Glaxo, Home Retail Group, Kazakhmys

123jump.com Staff
24 Oct, 2007
New York City

UK stocks lost morning gains in the afternoon on weak earnings from Glaxo and lowered production output from Kazakhmys. Wider than expected mortgage trading related loss at Merrill Lynch also affected the sentiment. FTSE 100 index closed 0.5% lower to close at 6,482. Of the 102 stocks in the index, 32 closed higher and 67 declined. Home Retail Group earnings tripled. Glaxo reported weaker than expected earnings and Kazakhmys copper production was lower than anticipated.

[R]2:00PM New York, 7:00PM London – Earnings from GlaxoSmithKline, Home Retail Group, and Reckitt Benckiser dominated trading. Market lost early gains after wider than expected loss at Merrill Lynch.[/R]

Earnings and ratings drove stocks in London trading lower after gaining as much as 0.6% in the morning trading.

In London FTSE 100 Index closed down 32.00 or 0.49% to 6,482.00, in Paris CAC 40 index fell 30.38 or 0.53% to close at 5,674.67, and in Frankfurt DAX index decreased 0.18% or 13.83 to close at 7,828.96. In Zurich trading SMI lost 0.59% or 52.21 to close at 8,851.02. Sweden and Spain led the region with a loss of more than 1.3%.

Of the 102 stocks in the FTSE 100 index, 32 traded higher, 67 closed lower, and 3 closed unchanged. Kazakhmys led the decliners in the index with a loss of 7.3% and BAE Systems led the gainers with a rise of 3.4%.

Of the stocks in the FTSE 100 index 12 stocks closed higher than 1% and 37 stocks lost more than 1%.

Cairn Energy soared 6.4% or 144p to 2,413p after adding 7.5% in the previous trading on the speculation that BP is likely to make a tender offer for the company. Both companies declined to comment on the rumors.

Friends Provident Plc jumped 1.4% to 175.50p after the statement that it plans to return £1 billion to shareholders after its proposed merger with Resolution.

Kazakhstan based copper mining and smelting operator Kazakhmys PLC reported that the third quarter production will be lower than anticipated.

In the press release the company added, “The total production of copper cathode in the first 9 months of 2007 was 6% lower than the same period of 2006, at 277.1 thousand tons.

Total cathode output in Q3 2007, at 87.0 thousand tones, was primarily reduced due to significantly lower volumes of output from purchased concentrate Inventories of purchased concentrate have increased at Balkhash smelter, which underwent maintenance work in September 2007, and this material is likely to be processed in Q4 2007.

Copper cathode production from own concentrate increased by 8% in Q3 2007 primarily due to processing of inventory, which was reduced by 5.9 thousand tons.”

GlaxoSmithKline ((GSK)) reported third quarter sales of £5.5 billion, up 1% from a year ago and profit before tax of £1.882 billion, a decline of 2% from a year ago. Earnings per share in the period fell 23.7p from 24.7p. After the news the stock fell 0.9% to 1,249p.

Total pharmaceutical turnover fell by 2% to £4.6 billion. In the United States, turnover fell 7% to £2.2 billion, impacted by continued generic competition and a reduction in Avandia sales. In Europe turnover was up 1% to £1.3 billion, with sales growth of vaccines and newer products offsetting generic competition to older products and further price cuts mandated by European governments. Sales in International were £1.0 billion, up 9%, with good growth seen in emerging markets including India and China.

Sales of the Avandia product group, for the treatment of type 2 diabetes, fell 38% to £225 million for the quarter, with US sales down 48% to £130 million. Sales in European and International markets declined 11% to £50 million and 22% to £45 million respectively.
The company has completed the purchase of £1.7 billion of stock between August 2007 and October 23rd 2007 of the £12 billion stocks authorized for repurchase.

The company guided for the year 2007 earnings rise of between 8% and 10% at constant exchange rate excluding charges related to restructuring.

Reckitt Benckiser lost 5% to 2,728p after reporting fiscal third quarter results. The company sales increased 8% to £1.337 billion in the third quarter from a year ago and for the nine months increased 7% to £3,897 billion.

Operating earnings jumped 51% to £338 million and adjusted operating profit increased 7% to £291 million. Net income increased 14% to £218 million and earnings per share increased 14% to 29.8p from a year ago.

The company chief executive Bart Becht said. “Profit growth continues to run ahead of the full year target due to good gross margin expansion and BHI synergies coming in ahead of schedule. We are therefore raising our full year target for net revenue growth (2006 base £4,922m) to around 9% at constant exchange (previously 7% - 8%) or up to 6% at actual exchange. For net income growth (base £786m) we are raising our target to 15% growth at actual exchange (equivalent to high teens at constant exchange versus previous target of mid teens). The increased target excludes exceptional pretax profits of £47m in Q3 2007. """"

BHI, Boots Healthcare International was recently integrated with the company.

Home Retail Group reported its interim results at the end of August 2007. The sales rose 3% to £2.736 billion from £2.656 billion and net income after tax increased to £114.5 million from £37.7 million, and earnings per share jumped to 11.7p from 8.3p.

Sales up 3.0% to £2,737m, reflecting total growth of 4.7% at Argos and a decline of 0.3% at Homebase. Same stores sales were up 1.4% at Argos and down 2.5% at Homebase, while the net new space contribution was 3.3% at Argos and 2.2% at Homebase.

Argos’ gross margin was ahead by approximately 125 basis points and Homebase’s by approximately 300 basis points.

The company recently acquired 27 Focus DIY stores and plans to relocate five stores at a cost of £15 million, a charge to be recorded in the second half of the fiscal year.