48 1GM Wednesday December 2 2020 | the times
BusinessMarkets
news in brief
VW boss’s ultimatum
Volkswagen, the German car
company at the centre of the
dieselgate scandal in 2015 in
which regulators were misled
over the extent of vehicle
pollution, is in turmoil again after
its chief executive issued an
ultimatum to the board. Herbert
Diess, who was headhunted from
BMW after the scandal, has
demanded an extension to his
contract, scheduled to end in
2023, to force through reforms
during the change to
electrification. The request from
Mr Diess is likely to trigger a
boardroom vote of confidence.Klarna’s new chairman
Sir Michael Moritz, the veteran
venture capitalist, is to become
chairman of Klarna, the Swedish
“buy now, pay later” company,
which is preparing for a flotation
in the next couple of years. Sir
Michael, 66, who is Welsh, was
one of Klarna’s earliest investors
through Sequoia Capital, the
venture capital firm. Klarna was
valued at $10.65 billion in a
funding round in September and
has made a push into the United
States in recent years after
establishing itself in Europe.Lastminute refunds
More than 9,000 customers of
Lastminute.com will receive
refunds totalling £7 million for
cancelled holidays after an
investigation by the Competition
and Markets Authority. The
CMA received hundreds of
complaints that people were not
refunded for holidays cancelled
because of Covid-19. Andrea
Coscelli, 51, chief executive of the
authority, said: “If we find
businesses are breaching
consumer protection law, we will
not hesitate to take action.”Store chief cuts pension
David Potts, the boss of Wm
Morrison, has agreed to cut his
pension benefits after a backlash
from investors against its
remuneration policy at its annual
meeting. Last year Mr Potts
received £213,000 in cash in lieu
of a pension, which was 25 per
cent of his £850,000 salary. By
the end of 2022 his retirement
benefits will fall into line with the
rest of the company’s staff. Mr
Potts has agreed to lift his
shareholding to 300 per cent of
his salary from 250 per cent.stock offering relatively pure-play
exposure to the metal. Early last
week, analysts at Jefferies upgraded
Antofagasta’s shares, then trading at
around £11, to “buy”. It was a good
call: by yesterday, they had already
risen above £13 and were closing in
on Jefferies’ price target of £14 a
share.
Others remain cautious, however.
Analysts at RBC have argued that
the stock looks overvalued,
especially given the need to plough
funds into expansion projects at its
Los Pelambres and Centinela mines.
This summer Antofagasta warned
that it would need to spend
$150 million more than planned on a
desalination plant for the former, inMarch. Since then, though, copper
has more than recovered its losses as
China rebounded and, after rallying
sharply thanks to vaccine
breakthroughs in November, it has
risen to seven-year highs, up by a
quarter since the start of this year.
In the past fortnight there have
been several upgrades from analysts.
Liberum forecast that “increasing
tightness across the market should
keep prices at least at current levels
for the next six months”, while
yesterday Goldman Sachs called the
rally “the first leg of a structural bull
market in copper”.
That has brought into focus shares
in Antofagasta, which mines copper
in Chile and is the only FTSE 100C
opper has been the commodity
on miners’ wish lists for several
years, in anticipation of rising
demand to drive the electrification of
the global economy (Emily Gosden
writes). Unfortunately, that hasn’t
always meant that the red metal has
been a golden ticket for the
companies digging it out of the
ground.
Copper prices struggled amid
American-China trade tensions and
then were hit by the pandemic,
which led to a sharp sell-off inTempus
Buy, sell or hold: today’s best share tips
Chemical attraction defies rough spell
C
roda International is one
of those companies that
seems to quietly get on
with the business of
turning a healthy profit
and returning some of it to
shareholders (Miles Costello writes).
That’s not to say it hasn’t been busy.
This year alone the specialist
chemicals producer has made two
acquisitions, one of them financed
through a £600 million-plus placing.
It also has landed a contract with
Pfizer, the pharmaceuticals group, to
provide non-active ingredients for its
Covid-19 vaccine. Against the
backdrop of the pandemic, the shares
have performed creditably and it has
held its interim dividend.
Enough said? Not quite. The
coronavirus undoubtedly has put the
dampeners on sales in two of its
three core divisions, the shares don’t
come cheap and the dividend yield is
pretty meagre.
