Markets & Finance

Nokia Falls on Fourth Quarter Outlook


From Standard & Poor's European MarketScope

France

SOC GEN rose €1.15 to €92.20. The company and ABN Amro (ABN) are bidding for a 51% majority stake in China's Guangdong Bank. Citigroup (C) and DBS are also thought to be interested. Guangdong Bank has assets worth around US$43 billion, and a market value of approximately US$1 billion.

SCHNEIDER rose €2.80 to €69.05. The company reported third quarter sales of €3.017 billion, up 14.3%. It says nine-month sales rose 10.5% to €8.416 billion, and that sales volumes accelerated in September. Schneider raised its fiscal 2005 targets to 7% organic sales growth and also expects an increase in operating profit of between 15% and 20%. SocGen says third quarter sales of €3.017 billion largely exceeded the consensus of €2.878 billion. The broker points out third quarter 2005 organic growth of 10.3% exceeded 8.0% growth in the preceding quarter, driven by stronger organic growth in the U.S. of 11% and Europe of 7.9%.

LAFARGE (LF) fell €1.40 to €67.50. The company reported nine-month sales of €11.76 billion, up 8.2%. It says forex variations impacted sales by 0.2%. Nine-month like-for-like sales rose 7.4% (+9.5% in the third quarter). Lafarge reports continuing good overall pricing trends in most of its markets, in a context of higher energy and transportation costs, but warned that previously stated fiscal year expectation of LFL current operating income growth now appears challenging.

GAZ DE FRANCE rose €0.17 to €25.77. The company announces plans to raise gas prices by 12% from November through March as a way to offset higher energy costs. SocGen says the announcement will have a major influence, boosting the belief the stock is in a strong position, as well as auguring well for fiscal 2006, when improved retail margins should accompany higher upstream earnings.

Germany

SAP (SAP) rose €4.40 to €147.05. Having seen third quarter license sales rise a better-than-expected 20% to €590 million, the company now targets 12-14% growth in license sales this year, up from a previous forecast of a rise of 10-12%. Third quarter sales came in an in-line 13% higher year-over-year to €2.01 billion. On the broker front, Cheuvreux lifted its target to €170 from €165 as it sticks with outperform.

SIEMENS fell €0.05 to €61.45. The company has approached Kohlberg Kravis Roberts to buy Legrand, the French electrical equipment maker which is pursuing an initial public offering, the FT reports. The newspaper cites people familiar with the situation saying the company had held talks recently with KKR, the private equity group which together with French investment group Wendel led the buy-out of Legrand in 2002. Legrand has an estimated value of close to €7 billion, including debt.

SCHERING (SHR) fell €0.24 to €50.18. The company has initiated an additional Phase III trial of sargramostim as a result of patient recruitment delay in one study on Crohn's disease. Its third quarter numbers are due out on Monday. A poll compiled by Reuters puts quarterly operating profit 19% higher at €217 million on sales up 6% at €1.31 billion. Merck Finck puts net profit 7% higher year-over-year at €131 million, and reiterates its buy opinion.

Italy

FONDIARIA-SAI added €0.59 to €23.34. The company's CEO, Fausto Marchionni, has reportedly indicated the company's guidance for 2005 which sees a consolidated income before minority interests above €465 million (business plan target) and above €500 million if calculated according to IFRS.

FIAT rose €0.05 to €6.83. The company and Japanese compact car maker Suzuki have reportedly agreed to study a license deal on diesel engine production.

ALITALIA was up €0.07 to €6.74. The company is looking at 1,200 job cuts in 2006 as part of its plans to save money, Reuters reports citing La Repubblica, which adds that the company is still targeting a return to profit next year. Previously, the company has cancelled 102 flights due to a 4-hour strike of air traffic controllers, La Repubblica reported.

Netherlands

ROYAL DUTCH SHELL (NL) (RD) was up €0.05 to €25.65. Canada's EnCana Corp shot up 9.5% in Toronto Wednesday on speculation it could be a takeover target for the company. EnCana's market cap is about US$43 billion. Separately, Lehman Brothers upgraded its long-held underweight rating on the company to equal weight after sustained underperformance, and with the A and B shares now trading at an average 11% below the broker's price target.

BUHRMANN NV was €0.24 to €9.31. ING notes that on Wednesday the company's U.S. peer Office Depot reported solid third quarter 2005 results with an adjusted EPS of US$0.36 vs. the consensus forecast of of $0.35.

