Trendspotting
☺ Paul Walsh (Chemicals) – Johnson Matthey, the world's largest autocatalyst company, has said that global car production rose 20% in
calendar Q4 09. With North America flat, most of the growth came from Europe (+15%) and Asia (+25%). JM expects light duty vehicle
production to remain stable in Q1 10 vs. Q4 09. SABIC, the world's largest petrochemical company, expects further growth in pricing, volumes
& profitability in 2010, driven in particular by growth in China. SABIC claims that China is now the world's largest petrochemical market, and
sees further growth opportunities in the Chinese automotive, aircraft and construction sectors in particular.
☺ Ephrem Ravi (Metals & Mining) – The world's two largest miners announced acquisitions in the fertilizers business last week. BHP Billiton
announced the $320mn acquisition of Athabasca Potash of Canada; Vale announced a $3.8bn deal to buy Bunge's fertilizers business.
☺ Scott Babka (Cap Goods) – Siemens industrial operations outpaced expectations in the quarter to December. Commenting on the
performance, CFO Joe Kaeser explained that "demand is stabilising in short cycle Industry businesses [namely industrial automation and
lighting], albeit at a low level and against a backdrop of continuous sluggish end market demand. But, customers ran down their inventory
drastically throughout 2009 and have now spent the last three months of the year restocking just as drastically above normal rates."
☺ Louise Singlehurst (Brands) – Luxottica, the eyewear manufacturer, delivered its first positive LFL growth (+2%) for its US retail business
since mid-2007. Volumes were strongest within the low/mid tier priced prescription business but the premium division has also improved.
Beneteau, the French boat manufacturer, confirmed that it expects divisional sales to increase 15% for FY10 (end August) and this is likely to
accelerate to +20% in FY11, partly driven by the 'boom' in yachting in emerging markets. Bulgari's sales fell -3% in Q409 as a strong
performance within retail (+12% U/L) was offset by continued de-stocking amongst wholesale customers. Looking forward, the company
believes de-stocking is now over for perfumes and accessories and inventory levels for the group materially improved in Q4.
☺ Haythem Rashed (Oils) – Over the last two weeks, we have seen a number of the UK E&Ps come to the capital markets - Over US$1.7bn of
primary equity issuance has been successfully raised by SOCO, JKX Oil & Gas and Tullow Oil to fund drilling and development programs.
☺ Scott Babka (Cap Goods) - Rockwell automation raised its 2010 revenue outlook by roughly 5pct pointing to a quicker than expected turn in
C4Q09 demand for industrial automation products. CEO comments on reason despite weak capacity utilisation: "there has been such a
reduction in normal operating spending in C1Q-3Q09 that because industrial production picked up, there was a natural rebound. Supply chains
were also pretty well done and people reduced their maintenance, store rooms and other spending so much that they had to spend."
☺ Suzanne Todd (Transport) – Delta Airlines noted the transatlantic business is "having a very nice rebound" in both premium and economy. The
company is bullish on the 2010 transatlantic outlook and guided for double-digit yield improvement in Q1’10.
☺ Allen Wells (Clean Energy) - The American Wind Energy Association confirmed that the US added 9.9GW of new wind power in 2009, up 18%
on 2008 levels and a record year. Wind power was the joint leading source of new electricity generation for the country, along with natural gas.
Together, the two sources account for about 80% of all new power capacity added in the country last year. These record installations came
despite concerns through most of 2009 on the availability of financing for renewables projects.
☺ Fred Bjelland (Retail) – H&M delivered a 390bps improvement in gross margin despite FX headwinds and higher markdowns. Management
highlighted very favourable supply/demand conditions when negotiating with Far East suppliers for last year's collection. Although recent
channel checks suggest inflation is returning, it really shows that size does matter (H&M is the world's 3rd largest clothing retailer by sales).
Guillermo Peigneux (Cap Goods) – SKF, an industrial bellwether, is cautious re outlook for 1Q2010: SKF sees demand "only" slightly higher
for the group in Europe, Asia and Latam, and unchanged in North America. The main culprit behind the slower than expected recovery in
volumes is Industrial, characterized by its late (later than group average) cycle nature.
Mark Christensen (Consumer HPC) - Signs of increasing competitive intensity and promotional activity from major global HPC companies
reporting last week (P&G, Colgate, Estee Lauder, Hindustan Unilever), with companies re-investing input cost tailwinds heavily in A&P, and
continuing to put through price decreases across their portfolios. In India, Hindustan Unilever was forced to cut prices by 30% for a popular
laundry brand in response to P&G launching a lower-priced variant, whilst at the same time raising A&P by 540 bps in the Dec Qtr. Both P&G
and Estee highlighted intentions to increase investment further in 1H10.
Steve Hayne (UK Banks) - Skipton Building Society, Britain’s fifth-largest building society, confirmed plans to raise its standard variable rate
from 3.5% to 4.95%. The move will raise mortgage repayments by up to 40 per cent for some borrowers. Skipton has based its decision on
“unprecedented” competition in the savings market from NS&I (the Treasury-backed savings provider), and state- controlled banks.
Bruce Hamilton (Div Fins) - 3i CEO indicated that companies starting to build order books and seeking an increase in bank credit lines were
typically being told that not only won't the banks increase, they are typically trying to shrink credit lines 25%. Where loans are re-priced due to
covenant breach typically the cost increases 300bps in addition to an arrangement fee.
Marcus Almerud (Metals & Mining) - Norsk Hydro said it sees some signs of a cooldown in Chinese demand; that there is still a 2m tonne
oversupply of Aluminum in the Western World.
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