British Airways Higher

Old Mutual falls on possible acquisition; plus more of Friday's European stocks in the news

From Standard & Poor's European MarketScope


British Airways was up £0.06 to £2.60 Friday, after the company reported fiscal-year pre-tax profit of £415 million, compared to £230 million in the previous year, and fiscal-year operating profit of £540 million, compared £405 million. The company added that fuel costs, net of hedging, are now expected to be about £400 million more than last year, up from £300 million due to recent price rises. It sees the current year's revenue up 4 to 5% and market conditions remaining unchanged. Dresdner Kleinwort Wasserstein said that pre-tax profit was 7% ahead of forecast and up 55% year over year. The broker thinks that its forecast of £480 million for this year looks eminently achievable, and adds that operating margin of 7.5% makes company's 10% target look achievable and the broker now thinks its own forecast of 7.1% for fiscal-year 2006 looks conservative. It retains its buy rating, and £3.30 target.

Financial-services group Old Mutual was down £0.06 to £1.23, after it confirmed that it is in preliminary discussions with Nordic insurer Skandia concerning a potential transaction. The company added that discussions are at an early stage and may or may not lead to an offer for Skandia. Earlier, Skandia's shares were suspended in early trade. Friday morning the Financial Times reported that the company is in early talks to buy Skandia, saying if the deal goes ahead it would create a cross-border financial services group valued at more than £8 billion. Old Mutual is understood to be interested in buying the whole of Skandia, valued at £3.5 billion. Talks are understood to be at a very early stage.

Engine-maker Rolls Royce was up £0.08 to £2.60, after Merrill Lynch upgraded the company to buy, with a fair value of £3.00, and added it to its Europe 1 List of preferred stocks. The broker said that the company is now firmly established as one of the two global aero-engine suppliers and has successfully aligned itself and its workforce with the interests of the customer. In addition, since September 11, 2001, it has been firmly established that the company is much less cyclical than the market thought, the broker said, adding that there is a high correlation between group profits and the installed fleet. The almost inevitable increase in the installed fleet should feed though to continued profit growth, the broker said.

Brewer SABMiller was down £0.14 to £8.14, after the Dutch bank ABN Amro initiated coverage with a reduce rating and £7.50 target. The bank comments that South Africa has been the company's largest profit pool and contributor to growth for the past two years. The broker now thinks that growth will slow in the home market and says earnings momentum is peaking for the group. The time is right to take some profits, the bank added.


Steelmaker Arcelor was down €0.32 to €15.12, as global steel stocks fell. In Seoul, South Korean POSCO fell amid worries global steel prices may have peaked, while China's demand for steel may be weakening. In Wall Street trading, U.S. Steel fell 7.4%, after cutting forecasts for domestic shipments this year for the second time in three weeks. Other U.S. steel-related stocks fell around 5%. Also, Areclor's German peer Thyssen Krupp posted weaker-than-expected results.

Management consulting and IT services group Atos was up €1.61 to €49.46, after the company reported first quarter revenues up 3.9% to €1.356 billion, or up 9.1% on a like-for-like International Financial Reporting Standards basis. Brokers were generally positive ahead of the report, with Kepler forecasting sales would rise1.8% to €1.328 billion, translating into organic growth of 7%. The broker rated the company buy, with a €60 target. The brokerage ETC Pollak Prebon expected sales to increase by 2% at € 1.331 billion. It reiterated its add rating and €59.0 target.

Chipmaker STMicroelectronics was up €0.47 to €11.59, after net profit at computer-maker Dell rose to $0.37 per share compared to $0.28 last year, beating forecasts. The news eases worries about IT technology weakness.


Steelmaker Thyssen Krupp was down €0.41 to €13.94, after the company reported second-quarter profit tripled to €1.045 billion from €345 million a year ago, but was still slightly less than analysts expected. Second-quarter earnings per share came in at €0.52, compared to a previous €0.44, while pre-tax profit at €445 million was slightly below the €474 million forecast. Second-quarter sales came in at €10.5 billion, which was in-line with forecasts. The company reiterates that fiscal year pre-tax profit will exceed €1.45 billion, and it sees sales rising to €41 billion. The bank WestLB downgraded the company to neutral from outperform and cut its price target to €16.5 from €19. As expected, the company did not announce details about its restructuring plan for the automotive division, but said that it might book charges less than €100 million this year.

Steelmaker Salzgitter was up €0.60 to €17.47, after the company reported first-quarter profit rose eightfold to €173.5 from €20.1 million a year ago. Expectations were for a profit of €124 million. The company plans to boost steel production by 15% over the next four years to 4.7 million metric tons. The company said it expects to post fiscal-year sales of €8 to €10 billion by 2010, compared to €6 billion in 2004. The company raised its fiscal-year pre-tax guidance to a three-digit million euro range. The brokerage Kepler said the main surprise was an increase in steel earnings before taxes to €167.7 million from €11.5 million on a year over year basis. The broker said the main earnings driver was an increase in average revenue per tonne by 50% year over year and 11% quarter over quarter. Contrarily, the broker noted that shipments were down 11.6% year over year due to high inventories in the market.

Commercial real estate lender Hypo Real Estate Group was down €1.00 to €31.05, after the company reported first-quarter pre-tax profit nearly doubling to €102 million from $55 million last year, aided by a drop in its loan provision to €35 million from €71 million. First-quarter net profit also nearly doubled to €78 million from €41 million previously. The company sees fiscal-year pre-tax profit rising to between €400 million to €425 million this year. Shares eased, however, after disappointing commission and interest income numbers.

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