News Column

IKEA posts record profit, sees consumer recovery worldwide

January 28, 2014

World No 1 furniture maker IKEA Group said yesterday it saw signs of a recovery in consumer spending in many of its markets as it posted record full-year profits and set its sights on growing revenues to €50bn ( $68.37bn ) by 2020. Retailers have been struggling particularly in Europe , where IKEA generates nearly 70% of its sales, as the global economic downturn and austerity measures hurt consumer sentiment and spending power in many markets. IKEA, whose warehouse-like stores sell everything from highchairs to fitted kitchens, has been an exception. It posted a net profit of €3.3bn ( $4.51bn ) in the 12 months through August 2013 , up 3.1% on a year earlier. 2012 was also a record year. "Consumers have become more and more confident and have started to shop a bit more and open their wallets a bit more often," IKEA Group CEO Peter Agnefjall told reporters. He said IKEA had grown strongly in the US, Russia and China during the year. "Even in southern Europe - Portugal for example - we see clear signs of growth," Agnefjall said. Sales fell, however, in Italy and Spain, the company said. Agnefjall said IKEA remained focused on lifting to turnover €50bn by 2020, up from €27.9bn in the 2013 financial year. Although IKEA will expand into new countries such as India in coming years, much of its growth will be in existing markets, where Agnefjall said there is still much to do through improving products, lowering prices and widening services. "We had the third strongest growth last year in the US. If you just look at the number of stores in Europe , then of course we still have big potential to grow in the US. American Airlines American Airlines Group Inc , the world's biggest carrier after merging with US Airways last year, reported better-than-expected adjusted profit and revenue as fares climbed and fuel costs fell, sending its shares up 3.4%. The company reported a net loss of $2bn , or $8.66 a share yesterday, in the fourth quarter through December 31 , after charges of $2.4bn relating to its reorganisation. Excluding those charges, combined profit was $436mn for American's former parent AMR Corp and US Airways , compared with a year-earlier loss of $42mn . Adjusted profit was 59 cents a share, higher than the 55 cents a share expected by analysts surveyed by Reuters. The merger of American and US Airways on December 9 , the fourth major union in the US airline industry since 2008, was the means by which American parent AMR emerged from US bankruptcy protection. Combined revenue grew 8.7% to $9.98bn , better than the $9.9bn expected by analysts. Yield, a measure of the average fare, rose 5%. Operating expenses were up 7% on a combined basis, but costs for fuel - the carrier's biggest expense - fell 1.7%. Philips Philips forecast a slow start to 2014 as it grapples with currency volatility in Turkey , Argentina , Indonesia and other emerging markets and weak orders for healthcare equipment. The turmoil in developing economies is a setback for the Dutch healthcare, lighting and consumer appliances company, which has reinvented itself since Frans van Houten took over as chief executive in April 2011 . Van Houten has cut costs, sold weak businesses and targeted new products at emerging markets, sending Philips shares up nearly 60% in two years. Van Houten said the turnaround was not over for the world's biggest lighting maker. The company has met its 2013 full-year targets and already set out slightly more ambitious financial goals for 2016. It is now targeting a 2014-2016 margin for earnings before interest, tax and amortisation (EBITA) of 11-12%, return on invested capital of at least 14% and sales growth of 4%-6%. Fourth-quarter EBITA for the group was €884mn ( $1.2bn ), compared with a loss of €50mn a year ago. The company turned to a quarterly net profit of €412mn from a loss of €420mn a year earlier. Sales rose 7% on a comparable basis to 6.8bn euros . Pfizer Pfizer Inc reported better than expected fourth-quarter results, helped by higher sales of drugs for cancer, nerve pain and arthritis, and the company forecast 2014 earnings in line with Wall Street estimates. The biggest US drugmaker yesterday said it earned $2.57bn , or 40 cents per share, in the fourth quarter. That compared with $6.32bn , or 86 cents per share, in the year-earlier quarter, when the company recorded a gain from selling its nutritional products business to Swiss food group Nestle SA . Excluding special items, Pfizer earned 56 cents per share. Analysts, on average, expected 52 cents per share, according to Thomson Reuters I/B/E/S. JP Morgan analyst Chris Schott said quarterly results were "solid" and driven by unexpectedly strong sales and lower than expected expenses. Global company sales fell 2% to $13.56bn , hurt by competition from cheaper generic forms of its medicines. But they topped Wall Street forecasts of $13.35bn . Pfizer said it expects full year earnings in 2014, excluding special items, of $2.20 to $2.30 per share. That is roughly in line with Wall Street expectations of $2.28 per share, and assumes that Pfizer buys back $5bn worth of its common stock during the year. Maruti Suzuki India's top carmaker Maruti Suzuki yesterday reported a 36% jump in quarterly profit helped by cost-cutting, more local production and favourable foreign exchange movements, even as sales fell. The profit posted by Maruti Suzuki, majority owned by Japan's Suzuki Motor Corp , was largely in line with market estimates. Maruti, the country's largest carmaker by unit sales, reported that net profit was 6.81bn rupees ( $108mn ) in the three months to December, a 36% rise on a year earlier. But sales fell 3.1% to 106.2bn rupees in the financial third quarter from a year earlier, while unit sales fell 4.41% to 2.9mn vehicles. "Higher localisation, favourable foreign exchange and cost reduction