Markets & Finance

Nestle Falls on Results


From Standard & Poor's MarketScope:

Switzerland

Nestle was down 5.00 Swiss francs to 353.00 francs, after the company's reported sales that beat forecasts. First half sales came in at 43.47 billion Swiss francs, up 2.4%, while net profit was 3.68 billion Swiss francs, up 32.4%. The company said, however, that trading conditions will continue to be challenging in a number of markets, and commodity costs and currencies are likely to remain volatile. Despite this difficult environment, the group's operating efficiency plans are on track to deliver their combined gross savings target of 1.2 billion Swiss francs for the year, which is necessary to offset the input cost pressures.

Adecco, the temporary staffing group, was down 3.40 Swiss francs to 62.30 francs after the company reported second-quarter net profit of €100 million, just below consensus, on in-line revenues of €4.5 billion, which were up 6%. Earnings before interest, taxes, and amortization was €157 million, lower than the consensus forecast of €166 million. Following the results, CEO Jerome Caille said that the company won't manage to meet its full-year target of a half a percentage point gross margin improvement because of difficult markets in France.

Germany

DaimlerChrysler was down €0.45 to €40.85 as the newspaper Handelsblatt reported that German regulator BaFin has found indications of possible insider trading in shares of the carmaker at the time of the group's announcement that CEO Juergen Schrempp would be stepping down. The newspaper says BaFin is widening its investigation.

Insurance and asset management group Allianz was down €1.14 to €108.70 after the Financial Times reported that the company's Dresdner Bank is considering a €2 billion divestment of 300 of its offices and bank branches in what would be the largest ever sale-and-leaseback project by a German company. Separately, Goldman Sachs upgraded the company to outperform from neutral, saying that the release of detailed first-half results confirmed the broker's view of the overall quality of the pre-announced numbers. Note that yesterday the stock was higher as both UBS and Credit Suisse First Boston raised their price targets.

France

Aerospace and defense giant EADS was down €0.40 to €26.67, as the company's Airbus unit plans to increase acquisitions of Chinese parts by eight times in the coming five years, bringing the total to $60 million worth of parts in fiscal 2007 and $120 million in fiscal 2010. The company's U.S. rival Boeing plans to acquire parts for some $1.3 billion by fiscal 2010.

Cosmetic maker L'Oreal was up €0.70 to €63.85 after the company was told to pull a TV ad featuring Claudia Schiffer as the British advertising watchdog said that there is insufficient evidence to support claims that the company's products combat wrinkles and celullite, The Guardian reported. Separately, the company and rivals Revlon, Procter & Gamble, Johnson & Johnson and Japan's Kao are all eyeing Japanese beauty and food group Kanebo, reported the newspaper Les Echos. Kanebo was delisted from the Tokyo exchange last June after a five-year-long accounting malpractice.

Nordic

Telecom group TDC was up 41.50 Danish kroner to 316.50 kroner, after the Wall Street Journal Europe reported that the comapny is drawing attention from U.S. and U.K. private equity firms eager for a deal in the sector. The newspaper said that the funds have informally grouped into two competing camps and have approached management about a potential deal to buy the whole company, although a firm bid is yet to emerge.

Mobile networks company Ericsson was down 0.60 Swedish kronor to 26.80 kronor, after the daily Dagens Industri reported that the company may see an end to the positive run experienced recently in the telecom's shares. The report notes that five out of six analysts have lowered their recommendation after the company's second-quarter report.

Royal Caribbean was down 3.50 Norwegian kroner to 283.50 kroner, after Deutsche Bank said it sees 19% of the group's revenues at risk. Deutsche Bank kept its target at 380 kroner and reiterated a "buy" rating, saying that concerns over the new U.S. passport rules are overblown and that the company's shares along with those of its peer Carnival Cruise Lines - are cheap, even on worst-case scenario. The broker sees little long term impact from the new requirements, which require US citizens to use a passport for Caribbean travel from as early December. However, the bank estimates that 19% of the company's revenues are at risk.

Britain

Mobile phone service provider O2 was up £0.04 to £1.47 after the newspaper Handelsblatt reported that Deutsche Telekom remains interested in the company, even after talks with Dutch group KPN about a joint purchase ended, according to people close to the German group. The price tag would be around £14 billion.

Insurer Royal & Sun Alliance was down £0.02 to £0.95 on takeover talk. The Independent noted that shares rose 4% yesterday on rumors that a predator might be about to pounce. It said that talk pointed at Zurich Financial and France's Axa as possible bidders.


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