

“The further writeoffs announced raise the issue of capital again,” the head of European equities at a fund firm which sold out of Deutsche Bank shares in late 2015 said, without wishing to be identified.

Cryan stressed that at this stage, Deutsche Bank is not planning to increase its capital.

Restructuring was hurting employee morale, he said, but he was confident that sticking to the bank’s strategy would deliver results.

“We can and will transform Deutsche Bank into a stronger, more efficient and better-run institution,” he told the bank’s annual press conference. “It does not happen overnight.”

Restructuring and severance charges will reach about 1 billion euros in 2016 and litigation costs will stay high, albeit below the 5.2 billion euros it spent in 2015, the bank said. Savings would help keep adjusted costs flat and no further writedowns are to be expected, it said.

Like other investment banks, Deutsche Bank struggled with near-zero interest rates, a slump in oil prices and investor caution due to worries about slowing growth in China, but analysts have said Deutsche’s revenue performance appeared weaker than that of its U.S. peers.

Deutsche Bank’s final results showed a full-year loss of 6.8 billion euros and a fourth-quarter loss of 2.1 billion euros, mainly due to writedowns, litigation charges and restructuring costs.

By contrast, lower costs helped peers such as Citi (C.N), Bank of America (BAC.N), JPMorgan (JPM.N) and Morgan Stanley (MS.N) report higher fourth-quarter profits.

“It’s hard to stand up and smile a lot,” Cryan said. “Not every day is easy but we can see light at the end of the tunnel.”

In the fourth quarter, revenue at the investment bank fell by 30 percent, with equities trading as well as advisory activities contributing to the slowdown.

“I recognize that in the fourth quarter we lost some momentum in sales and trading,” Cryan said.

“I am not so concerned about debt sales and trading where we are choosing to exit some capital intensive businesses,” he said, but added: “We do believe we have lost some ground in equities.”

Deutsche’s retail banking activities fell to a quarterly loss, mainly on restructuring costs.


Deutsche shares were down 2.5 percent at 1101 GMT, underperforming a 0.8 percent drop in Germany’s blue-chip index .GDAXI.

In October, the bank announced a restructuring of its business, splitting its investment bank in two and parting ways with some of its top bankers.

The bank’s staff are bracing for pay cuts as bonus pots for individual divisions are being cut by at least 25 to 30 percent, people familiar with the matter said this week.

While Deutsche has pulled back from a number of countries, the lender remains committed to grow its business in Asia, co-CEO Juergen Fitschen said, adding that revenues grew by 14 percent in the region last year, while earnings tripled over the last three years.

On taking the helm on July 1, Cryan promised simultaneously to overhaul Deutsche to meet tighter banking rules and to end costly litigation from past scandals.

(Additional reporting by Simon Jessop; Editing by Maria Sheahan and Susan Fenton)

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China shares lower, but ‘real economy’ sound says state media

SHANGHAI China’s volatile shares were lower again on Thursday, taking losses this month to about 23 percent or 12 trillion yuan ($1.8 trillion), while state media insisted that the market ructions did not reflect the real economy.

The benchmark Shanghai Composite Index .SSEC was down 1 percent in afternoon trade, and the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen was down 0.8 percent, both indexes having tumbled this week to levels not seen since December 2014.

Trading was very light, as many investors have given up on Chinese stocks, burnt by last summer’s 40 percent crash and a hair-raising January that has taken indexes back to late 2014 levels.

“The majority of equity investors we met over a four-day marketing trip in ASEAN last week had trimmed exposure to China equities by varying degrees and were waiting for signs of stabilisation for potential re-entry,” said Japanese broker Nomura.

January began with sharp falls in Chinese stocks and a depreciation in the yuan currency, and the sell-off hasn’t abated as economic data confirmed slowing growth and deteriorating business conditions.

As the market falls, the prospect of investors being forced to sell stocks bought with borrowed money to cover margin calls has hurt sentiment further.

China’s woes have damaged risk appetite across the world’s financial markets, along with tumbling oil prices, and are complicating the policy calculations of leading central banks.

The U.S. Federal Reserve left interest rates unchanged late on Wednesday and said it was keeping a wary eye on global markets and their impact on the labour market and inflation, but didn’t signal it was ready to abandon its plan to tighten monetary policy this year.

