Service Sector Struggles Across Europe, Evonik Drops to a 3-Year Low

Lucy Stoeva
03 Mar, 2016
New York City

European markets closed slightly lower as investors digested latest service sector surveys in the region. Evonik hit a three-year low on a weaker 2016 outlook. Insurer Admiral Group surged after posting 6% growth in 2015 pre-tax profit.

[R]4:00 PM Frankfurt, Germany - European markets closed slightly lower as investors digested latest service sector surveys in the region. Evonik hit a three-year low on a weaker 2016 outlook. Insurer Admiral Group surged after posting 6% growth in 2015 pre-tax profit.[/R]

European markets closed slightly lower in a highly volatile session, as investors searched direction amid service sector surveys, corporate reports, and ahead of key data on the U.S. economy.

In the U.K., the February Markit reading on services fell to a three-year low. The services sector purchasing managers’ index dropped to 52.7 from 55.6 in January, below the market expectations of 55.

In Germany the services PMI was slightly higher at 55.3, while in France the index declined to 49.2, below the key 50 benchmark that separates expansion from contraction.

Investors were cautious ahead of the monthly U.S. job report on Friday, which may provide more guidance on the U.S. economy.

In London, gains in mining stocks and insurer Admiral Group helped limit the losses, while in Frankfurt, chemical maker Evonik plunged 12% on weak 2016 outlook.

The FTSE 100 index fell 12.44, or 0.2%, to 6,134.62, while the DAX index edged down 4.75, or 0.05%, to 9,771.87.

In Paris, the CAC 40 index dropped 3.23, or 0.07%, to 4,421.66.

Admiral Group Plc surged 8.75% to 1,914 pence after the insurer posted full-year 2015 pre-tax profit increased 6% to £377 million.

Revenues soared 13% to £232 million from a year ago and earnings per share rose 4% to 107.3 pence from the prior year.

The company proposed a final dividend of 63.4 pence, payable on June 3.

Evonik Industries AG plummeted 11.9% to €24.93, a three-year low, after the German chemical maker negatively changed its profit outlook for 2016 and blamed it on weakening market conditions.

Adjusted EBITDA for 2016 is now expected in the range of €2 billion to €2.2 billion, down from €2.5 billion last year.

2016 sales are expected to be below €13.5 billion as the price of amino acids declines from the previous high levels, while competition in baby care is intensifying.

Evonik confirmed its mid-term targets and held out for adjusted EBITDA of more than €3 billion and sales of €18 billion by 2018.

The weaker outlook puts greater pressure on the company to find an acquisition target with cash of €2.4 billion at the end of 2015.

Since previous attempts to acquire Clariant AG and Royal DSM NV have failed now Evonik is, reportedly, looking for potential targets in the U.S.

JC Decaux advanced 3.8% to €37.6 after the French advertising company forecast organic revenue growth of 9% for the first quarter of 2016 on top of solid growth in 2015.

Adjusted net income in 2015 rose 12% to €241.4 million, before impairment charges, from 2014.

Full-year adjusted revenue climbed 14% to €3.2 billion, while adjusted organic revenue grew 4.2% from the previous year.

Adjusted EBIT, before impairment charge, increased 10.9% in 2015 to €371.4 million.

The proposed dividend per share was 12% higher at €0.56 per share from the previous year.