European Earnings: Banks Slip, EADS Beats Forecasts
Banks dominated European earnings Wednesday, as France's BNP Paribas and the Netherlands' ING Group reported falls in first-quarter profit due to the ongoing market turmoil.
BNP Paribas reported a 21 percent drop in first-quarter net profit, although the figure came in above the consensus forecast.
Net profit fell to 1.981 billion euros ($3.06 billion).
Earnings at BNP Paribas' corporate and investment banking division sank 73 percent, with further writedowns coming because of the global credit crunch.
The drop in earnings in its investment banking business contrasted with higher profits at its retail banking operations.
BNP Paribas wrote down 514 million euros at its investment banking arm.
A Reuters poll of 20 analysts gave an average net profit forecast of 1.675 billion euros.
Gross operating profit fell 23 percent to 2.79 billion euros, below an average forecast of 2.89 billion.
ING said its quarterly net profit fell 19 percent, hit by a weaker U.S. dollar during the first three months of the year.
First-quarter net profit was 1.54 billion euros ($2.38 billion), compared with 1.89 billion euros a year earlier.
The average expectation of 12 analysts polled by Reuters was 1.66 billion euros.
ING said it booked 2.3 billion euros charge as a charge to shareholders equity related to its investments in residential mortgage-backed securities (RMBS) in subprime mortgages made to risky borrowers and "Alt-A" loans, made to borrowers with a slightly better credit profile, as well as from collateralized debt obligations (CDOs).
ING also took a charge of 55 million euros on such investments from profit.
Investment returns were also hit during the quarter, which also saw a 10 percent decline in the S&P 500.
It said lower real estate and private equity valuations, as well as weaker equity investments, accounted for a 436 million euros decline from the same quarter a year earlier.
On the banking side, underlying income was 1.4 billion euros, up from 1.38 billion euros a year earlier and compared with analysts' forecasts for 1.06 billion euros.
>> Click here for interview of ING CFO on Profit Decline
Another financial services company to report a profit drop was Dexia. The Beligian-French group said its first-quarter net profit fell 14.5 percent, below market expectations as it was hit by U.S. mortgage-related losses.
Dexia, one of the world's largest municipal lenders, said underlying net profit fell to 539 million euros ($833.2 million) from 630 million euros a year earlier. The average forecast in a Reuters poll of 16 analysts was 582 million euros.
ArcelorMittal Earnings Miss Expectations
The world's largest steelmaker reported a rise in first-quarter core profit that was slightly below expectations, and forecast higher earnings in the second quarter on strong demand.
Earnings before interest, tax, depreciation and amortization (EBITDA) totaled $5.04 billion against the average forecast in a Reuters poll of eight analysts of $5.06 billion.
ArcelorMittal had forecast a range of $4.7 billion to $5 billion.
The company said EBITDA in the second quarter would be above $6.5 billion "largely on account of strong demand for our products across all regions." Sales and net profit was $29.81 billion and $2.37 billion, while the Reuters poll of analysts gave averages of $29.78 billion and $2.49 billion respectively.
EADS Profit Beats Forecasts
Aerospace company EADS posted a stronger-than-expected first-quarter operating profit of 769 million euros ($1.19 billion), up from 88 million a year earlier, and confirmed its main 2008 targets.
The parent company of planemaker Airbus also reported a 10 percent rise in quarterly revenues to 9.853 billion euros, above average market forecasts.
The group made a quarterly net profit of 285 million euros, compared with a 10 million euro loss a year earlier.
According to a Reuters consensus poll, analysts had on average been expecting operating profit of 371 million euros on revenues of 9.165 billion revenues and net profit of 194 million euros, equivalent to 0.24 euros per share.
After diving into the red due to restructuring charges in the first quarter of last year, Airbus bounced back into profit with first quarter operating income of 628 million euros on revenues of 7.057 billion, EADS said.
Analysts had been looking for an Airbus profit of 259 million euros and revenues of 6.527 billion, according to the poll.
EADS confirmed its main operating and revenue targets for 2008 but increased its forecast for free cash flow before customer financing to 1.1 billion euros from 500 million.
It also confirmed its target of 470 Airbus aircraft deliveries and more than 700 new aircraft orders in 2008.