It raised interest rates in December for the first time in almost a decade, and the prospect of more hikes has given the People’s Bank of China (PBOC) an unenviable task of finding a level for the yuan that slows capital outflows without punishing the country’s struggling exporters.

An editorial on Thursday in the People’s Daily, the official mouthpiece of China’s Communist Party, laid in to “groundless fears” about the economy, which it said was still propelling global growth, and enjoying rising foreign investment, moderate inflation and prudent monetary policy.

Market volatility, it said, was not a reflection of the economy but rather showed that the market, regulatory environment and investors still needed to mature.


Nomura said equity investors’ top concern was the possibility of a one-off 10-15 percent devaluation of the yuan, though the PBOC has kept the currency’s daily midpoint fixing CNY=SAEC little changed since spooking the markets with a sharply weaker fix in early January.

That was the second time in six months that the bank allowed a sharp slide in the currency, which has depreciated more than 5 percent over the past year, only to step in aggressively to stabilise it and deter speculation.

Spot yuan CNY=CFXS was at 6.5779 on Thursday, having hardly budged from Wednesday’s close, while offshore it had firmed a little to 6.6133, a 0.5 percent discount to the onshore rate.

State media have warned investors including billionaire George Soros, dubbed “the man who broke the bank of England” for betting against sterling in 1992, not to speculate against the currency.

The central bank has been making plenty of liquidity available to the banking system to avoid any cash squeeze ahead of long Lunar New Year celebrations beginning in early February.

But those funds are largely short term, and the big injections may have dashed some investors’ hopes that the PBOC would cut banks’ reserve requirements (RRR) soon to free up more money for longer-term lending which could boost economic activity.

The decline in the yuan and concerns about growth have fuelled a flight of capital out of the world’s second-largest economy which policymakers are struggling to contain.

(Writing by Will Waterman; Editing by Shri Navaratnam)

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Oil falls back after jumping on hopes of Russia, OPEC cooperation

SEOUL Crude oil futures fell around 1 percent in Asian trading on Thursday, eroding gains of nearly 3 percent made in the previous session after Russia held out the possibility of cooperating with OPEC to control global oversupply.

But falls were curbed by a weaker dollar following the Federal Reserve’s decision to keep its overnight interest rate unchanged and the release of a statement suggesting concern about global events had diminished but not squashed chances of a rate hike in March.

Saudi Arabia’s deputy minister for company affairs at the Ministry of Petroleum and Mineral Resources said on Thursday in Tokyo that OPEC estimates global oversupply to be around 2 million barrels per day (bpd).

“So it will take some time for the market to rebalance,” said Aabed A. Al-Saadoun. But he added that “we feel that the market will begin to come into balance in 2016 and that demand for energy in all forms will continue to increase”.

Brent crude had eased 30 cents to $32.80 a barrel by 0455 GMT, after ending up 4.1 percent at $33.10.

U.S. crude declined 39 cents to $31.91 a barrel. It settled the previous session up 85 cents at $32.30, a 2.7 percent gain.

Russian officials have decided they should talk to Saudi Arabia and other OPEC countries about output cuts to bolster oil prices, the head of Russia’s pipeline monopoly said on Wednesday.

The Energy Information Administration said on Wednesday that U.S. crude inventories climbed by 8.4 million barrels last week, higher than analyst expectations for a rise of 3.3 million barrels. That brought crude inventories to the highest level since the EIA began tracking the data.

But crude stocks at the Cushing, Oklahoma, delivery hub fell by 771,000 barrels, which supported oil prices. [EIA/S]

“Overall inventories rose by 8.38 million barrels. This helped to narrow the spread between Brent and WTI overnight,” ANZ said in a note on Thursday.

Daniel Ang at Phillip Futures said: “We remain slightly skeptical of further increases with the current weak fundamentals. We believe that the slight weakening of the U.S. dollar could be giving the extra push to break the current resistance for WTI and Brent, however, that should not last for long.”

On the outlook for the global upstream sector this year, Wood Mackenzie said in a report: “As companies re-shape their portfolios for the lower oil price environment, exploration spend will be hit hard, to less than half of the 2014 peak.”