Croda International began life in
Yorkshire in 1925 as a factory for
refining wool grease. In its latter-day
form, the group produces a wide
range of chemicals from 33
manufacturing sites and employs
5,400 staff in 30 countries.
As well as its operating efficiency,
part of the attraction of Croda for
investors has been its diversity. It has
three main divisions, each of them
differentiated. The largest by salesand profits — and arguably the most
interesting — is personal care, which
makes active ingredients for hygiene
and beauty products such as
shampoos and face creams.
The second largest by sales is
performance technologies, whose
products include lubricants for cars,
and then there is life sciences, which
makes chemicals to protect crops,
among other things. Shareholdersmight expect that sales of personal
care products would have held up
well during the pandemic, in
particular for those who self-
groomed at home while hairdressers
were shut. With the automotive
market all but closed during
lockdown, the performance
technologies business should have
suffered, while the life sciences unit
should have escaped relatively
unharmed.
It didn’t quite turn out that way. As
expected, sales at the life sciences
division were barely affected during
the six months to the end of June,
dipping 0.8 per cent mainly because
of a slowdown in the healthcare
markets it serves. Similarly, sales inShot in the arm
Share price Croda International by division*
Source: Refinitiv
*Six months to June 30Personal care
Sales £226.7m
Adjusted profit £68.9mAdjusted profit £32.7m
Performance technologies
Sales £216.3m
Adjusted profit £59.4m
Life sciences
Sales £182.9m
Adjusted profit £0.6m
Sales £47m
Industrial chemicals
Jan Apr Jul Oct
40
45
50
55
60
65
£70
performance technologies were off
4.6 per cent, although that seems
pretty resilient after the widespread
shutdowns across industry. Sales in
personal care fell, though, and by a
surprisingly high 8.1 per cent. This
was the result of a drop in the use of
beauty treatments more closely
associated with trips out, as well as a
decline in luxury care markets
during lockdown.
Should investors be worried? Over
the long term, probably not. The use
of expensive beauty and skincare
products is on the rise the world over
and demand should recover steadily
as the coronavirus is brought under
control. Croda’s acquisition last
month of Iberchem, a Spanish
fragrances business, bulks up the
group in the area. The outlook for
the industrial markets, car
manufacturing in particular, feels
more uncertain. A global recession
doesn’t augur well for demand, even
if the world bounces back and
resumes growth relatively quickly.
It remains to be seen how
profitable the vaccine contract is,
although Croda has estimated that it
could be worth $100 million in
revenues next year. But it does show
the group’s capabilities with chemicals
that help to get drugs into patients,
enhanced by the acquisition of Avanti
Polar Lipids, of the United States.
The shares, up 82p, or 1.4 per cent,
at £60.38 yesterday, are pretty dear,
trading at more than 29 times UBS’s
forecast earnings, and yield only 1.7
per cent. That is not compelling for a
buyer, but they remain a solid hold.ADVICE Hold
WHY Tempting to take profits
with shares well priced, but
long-term outlook is strong
order to facilitate a future project to
double the plant’s capacity. The costs
of that project are not yet known,
nor has Antofagasta published a
revised construction schedule after
experiencing Covid-19-related delays
— an update is promised in January.