initiatives by the company contributed significantly to net profit," the company said. Siemens German engineering group Siemens posted a 15% rise in quarterly profit and higher margins, the first signs that Chief Executive Joe Kaeser is starting to close the gap with more profitable rivals. Siemens , Germany's second-biggest company by market value, lost ground to competitors including Switzerland's ABB and US-based General Electric (GE) as it focused on sales growth and poor project management resulted in a series of costly charges. Kaeser, who replaced Peter Loescher after a boadroom battle last July, is continuing his predecessor's plan to save €6bn ( $8.2bn ) over two years and is due to unveil his strategy in May. Siemens , whose products range from gas turbines to trains and industrial automation software, yesterday reported a 15% gain in core operating profit to €1.79bn in its financial first quarter ended December. That fell slightly short of analysts' average forecast of €1.86bn in a Reuters poll, but was still seen as positive following disappointing reports from rivals. Siemens first-quarter profit margin rose to 10.2% from 8.6% the year before, largely due to lower project charges. "We expect that the high one-off charges are in the past," DZ Bank analyst Jasko Terzic said, adding he expects Siemens to benefit from any coming economic recovery in Europe . Comcast Comcast Corp posted higher fourth-quarter revenue yesterday, raised its dividend and authorised a new share repurchase programme, sparking a 3% jump in its shares in premarket trading. The largest US cable provider added quarterly cable video subscribers for the first time in more than six years, helping to more than offset a slight miss on quarterly profit. The 43,000 new video subscribers topped estimates of a gain of 1,600 customers, according to StreetAccount. In the third quarter it lost 129,000 video subscribers. Comcast , which also owns NBC Universal , increased its dividend by 15% to 90 cents per share annually, authorised a new $7.5bn stock repurchase programme and said it would buy back $3bn in stock this year. Comcast recorded fourth-quarter net income of $1.91bn , or 72 cents a share, compared with $1.52bn , or 56 cents per share, a year ago. Adjusted for a tax gain, the company's earnings per share were 66 cents per share, which missed analysts' estimates by 2 cents . Revenue rose 6% to $16.92bn , above estimates of $16.625bn , according to Thomson Reuters I/B/E/S. Posco South Korea's Posco , the world's fifth-largest steelmaker, said yesterday its net profit for last year plunged 43.2% due to the global slowdown and intensifying competition with Chinese rivals. Net profit for 2013 amounted to 1.35tn won ( $1.25bn ) compared to 2.38tn won a year earlier, the country's top steel group said in a statement. Operating profit was down 18% to 2.99tn won, while sales shrank 2.7% to 61.8tn won. Slowing growth in China—the world's top steel consumer—and economic woes in Europe have sapped demand and caused a global glut, squeezing margins for the company. Posco earns about 40% of its sales from overseas. SK Telecom SK Telecom , South Korea's biggest wireless operator, said yesterday its net profit for 2013 jumped 44.3% on increased value of its stock investment and expansion of lucrative 4G services. Net profit jumped to 1.6tn won ( $1.48bn ) from 1.1tn won in 2012, while operating profit rose 16.2% to 2.0tn won from 1.7tn won. The firm said net profit was boosted by the increased value of its stock holdings in SK Hynix , the world's number two memory chipmaker whose annual net profit for 2013 hit a record high. Sales also rose 2.9% to 16.6tn won, the company said in a statement. Net profit for October-December came in at 293.6bn won , down 43% from a year ago when the firm's bottom line was boosted by one-off sales of property and a stake in steel giant Posco Operating profit for the fourth-quarter fell 5.4% on-year to 509.7bn on heavy spending for marketing, while sales rose 3.3% to 4.29tn won. Ford Ford Motor Co reported higher-than-expected quarterly results yesterday as earnings in its core North American market fell less steeply than Wall Street expected, but declining vehicle prices there raised concerns about 2014. The No 2 US automaker also affirmed the 2014 profit outlook it presented to investors last month. Ford has described 2014 as a transition year that will test the strength of chief executive officer Alan Mulally's team and the company's restructuring since he took over in 2006. Guggenheim Securities analyst Matthew Stover said Ford's first quarterly drop in North American vehicle pricing in five years was ominous. Ford's net income in the fourth quarter rose to $3bn , or 74 cents a share, from almost $1.6bn , or 40 cents a share, a year earlier. The results included a $2.1bn gain from the addition of deferred tax assets to the balance sheet, as well as charges of $311mn for last year's pension buyouts and layoffs in Europe . Excluding one-time items, Ford earned 31 cents a share, 3 cents more than analysts polled by Thomson Reuters I/B/E/S had expected. Analysts also attributed some of the outperformance to a lower-than-expected tax rate. Revenue rose 4% to $37.6bn , above analysts' estimates of $35.17bn . In North America , Ford's pretax earnings were $1.7bn , a decline of $200mn , as vehicle pricing fell for the first time in five years due to increased competition. However, the profit was higher than expectations of $1.5bn by RBC Capital Markets and $1.43bn by Barclays . Ford's 2013 pretax profit of $8.57bn was the second-highest in the last decade, trailing only 2011's $8.76bn . Yesterday, Ford said it still expected a global pretax profit this year of between $7bn and $8bn , with lower auto operating margins.

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Source: Gulf Times (Qatar)

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