Wall Street stocks and the dollar fell on Wednesday after the Fed left rates unchanged. [MKTS/GLOB]

(Reporting by Meeyoung Cho; Additional reporting by Osamu Tsukimori in TOKYO and Henning Gloystein in SINGAPORE; Editing by Joseph Radford and Subhranshu Sahu)

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Samsung Elec warns of difficult 2016 as smartphone troubles spread

SEOUL Tech giant Samsung Electronics Co Ltd (005930.KS) on Thursday warned of possible weaker earnings this year due to softer sales of gadgets such as smartphones, a trend that is also hurting rival Apple Inc (AAPL.O) and major chipmakers.

The South Korean firm’s warning came a day after Apple shares fell more than 6.5 percent, the biggest percentage drop in two years, as the iPhone maker forecast its first quarterly sales drop in 13 years.

Slowing economic growth in China and weaker emerging market currencies are undercutting sales of electronics ranging from televisions to personal computers, spelling trouble for not only for Samsung and Apple but for their suppliers and the broader industry.

“Broadly weaker IT demand will make it difficult to maintain 2016 profits at the level of the previous year’s,” Samsung said in a statement accompanying its fourth-quarter results, adding that “challenging business conditions” would remain for the current quarter and last throughout the first half of this year.

Samsung said its October-December operating profit was 6.1 trillion won ($5.05 billion), matching its earlier guidance. Revenue rose 1.1 percent to 53.3 trillion won, slightly better than the 53 trillion won it guided for.

The maker of Galaxy smartphones and tablets reported a full-year operating profit for 2015 of 26.4 trillion won, compared with 25 trillion won the previous year.

Samsung shares were down 2.4 percent as of 0322 GMT, underperforming a 0.2 percent rise for the broader market .KS11.

Some investors and analysts believe Samsung will see its profit fall for the second time in three years in 2016, as slack demand for gadgets undercuts prices of memory chips and displays that helped to offset declining mobile profits last year.

The semiconductor division was the top earner for the sixth straight quarter in the October-December period, lifting its operating profit to 2.80 trillion won from 2.70 trillion won a year earlier.

Mobile division profit slipped 7.3 percent from the third quarter to 2.23 trillion won, its weakest result in four quarters. Samsung said first-quarter mobile profits would improve slightly, boosted by the launch of new smartphones, although overall smartphone shipments were expected to decline slightly.

Separately, Samsung said it planned to buy back and cancel 2.99 trillion won worth of common and preferred shares, marking the second round of share purchases as part of a 11.3 trillion buyback plan announced late last year.

The firm would also pay a year-end dividend of 20,000 won per share.

(Reporting by Se Young Lee; Editing by Stephen Coates)

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Samsung C&T books $2.15 billion potential losses on 2015 results

SEOUL Samsung CT Corp (028260.KS) said on Thursday it booked 2.6 trillion won (1.50 billion pounds) in potential losses in its 2015 earnings results, from projects such as its construction work in Australia’s Roy Hill iron ore mine.

Samsung Group’s de facto holding company said it booked about 850 billion won in estimated losses and contingent liabilities for the Roy Hill project.

(Reporting by Joyce Lee; Editing by Stephen Coates)

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Asia stocks find support, oil still unstable

SYDNEY Asian shares pushed back into the black on Thursday as investors dipped their toes back into equities and demand for safehaven assets such as the yen and sovereign bonds faded.

A bounce in oil prices offered some salve to strained nerves. While Brent crude LCOc1 was off 23 cents at $32.87 a barrel, this followed a 4 percent jump on Wednesday after Russia hinted at co-operation with OPEC on oversupply. [O/R]

U.S. crude eased back 21 cents CLc1 to $32.09.

After starting weaker, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS swung 0.4 percent firmer in very choppy trade.

Likewise, Japan’s Nikkei .N225 turned 0.3 percent higher having been down more than 1 percent at one stage. Shanghai’s Composite Index .SSEC was just a whisker lower.

The initial losses followed a poor finish on Wall Street, though dealers noted E-Mini futures for the SP 500 ESc1 had since rebounded by 0.65 percent.

The Dow .DJI had ended Wednesday with losses of 1.38 percent, while the SP 500 .SPX fell 1.09 percent and the Nasdaq .IXIC shed 2.18 percent.

