LAN Airlines Buys Boeing; Softbank Triples Earnings; J. Sainsbury Plummets 21%; Tongjitang Profits up 29%:
- LAN Airlines (LFL), the largest airline in Latin America, has finalized a contract with North American aircraft manufacturer Boeing (BA) for 26 long haul Dreamliner 787 passenger jets and two 777 freight aircraft, The Associated Press has reported. The Dreamliner order is reportedly worth $4.5 billion and the 777 order would add another $500 million at current list prices. In addition to the purchased aircraft, LAN will lease six 787s from International Lease Finance Corp. and two more from GE Commercial Aviation Services (GE). LAN has experienced rapid growth in the past few years as key Latin American economies experienced solid economic growth in both passenger and freight demand. Revenue has doubled since 2003 and earnings have tripled in that time.
- Japanese telecom and internet giant Softbank Corp. (STTFB) yesterday (Tuesday) announced that earnings have more than tripled in first six months of 2007. According to the Associated Press, Softbank posted earnings of 46.5 billion yen ($405.4 million) for the year’s first six months, up more than 221% from 2006. Revenue rose more than 22% to $11.90 billion. Softbank said that the number of subscribers to its mobile phone service has risen more than 10%, reaching approximately 17 million users. The company has been engaged in intense competition for subscribers with Japan’s largest carrier NTT DoMoCo (DCM). So far, Softbank appears to be winning the struggle. President Masayoshi Son even commented that the company’s phones are so popular that the company has been receiving complaints about long lines at its retail stores. In response to demand, the company has increased the number of retail outlets by 30%, totaling 2,400 stores across Japan. Softbank also announced that it would be booking investment gains sometime between now and December from its stake in Alibaba.com, which had a wildly successful listing on the Hong Kong Exchange.
- In London, shares of grocer J. Sainsbury PLC plummeted nearly 21% after Qatar investment fund Delta Two withdrew its bid for the company. Delta Two said the steep jump in borrowing costs made the deal unviable. The Qatari investment vehicle still owns 25% of the grocer, though its future plans for that stake are unknown at this time. U.K. securities laws prevent them it from making another bid for at least six months. J. Sainsbury, once the largest grocer in Britain, has fallen to third over the past 10 years, thanks to stiff price competition in the U.K. grocery markets. Chief Executive Justin King was recruited away from Marks and Spencer Group PLC in 2004 and has implemented a three-year recovery program, cutting jobs and closing underperforming stores.
- Tongjitang Chinese Medicines Co. (TCM) reported a 29% increase in profits in the third quarter. The manufacturer of modernized traditional Chinese medicines said net income for the period rose 465% to RMBI 50.1 million ($6.7 million). Gross margins rose to 63.9% this year from 61.3% last year. Revenue rose 29%, driven primarily by sales of the flagship herbal osteoporosis remedy XLGB. Tongjitang also stated that it has a stellar balance sheet with total cash of $101.5 million, which includes a $5.5 million deposit for the purchase of trading securities. Chief Executive Xiaochun Wang said the firm’s “formidable cash position bolsters our ability to execute potential acquisitions. In fact, we are currently in the midst of due diligence on several acquisition targets, which we are evaluating within the boundaries of our strict criteria.” The company also reiterated its guidance for the full year 2007, projecting revenue of $79 million to $83 million, with gross margins in the mid-60% range. The company also expects to introduce as many as 11 new products over the rest of the year. Shares closed on the New York Stock Exchange at $11.75, up 22 cents each.