European Markets Rise; Daimler, Sanofi, Software AG Earnings Gain

Arthi Gupta
27 Apr, 2012
New York City

The European indexes advanced and yields for Spanish and Italian bonds rose. Ireland-based Jazz Pharmaceuticals agreed to acquire EUSA Pharma for $700 million. Earnings at BASF fell 29% but Daimler AG net rose 29% and Sanofi SA net jumped 50%.

[R]1:30 PM Frankfurt – The European indexes advanced and yields for Spanish and Italian bonds rose. Ireland-based Jazz Pharmaceuticals agreed to acquire EUSA Pharma for $700 million. Earnings at BASF fell 29% but Daimler AG net rose 29% and Sanofi SA net jumped 50%.[/R]

The European indexes turned losses to gains after Italy successfully completed another short term bond offering but the yields rose. Spanish yields rose and unemployment jumped above 24%.

Standard and Poor''s downgraded Spanish credit ratings by two notches to ''BBB+/A-2'' from ''A/A-1'', citing further deterioration of the country''s public finances amid economic contraction and said the outlook is ''negative'' indicating more downgrades are likely.

Investors have largely learned to ignore the rating agencies moves after years of missteps by the agencies and the rating actions are considered lagging indicators and not the leading as these actions were two decades ago.

The agency further said that Spain''s government will need to provide further fiscal support to the banking sector.

S&P estimates the Spanish economy to contract in real terms by 1.5% in 2012 compared to its previous forecast of a real GDP growth of 0.3% in 2012.

Adding to the country’s woes, Spain said its unemployment rate soared to 24.44% in the first quarter.

Software AG, Total SA, and BASF AG quarterly profit declined. However, Sanofi earnings rose from the acquisition of U.S. biotech firm Genzyme and higher sales from diabetes drug Lantus.

In Paris trading, the CAC-40 Index climbed 14.67 or 0.5% to 3,243.99 and in Frankfurt the DAX Index edged higher 6.52 or 0.1% to 6,746.03.

For the week, the CAC-40 Index rose 1.7% and the DAX Index dipped 0.1%.

The yield on Spain’s benchmark 10 year bonds climbed 13 basis points to 5.93% and the Italian bond yields advanced 11 basis points to 5.71%.

Jazz Pharmaceuticals to Acquire EUSA Pharma

Jazz Pharmaceuticals agreed to acquire EUSA Pharma, a privately-held, specialty pharmaceutical company for $650 million in cash and a potential $50 million milestone payable in cash based upon its lead product, Erwinaze achieving a specified U.S. net sales target in 2013.

The transaction is expected to provide additional revenue of $210 million to $230 million, additional adjusted EBITDA of $75 to $85 million, and an additional $0.75 to $0.85 in adjusted earnings per share in 2013.

Gainers & Losers

BASF SE fell 1.8% to €63.85 after the German chemical company reported first quarter sales improved 6.3% to €20.59 billion from €19.36 billion a year ago. Net income in the quarter dropped 28.5% to €1.72 billion or €1.88 per share from €2.41 billion or €2.62 per share last year.

Daimler AG declined 1.8% to €41.88 after the German automaker reported first quarter revenues grew 9.2% to €27.01 billion from €24.73 billion in the year-ago quarter. Net profit for the quarter increased 20.3% to €1.42 billion or €1.25 per share from €1.18 billion or 99 cents per share in the prior year.

In the first quarter unit sales rose 9% to 502,100 vehicles.

Eni S.p.A. rose 1% to €16.73 after the oil and gas explorer reported first quarter net profit surged 42% to €3.62 billion from €2.55 billion last year. Natural gas sales fell 5.3% to 30.61 billion cubic meters affected by weak demand.

Novo Nordisk A/S dropped 2.0% to DKK 822 after the healthcare company stated first quarter sales rose 13% to DKK 17.75 billion from DKK 15.69 billion in the prior-year quarter. Net profit in the quarter climbed 15% to DKK 4.66 billion or DKK 8.32 per share compared to net profit of DKK 4.07 billion or DKK 7.06 per share a year ago.

Sanofi SA climbed 0.5% to $37.74 after the French drugmaker reported first quarter net sales increased 9.4% to €8.51 billion from €7.78 billion in the prior year. Net income in the quarter rose 50% to €1.83 billion or €1.38 per share from €1.22 billion or 93 cents per share reported a year ago.

Software AG soared 7.2% to €26.47 after the business infrastructure software maker said first quarter total revenues declined 7% to €254.6 million from €272.6 million in the prior year. Net income for the quarter fell 10% to €35.9 million or 41 cents per diluted share from €40 million or 46 cents per share in the prior year.

Total SA decreased 1.7% to €35.90 after the oil and gas explorer reported first quarter sales rose 11% to €51.17 billion compared with €46.03 billion in the previous year. Net income group share in the quarter fell 7% to €3.66 billion from €3.95 billion a year ago.