VNU added €0.11 to €25.65. Shareholders controlling more than 40% of the company met VNU management Wednesday and insisted the company abandons its proposed US$7 billion acquisition of IMS Health of the U.S. Discussions are set to continue.

Nordic

NOKIA (NOK) fell €0.66 to €13.36. The company reported third quarter 2005 operating profit up 19% year-over-year to €1.149 billion on net sales up 18% year-over-year to €8.403 million, vs. the company's recently-raised guidance of €8.4 billion-€8.5 billion. Operating margin slipped to 13.7% from 13.6% in third quarter 2004. Pretax profit comes in 17% higher year-over-year at €1.218 billion, leading to EPS of €0.20 vs €0.15 in the previous year. Nokia says average selling price is €102 vs €108 in third quarter 2004. Looking forward, it sees fourth quarter prices falling and expects own network sales down year-over-year. The company's CEO says profitability in Networks is under pressure, with fourth quarter industry volumes reflecting the usual seasonality. However, the company raised its fiscal year mobile device market outlook to 780 million units from 760 million previously estimated.

ERICSSON (ERICY) was down SEK0.30 to SEK26.20 in the wake of the Nokia report. Separately, the company is due to report its own third quarter numbers Friday. Danske Equities sees sales up 9% year-over-year to SEK34.6 billion (vs. the consensus estimate of SEK36.1 billion). The broker forecasts gross margins of 46% and operating margins of 20% or SEK6.94 billion. Danske maintains its hold recommendation but says Ericsson's valuation is getting very stretched.

Spain

IBERDROLA fell €0.04 to €22.25. The company reported nine-month net profit of €984.0 million, up from €873.7 million; EBIT of €1.644 billion, vs. €1.466 billion, and EBITDA of €2.393 billion, vs. €2.162 billion. Net sales jumped to €8.443 billion vs €6.366 billion. Results are within the range of upbeat expectations from brokers. Also, the company says combined cycle production was up 71% in Spain and wind-farm production was up 32%. The company highlights the fact Renewables and International businesses represent 27% of EBITDA.

BANKINTER gained €0.20 to €43.45. The company posted nine-month net profit of €153.6 million, up 17.5%. Net interest income came in at €322.1 million, up 11.2%. The results comfortably exceeded market expectations.

BANCO POPULAR fell €0.16 to €9.98. The company disclosed nine-month net profit of €650.6 million, up 21.2%; net interest income came in at €1.45 billion, up 10.6%. Figures are better than consensus.

Switzerland

NESTLE rose CHF13.50 to CHF379.00. The company reported nine-month consolidated sales of CHF67.7 billion. The food giant says real internal growth accelerated to 3.8%, while pricing, at 2.0%, was also higher than in the first half, resulting in organic growth of 5.8%. It says the acceleration in core food and beverage operations was broad-based. Nestle confirmed 5%-6% organic growth target for 2005, combined with a sustainable improvement of the EBITA margin in constant currencies. It also announced a new share buy-back program, subject to board approval.

ACTELION rose CHF12.60 to CHF143.20. The company reported Wednesday (one week earlier than expected) that third quarter net income rose to CHF37.9 million from CHF23.8 million year-over-year. The figures clearly beat estimates, in the view of Zuercher Kantonalbank; the broker upgraded the stock to overweight from marketweight.

UK

LEGAL & GENERAL was unchanged at £1.03. The company reported a 36% growth in UK new business in the third quarter to £300 million (nine-month £895 million, +33%); Worldwide £327 million, +31% (nine-month £979 million, +29%). It notes particularly strong pensions, unit-linked bonds and unit trust sales, and adds market share increased in the first half to 11.3%, up almost two percentage points.

BHP BILLITON (BHP) gained £0.08 to £7.92. The company will increase capacity at its Area C iron ore mine in Western Australia by 20 million tonnes per annum to 42 million. It says work on the project will commence immediately, with initial production forecast to begin in the fourth quarter of 2007. The company has approved capital spending of US$1.3 billion for its 85% share of the project. Prepared by European MarketScope reporters Zaida Espana (France), Michael Sanderson (Germany), Mariella Mongio (Italy), Alexander Wisch (Netherlands), Holly Cook (Nordic), Emma Stevenson (Spain), Pawan Girglani (Switzerland), and Rocio Opazo-Aniotz (UK)


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