Shell on Thursday reported a substantial rise in first-quarter earnings due to the surging price of oil, even as it joined energy peers in taking a write-down from exiting Russia following the invasion of Ukraine.
For the the three months to March 31, income attributable to shareholders was $7.12 billion, up 26% from $5.66 billion in the first quarter last year. Current cost of supply earnings attributable to shareholders for the first quarter was $5.02 billion, up 15% from $4.35 billion.
Shell explained income attributable to shareholders reflected post-tax charges of $3.9 billion related to the phased withdrawal from Russian oil and gas activities.
The oil major posted adjusted earnings of $9.1 billion, nearly tripled from $3.23 billion the year before. First quarter cash flow from operating activities was $14.82 billion, up nearly 80% from $8.29 billion.
Turning to returns, Shell raised its first quarter dividend by 47% to $0.25 per share from $0.17 a year ago.
‘Generating value through strong earnings and cash flow, coupled with maintaining a healthy balance sheet and continuing the disciplined delivery of our strategy, are crucial for Shell to play a leading role in the energy transition. This allows us to support our customers as they shift to cleaner energy. It’s also the best way for us to contribute to the security of energy supplies,’ said Chief Executive Ben van Beurden.
‘Today’s results, the progress we are making with our $8.5 billion share buyback programme and the reduction of our net debt to $48.5 billion all show we remain on track, and give us the confidence to plan future shareholder distributions and disciplined investments that will accelerate our strategy,’ added van Beurden.
Rival BP on Tuesday had said it swung to a first-quarter loss due to its decision to exit from its shareholding in Rosneft in response to Moscow’s invasion of Ukraine; however on an underlying basis, BP reported a big jump in profit.
The strong results come as calls mount from UK politicians in the opposition Labour and the Liberal Democrats parties for a windfall tax on oil and gas firms to help ease the cost-of-living crisis in the country.
The sector is reaping the benefits of rocketing oil and gas prices, which have been pushed to record levels by Russia’s invasion of Ukraine and surging demand as economies emerge from the pandemic.
UK Chancellor Rishi Sunak has so far resisted pressure to make the firms pay more tax, instead looking to companies making big profits to invest the cash back into the UK.
Shell shares were up 2.2% early Thursday, outperforming the wider FTSE 100 index. BP was up 1.3%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 1.5% at 7,606.06
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Hang Seng: up 0.1% at 20,884.14
Nikkei 225: Tokyo market closed for holiday
S&P/ASX 200: closed up 0.8% at 7,364.70
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DJIA: closed up 932.27 points, or 2.8%, at 34,061.06
S&P 500: closed up 3.0% at 4,300.17
Nasdaq Composite: closed up 3.2% at 12,964.86
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EUR: up at $1.0600 ($1.0560)
GBP: up at $1.2540 ($1.2501)
USD: down at JP¥129.50 (JP¥129.93)
Gold: up at $1,899.00 per ounce ($1,866.98)
Oil (Brent): up at $110.60 a barrel ($108.55)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday’s key economic events still to come
Japan Children’s Day holiday. Financial markets closed.
UK local government elections
OPEC+ meeting
0930 BST UK S&P Global-CIPS services purchasing managers’ index
1100 BST Ireland unemployment
1200 BST UK Bank of England interest rate decision
1230 BST UK BoE Governor Andrew Bailey press conference
0730 EDT US Challenger job cuts report
0830 EDT US jobless claims
1030 EDT US EIA weekly natural gas storage report
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Polling stations have opened in the local elections, with council seats in Scotland, Wales, London and many parts of England up for grabs, and Northern Ireland electing its new assembly. Millions of voters are expected to cast ballots to select the local representatives they want to run services and facilities in their area. The Conservatives will find out in the coming days as votes are tallied whether they will be made to pay the price for the so-called partygate saga in Downing Street, which has seen Prime Minister Boris Johnson and Chancellor Rishi Sunak fined for breaking coronavirus laws.
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Voting also is under way in the Northern Ireland Assembly election. The process is taking place amid speculation of a potentially seismic result. The DUP and Sinn Fein are vying for the top spot which comes with the entitlement to nominate the next first minister. A unionist party has always been the biggest in the Assembly, and previously the Stormont Parliament, since the formation of the state in 1921. This year a number of opinion polls have suggested that Sinn Fein will finish ahead of the DUP to become the first nationalist or republican party to emerge top.
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Ireland’s private sector growth ebbed in April but remained robust on a continued expansion in new business, even as inflation concerns and the war in Ukraine continued to cast a shadow over confidence, survey results from S&P Global showed. The AIB services purchasing managers’ index dropped to 61.7 points in April from 63.4 in March, marking the first slowdown in growth registered in 2022. The Ireland manufacturing PMI dipped to 59.1 in April from 59.4 in March, figures had shown on Tuesday. As a result, the composite PMI was at 59.6 points in April, down from 61.0 in March but still remaining firmly in expansion territory.
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German industrial orders dropped sharply in March, official data showed, as the Russian invasion of Ukraine hit demand. Incoming orders were down 4.7% on the previous month in March, according to the federal statistics agency Destatis. The drop was a ‘visible’ indication of the impact the war in Ukraine is having on the German economy, the economy ministry said in a statement. ‘Increased uncertainty is reflected in much more restrained demand, especially from the non-euro area’ the ministry said. Foreign orders from outside the eurozone dived by 13% in March, while demand from inside the bloc rose by 5.6%.