Apple’s (AAPL.O) shares fell 6.57 percent after the iPhone maker reported its slowest-ever rise in shipments, while Boeing (BA.N) lost 8.9 percent in its biggest fall since August 2011.

The blame for Wall Street’s fall was laid at the door of the Federal Reserve, with investors apparently frustrated the central bank was not concerned enough about the global outlook to scale back its plans for policy tightening.

Rather, the Fed left all options open, including a hike at the next meeting in March.

“We have no doubt that the market was looking for a ‘Fed put’ via some commentary about the committee growing increasingly nervous about financial markets and the global backdrop,” wrote Tom Porcelli, chief U.S. economist at RBCCM.

“Instead, the Fed chose the pragmatic route.”

The reaction to the Fed in currency markets was much more muted. The dollar gained on the safe-haven yen to 118.88 JPY=, while the euro was sidelined at $1.0883 EUR=.

Against a basket of currencies, the dollar .DXY edged up 0.12 percent.

The New Zealand dollar fell more than half a U.S. cent after the Reserve Bank of New Zealand said low inflation meant further policy easing may now be required, having previously flagged that it would not cut rates further.

The kiwi dollar fell to $0.6428 NZD=D4, from around $0.6480.

There is little in the way of market-moving economic data out of Asia. In Europe, Britain’s fourth-quarter growth data looms large for the embattled pound.

Annual economic growth is expected to have slowed to 1.9 percent, from 2.1 percent, an outcome that could push expectations for a hike in interest rates even further out. Markets are currently pricing in a rate hike in 2017. ECONGB

Sterling was last at $1.4256 GBP=D4, having retreated from this week’s high of $1.4367.

(Reporting by Wayne Cole; Editing by Shri Navaratnam and Sam Holmes)

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EBay’s disappointing forecast fuels stock decline

EBay Inc forecast weaker-than-expected revenue and profit for the current quarter and full year, as the e-commerce company struggles against a strong dollar while trying to revamp its core marketplace business.

Shares of the retailer fell more than 12 percent to $23.51 in extended trading on Wednesday.

The online retailer, which faces intense competition from e-commerce giant Inc, has also been hit by brick-and-mortar rivals like Wal-Mart Stores Inc that are aggressively boosting their online presence.

The company said its gross merchandise value, or the total value of all goods sold on its site, rose 5 percent after accounting for foreign exchange impact.

Under its new chief executive Devin Wenig, eBay has returned to its roots, refocusing on unique inventory and smaller sellers.

“I want to grow our metrics faster but I am very pleased with where we are,” said Wenig in an interview with Reuters.

The company forecast full-year adjusted profit of $1.82-$1.87 per share and revenue of $8.5 billion-$8.8 billion.

That was lower than analysts’ average expectation of $1.98 per share in profit and $8.99 billion in revenue, according to Thomson Reuters I/B/E/S. In 2015, it reported $8.6 billion in revenue.

Its forecast for first-quarter adjusted profit of 43-45 cents per share and revenue of $2.05 billion-$2.10 billion also missed analysts’ average estimates.

In its second quarter without PayPal, eBay’s revenue was $2.32 billion in the fourth quarter ended Dec. 31, flat with a year earlier during the crucial holiday shopping season and in line with analysts’ average expectations.

Online sales in the United States jumped 9 percent to $105 billion in the November-December holiday period, according to the National Retail Federation.

“While not a direct competitor in every respect, the growth of (Amazon’s) successful Prime service has locked more customers into using its services and sites in a way that is unhelpful to eBay,” said Carter Harrison, a retail analyst at research firm Conlumino.

EBay began testing a paid shipping membership program in Germany last year, responding to shoppers’ increased demand for faster delivery.

Wenig on Wednesday said there were “no plans for now” to expand the program.

EBay derives nearly 60 percent of its revenue from overseas and faces headwinds from a strong dollar.

Excluding the effects of currency changes, eBay’s revenue grew 5 percent in the quarter.

The company’s net income fell to $477 million, or 39 cents per share, from $1.02 billion, or 82 cents per share.

(Reporting by Sai Sachin R in Bengaluru and Mari Saito in San Francisco; Editing by Savio D’Souza, Stephen R. Trousdale and Bernard Orr)

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