October’s vote for a new constitution
in Chile also threatens longer-term
uncertainty. Such risks offset the
potential rewards of a copper bull
market.ADVICE Hold
WHY Copper prices buoyant
but execution risks remain
croda international
H1 sales £672.9m
Pre-tax profit£144.9m Int
dividend 39.5pantofagasta
Copper output
(9 months)541,300 tonnes
Net cost $1.14/lbCommodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)Brent Physical 47.12 +0.01
BFOE(Mar) 47.59 +0.09
BFOE(Feb) 47.53 -0.46
WTI(Mar) 45.02 -0.01
WTI(Feb) 44.73 -0.78Products ($/MT)Spot CIF NW Europe (prompt delivery)Premium Unld 372.00 373.00 +0.00
Gasoil EEC 384.25 386.25 -0.75
3.5 Fuel Oil 254.00 256.00 -1.00
Naphtha 392.00 396.00 +0.00ICE FuturesGas OilDec 384.25-384.00 Mar 394.00-393.75
Jan 387.00-386.75 Apr 396.50-396.00
Feb 390.75-390.50 Volume: 641141Brent (9.00pm)Feb 47.38-47.37 May 47.41-47.39
Mar 47.36-47.35 Jun 47.42-47.40
Apr 47.37-47.36 Volume: 1737433LIFFECocoaDec 1822-1820 Mar 1721-1654
Mar 1825-1824 May 1715-1550
May 1769-1767 Jul 1720-1630
Jul 1750-1743
Sep 1728-1717
Dec 1735-1656 Volume: 78537RobustaCoffeeJan 1381-1378 Sep 1440-1397
Mar 1389-1384 Nov 1469-1392
May 1398-1373
Jul 1428-1410 Volume: 13884White Sugar (FOB)Reuters Oct 387.00-381.00
Dec 390.00-381.00
Mar 400.50-400.20 Mar 390.40-384.90
May 395.10-394.40 May 386.10-366.60
Aug 394.10-388.60 Volume: 47207PRICES
Major indices
New York
Dow Jones 29823.92 (+185.28)
Nasdaq Composite 12355.11 (+156.37)
S&P 500 3662.45 (+40.82)
Tokyo
Nikkei 225 26787.54 (+353.92)
Hong Kong
Hang Seng 26567.68 (+226.19)
Amsterdam
AEX Index 611.41 (+5.39)
Sydney
AO 6812.20 (+70.10)
Frankfurt
DAX 13382.30 (+91.14)
Singapore
Straits 2814.12 (+8.17)
Brussels
BEL20 3717.68 (+50.52)
Paris
CAC-40 5581.64 (+63.09)
Zurich
SMI Index 10449.21 (-27.22)
DJ EURO Stoxx 50 3525.24 (+32.70)London
FTSE 100 6384.73 (+118.54)
FTSE 250 19844.81 (+508.49)
FTSE 350 3641.18 (+72.16)
FTSE Eurotop 100 2848.57 (+23.23)
FTSE All-Shares 3614.17 (+71.30)
FTSE Non Financials 4311.28 (+68.72)
techMARK 100 5972.50 (+37.70)
Bargains n/a
US$ 1.3422 (+0.0087)
Euro 1.1139 (-0.0031)
£:SDR 0.98 (+0.00)
Exchange Index 78.54 (+0.01)
Bank of England official close (4pm)
CPI 109.05 Oct (2015 = 100)
RPI 294.30 Oct (Jan 1987 = 100)
RPIX 290.10 Jun (Jan 1987 = 100)
Morningstar Long Commodity 514.95 (-5.22)
Morningstar Long/Short Commod3747.26 (-22.50)London Financial Futures
Period Open High Low Sett Vol Open Int
Long Gilt Dec 20 135.26 135.26 134.50 134.55 961 10293
MAR 21 134.23 134.38 133.56 133.63 356482 462727
3-Mth Sterling Dec 20 99.950 99.955 99.950 99.950 22289 469804
Mar 21 99.965 99.970 99.955 99.960 37493 687073
Jun 21 99.985 99.985 99.970 99.975 48144 834615
Sep 21 99.995 100.00 99.980 99.985 38361 567054
Dec 21 100.00 100.00 99.980 99.990 64362 503196
3-Mth Euribor Dec 20 100.54 100.54 100.53 100.53 27333 473480
Mar 21 100.54 100.55 100.54 100.54 36367 326749
Jun 21 100.55 100.55 100.54 100.54 42463 367003
Sep 21 100.55 100.55 100.54 100.54 38970 338866
DEC 21 100.55 100.56 100.54 100.55 47113 361429
3-Mth Euroswiss Dec 20 100.78 100.78 100.77 100.78 401 50462
Mar 21 100.78 100.78 100.77 100.78 1402 43839
Jun 21 100.77 100.78 100.77 100.78 1565 28987
Sep 21 100.77 100.78 100.76 100.77 1823 20157
FTSE100 Dec 20 6286.0 6387.5 6277.0 6379.5 118545 752706
MAR 21 6305.0 6333.0 6300.0 6337.5 513 6930
FTSEurofirst 80 Dec 20 4829.5
MAR 21 4813.5© 2019 Tradeweb Markets LLC. All rights reserved.
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