Airbus announced a fourth set of delays to its A380 superjumbo on Tuesday, trimming the 2008 delivery schedule to 12 aircraft from 13 and the 2009 forecast to 21 from 25.
Iberia Slips to Operating Loss
In Spain, airline Iberia fell to a 28.3 million euro operating loss in the first quarter after the price of fuel soared and competitors fought over its domestic and European business.
Spain's biggest airline was expected to post a 24.5 million euro loss according to a Reuters poll of nine analysts, compared to a 13.1 million euro profit a year earlier.
Net losses in the first three months of the year totalled 441,000 euros compared to a 12.3 million euro net profit a year earlier.
A poll of nine analysts polled by Reuters had forecast a loss of 10.3 million euros.
Earnings before interest, tax, depreciation and aircraft rentals (EBITDAR) fell 29 percent to 124 million euros.
Another airline reporting a quarterly loss was Alitalia. The near-bankrupt Italian company posted a wider loss and warned it could not sustain the damage from higher oil prices and uncertainty over its fate much longer.
Telefonica Earnings In Line with Expectations
Also in Spain, Telefonica reported a 22.4 percent rise in first-quarter net profit to 1.54 billion euros ($2.38 billion), bang in line with forecasts, and reiterated its 2008 earnings.
Operating income before depreciation and amortization (OIBDA), Telefonica's core profit measure, rose 5.3 percent to 5.38 billion euros, while revenues were up 1.1 percent at 13.9 billion euros, hit by the sale of two European units last year.
A Reuters survey of nine analysts had on average forecast the telecoms group would make net profit of 1.54 billion euros, OIBDA of 5.33 billion euros and revenues of 13.9 billion.
The company also said that by May 13, it had completed 35.7 percent of its 100 million share buyback program.
While Telekom Austria reported a better-than-expected 4.7 pct rise in first-quarter core earnings, thanks to its foreign operations, and reiterated its outlook for 2008, sending its shares higher.
Deutsche Post's Postbank Weighs Down Profit
German mail and logistics group Deutsche Post said first-quarter operating profit fell a worse-than-expected 15 percent as the global financial crisis hit results at its Postbank unit.
Earnings before interest and tax (EBIT) were 851 million euros ($1.32 billion), compared with 998 million a year ago, Deutsche Post said.
The average forecast in a Reuters poll of 18 analysts was for quarterly EBIT of 930 million euros.
>> Click here for interview of Deutsche Post CFO on Earnings
Enel Profit Rises
The Italian power company posted a 48 percent rise in first-quarter core profit powered by the purchase of Spain's Endesa and said it would trim its debt mountain by the end of the year.
Enel, Europe's fourth-biggest power company by market value, had earnings before interest, tax, depreciation and amortization (EBITDA) of 3.445 billion euros ($5.33 billion), the company said in a statement.
A Reuters poll of 11 analysts had forecast EBITDA of 3.329 billion euros on average.
The range was 3.2 billion euros to 3.608 billion euros.
Net profit was 1.004 billion euros, up 6.5 percent from 2007.
E.ON Profit Misses Expectations
E.ON, the world's largest utility and Enel's rival, reported first-quarter operating earnings were unchanged from the previous year, missing analyst expectations of an increase of 2.2 percent.
Adjusted earnings before interest and taxes (EBIT) were 3.3 billion euros ($5.10 billion) in the three months through March, the company said on Wednesday.
Sixteen analysts polled by Reuters had on average estimated adjusted EBIT would rise 2.2 percent to 3.39 billion euros.
The company reiterated adjusted EBIT would rise 5 to 10 percent this year and adjusted net income would climb "slightly".
Sainsbury's Profit Jumps
UK supermarket group J. Sainsbury reported an annual underlying pre-tax profit of 488 million pounds ($949.2 million), up 28.4 percent, for the year ended March, bang in line with expectations.
Sainsbury's said it had exceeded its three-year targets, increasing sales by 2.7 billion pounds -- better than a goal to make 2.5 billion pounds sales growth by March 2008 -- helped by lower prices and strong sales of fresh and premium foods.
-- Reuters contributed to this report