China Fires Raises Fuel Prices; Credit Suisse Suffers Losses; Tele Norte Takes Off; AstraZeneca Takes A Profit Hit
- In a move that came as a surprise to many, and a relief to oil refiners in the nation, the Chinese government raised the selling price for gasoline and diesel fuel by 10%. They hope the price increase will help slow demand, which has led to tight supplies and long lines at gas stations in recent months. Oil blew by the $96-a-barrel mark on U.S. exchanges yesterday (Thursday) and government controls forced refiners to pay the difference between soaring market prices for crude and lower retail prices at the pump. Many smaller refineries throughout China had slowed - or even stopped - production, in order to avoid losses. A Goldman Sachs Group Inc. (GS) research report released yesterday estimated that this price increase would not be enough to spur production if prices remain above $80 a barrel, meaning further increases of 15-20% could be needed. Most feel that this is unlikely as China's government continues to freeze prices across the economy in an attempt to reel in runaway inflation.
- Continuing the negative trend among major European banks this week, Credit Suisse Group (CS) of Zurich, Switzerland, reported that earnings were impacted by trading losses and write-downs of credit-related debt securities. Credit Suisse said third quarter earnings fell 31% year over year to $1.12 billion. Losses included $1.09 billion for residential and commercial mortgage bonds, as well as collateralized debt obligations, commonly known as CDOs. According to MarketWatch, bank Chief Financial Officer Renato Fassbind told investors that he saw encouraging signs the market for leveraged loans was recovering, which might allow Credit Suisse to shed some of the $59.52 billion worth of those loans it currently holds. Earnings were bolstered by a $27 million tax credit and solid performances from the private-banking and retail-banking divisions. Still, excluding discontinued operations, profit was down 11%. Shares of Credit Suisse were off sharply this afternoon, down $3.40 or 5% to $64.30.
- In Rio de Janeiro, Brazil, yesterday, telecommunications company Tele Norte Leste Participatoes SA (TNE) reported its profits doubled in the third quarter. Tele Norte said that profits reached 637 million Brazilian reals, or $367 million, compared with 270 million reals ($155.7 million) in the third quarter of 2006. Not only did earnings leap compared to last year, they were well ahead of the consensus analyst expectations of BRL453.3 million ($261.67 million). Earnings before interest, taxes, depreciation and amortization (EBITDA) also jumped from $890 million in 2006 to $1.1 billion this year. Mobile phone subscriptions were up18%, to 14.9 million, while the number of fixed-line customers fell 1.9% to 16.70 million. Subscriptions to its broadband Internet service, Oi Velox, jumped 33% in the quarter, reaching 1.39 million users. In addition to the rising revenue, the company was able to reduce operating expense 8.3% - from $158.6 billion last year to $145.4 billion this. Total debt levels fell for Tele Norte as well, reaching $1.79 billion compared to prior year levels of $3.19 billion.
- London-based pharmaceutical company AstraZeneca PLC (AZN) reported yesterday that its net profits for the third quarter were $1.34 billion, down 15% from net income of $1.59 billion for the comparable quarter a year ago. Sales rose 9.7%, reaching $7.15 billion, which beat analyst estimates. Total revenues rose 10% for the period, compared to last year, but the company attributed a smaller profit margin to a $146 million restructuring charge as well as $212 million of expenses incurred completing the takeover of U.S.-based biotechnology concern MedImmune Inc. Much of the revenue increase came from sales of the company's anti-psychotic drug, Seroquel, which brought in more than $1 billion in sales worldwide. This helped offset the drop in sales of such other key drugs such as Nexium and Toprol XL. According to an Associated Press report, AstraZeneca Chief Executive Officer David Brennan said the company and its employee-management team continues "to make progress on our key priorities: The business is on track to meet its earnings target for the full year, the entire organization is driving for increased productivity and the pipeline has been further strengthened."