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BROKER RATING CHANGES
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HSBC raises Ocado to ’hold’ (reduce) - price target 1,000 (1,100) pence
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Berenberg raises BP price target to 500 (450) pence - ’buy’
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HSBC raises Reckitt Benckiser price target to 8,800 (8,200) pence - ’buy’
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COMPANIES - FTSE 100
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Defence contractor BAE Systems said trading in the first quarter was in line with expectations with strong order intake and good operational performance being maintained. Ahead of its annual general meeting, the Farnborough-based firm said it continues to expect a strong year of order intake and order flow to date has been positive especially on its long-term programmes. BAE Systems said its 2022 guidance unchanged from its annual results in February with sales expected to be up 2% to 4%. Underlying earnings before interest and tax are seen up 4% to 6%, also unchanged from prior guidance. ‘Looking forward, our diverse portfolio, together with our focus on programme execution, cash generation and efficiencies, are helping us to navigate the challenging operating environment in the near term, while positioning us well for sustained top line and margin growth in the coming years, alongside accelerating our ESG agenda. Additionally, we see opportunities to further enhance the medium- term outlook as our customers address the elevated threat environment,’ said CEO Charles Woodburn.
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Melrose Industries, which also is holding its AGM on Thursday, said trading for the four months to April 30 is in line with expectations for the year. The industrial turnaround specialist said that, consistent with industry trends, its Aerospace division was experiencing continued growth, with like-for-like sales up 6%. The Automotive and Powder Metallurgy divisions remain constrained by supply, with combined like-for-like sales down 4%, significantly below underlying consumer demand levels, Melrose noted. ‘Your group continues to make good progress whilst dealing with the broader world challenges. We are increasingly seeing growth return to our Aerospace business, which is being rapidly well positioned for its future, and are confident of demonstrating the full quality of our largely restructured automotive businesses. We are well set to realise shareholder value as conditions improve,’ said CEO Simon Peckham.
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Mondi announced it has decided to pull the plug on its Russian businesses through a divestment process that is ‘operationally and structurally complex’. The Weybridge, England-based paper and packaging firm said it has decided to divest its Russian assets after assessing all options for its interests there. Mondi said the divestment of these ‘significant’ assets is ‘operationally and structurally complex’ and is being undertaken in an evolving political and regulatory environment. Also on Thursday, Mondi said it had delivered a strong quarterly performance underpinned by good demand across the business. Higher average selling prices more than offset continued cost pressures. Underlying earnings before interest, tax, depreciation and amortisation rose 63% to €574 million, from €353 million in the same period a year prior.
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COMPANIES - GLOBAL
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German luxury carmaker BMW beat expectations in the first quarter despite supply chain disruptions due to the war in Ukraine and coronavirus lockdowns in China. Earnings before interest and tax increased by 12% to €3.39 billion, the Munich-based group said. The company attributed the strong increase in earnings to full consolidation of Chinese joint venture BMW Brilliance Automotive, as well as sustained high demand for its premium vehicles. BMW booked an 8.9% operating profit margin in the car making division, far outperforming analysts’ estimates. On balance, BMW posted a net profit of almost €10.2 billion, more than three times as much as a year ago. This was mainly due to the revaluation of the company’s stake in its joint venture BMW Brilliance Automotive.
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Lufthansa saw a significant rise in ticket sales in the first quarter, helping to slow down the German carrier’s losses as it emerges from the coronavirus pandemic.
Net loss decreased by 44% to €584 million compared to the same period last year, the company announced in Frankfurt on Thursday. The group generated a total revenue of €5.36 billion, compared with €2.56 billion a year ago. ‘The restrictions on air traffic have largely been overcome,’ CEO Carsten Spohr said in a statement. ‘The past few weeks in particular have clearly shown how great people’s desire to travel is. New bookings are increasing from week to week - among business travellers, but especially for vacation and leisure travel.’ Owing to the rise demand, the group - which also includes SWISS, Austrian Airlines and Brussels Airlines - reaffirmed its full-year earnings outlook.
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Thursday’s shareholder meetings
AIB Group PLC - AGM
Alpha FX Group PLC - AGM
Apax Global Alpha Ltd - AGM
Ascential PLC - AGM
Avast PLC - AGM
BAE Systems PLC - AGM
Ceres Power Holdings PLC - AGM
Clarkson PLC - AGM
Costain Group PLC - AGM
Domino’s Pizza Group PLC - AGM
EJF Investments Ltd - EGM re rollover offer
Emis Group PLC - AGM
GetBusy PLC - AGM
Glanbia PLC - AGM
Griffin Mining Ltd - AGM
IMI PLC - AGM
Indivior PLC - AGM
James Fisher & Sons PLC - AGM
Jardine Matheson Holdings Ltd - AGM
John Wood Group PLC - AGM
KRM22 PLC - AGM
Made.com Group PLC - AGM
Melrose Industries PLC - AGM
Mincon Group PLC - AGM
MoneySupermarket.com PLC - AGM
Morgan Advanced Materials PLC - AGM
Morgan Sindall Group PLC - AGM
Personal Group Holdings PLC - AGM
Quixant PLC - AGM
Rathbones Group PLC - AGM
Reach PLC - AGM
React Group PLC - AGM
Sancus Lending Group Ltd - AGM
Scotgems PLC - AGM
Witan Investment Trust PLC - AGM
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