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Thursday October 30 - afternoon update
Unilever, the world's second-biggest supplier of consumer products, today celebrated a bumper rise in third-quarter profits with a share-price jump of 33p to 1376p.
The Anglo-Dutch group, whose brands include Dove Soap, Marmite, PG Tips and Persil, jacked up net income by 68% to €1.64 billion (£1.3 billion), way above City expectations. Analysts' consensus forecast had been €1.49 billion.
The company is already confident about full-year prospects, forecasting a rise in sales, before acquisitions and currency swings, “well in excess” of the 3%-5% range.
Sales grew 8.3% in the third quarter, with a 7.7% increase in prices. Analysts had pencilled in a rise of 6.6% on that basis. Chief executive Patrick Cescau said: “The company had earlier forecast revenue, excluding acquisitions and currency swings, would be ahead of the 3%-5% range”.
In stark contrast, shares in the world's biggest consumer products supplier, Procter & Gamble, fell 3.5% on Wall Street last night after the company sharply reduced profit expectations.
London investors continued to enjoy the benefits of the dead cat bounce, but there were signs the cat was not bouncing as high as earlier in the week. The FTSE 100 index rose 88.15 points to 4330.69 while the wider and less liquid FTSE 250 climbed 291.8 to 6280.9.
Traders continue to set their sights on a substantial cut in interest rates when the Bank of England's monetary policy committee meets next week. The best guess is another half-point, dropping UK rates to 4% after the US Federal Reserve last night cut its rates by a further half-point to 1%.
Further evidence about the extent to which blue-chip companies have been savaged by the stock-market sell-off has been provided by DigitalLook.com, the financial information website for private investors. It has discovered that almost a third of the top 100 companies are now trading at a discount to their book value, with 15 at less than half their book value.
DigitalLook.com points out that when a company's stock-market price tag falls below the value of the assets on its balance sheet, it is often seen by investors such as billionaire Warren Buffett as an opportunity to buy.
The market value of cruise ships operator Carnival, up 19p at 1610p, has fallen to just 21% of its book value while the value of British Airways, up 4.9p at 131.25p, is 45% and that of Kingfisher, 7¾p better at 116¼p, is 54%. The price-to-book value of Royal Bank of Scotland, 1p firmer at 65p, is 12% and the lowest of all Footsie 100 companies. DigitalLook.com says the uncertainty over how the Government's bailout will be implemented and fears over the value of the assets it has bought from ABN Amro partly explain the huge discount.
Cazenove says it may be time to start looking at the housebuilders. “We believe prospects for the industry could be starting to improve as being very battered already becomes a virtue”, says the broker's Anthony Codling. Bellway, up 62½p at 548½p, and Persimmon, 24¾p higher at 275¾p, are seen as best fitting the bill.
Platinum producer Lonmin warmed to its latest production numbers with a rise of 71p to 1147p but warned of a slowdown in demand next year. It was a similar story with Kazakhmys, up 50p at 318½p.
