A synopsis of today's Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.
How was earnings season for your coverage? Were things better or worse than expected?
It has been pretty mixed. Total's (NYSE: TOT) second-quarter results were slightly disappointing in terms of volume growth in E&P down 8.5% on maintenance in Norway and Angola, Nigeria disruptions, price effects and divestments. These lower volumes offset nearly all benefits of higher prices, with operating profit down 5%.
A lower tax rate helped to meet net income consensus expectations. Although this has disappointed, we would highlight the fact that volume growth in the sector has not been much better on average. We still believe volume growth will accelerate into year's end and will surprise in 2007. Downstream was in line. Profits were exactly the TRVC refining margin indicator - 15% down year over year. They came at EUR 1,036 millions. Chemicals were also bellow consensus due to weak Asian margins and the no-contribution from Arkema after the spin-off.
Eni SpA (NYSE: E) reported second-quarter 2006 earnings of EUR2.48 billion, which was slightly above consensus, thanks to higher realized commodity prices and strong gas earnings but a higher tax rate. Gas and Power earnings surprised on the upside, reflecting stronger gas wholesaling demand which has benefited from timing differences in sale and purchase price.
We believe this growth in the gas division is unsustainable since government regulations will get tougher going forward and margins will come under pressure. Remember, the recent change in the Italian government has not had enough time to implement its agenda. This will soon impact the Gas business. E&P growth was up 1% year over year thanks to new field expansion in Angola, Libya, Egypt, Nigeria LNG and Australia. Target growth for the year stood at 3%.
Syngenta (NYSE: SYT) sales at constant exchange rates (CER) were one percent lower. Crop Protection sales were unchanged; Seeds sales were four percent lower. EBITDA was unchanged (CER) at $1.54 billion, as operational efficiency savings offset the impact of higher oil-related costs ($82 million) and funded increased marketing and development expenditure in fast-growing areas of the business. Earnings per share, excluding restructuring and impairment, were up nine percent to $10.44, benefiting from higher operating income and a reduction in net financial expense helped by currency exchange gains. After charges for restructuring and impairment, earnings per share were $9.51 (2005: $8.92). Sales were negatively impacted by two percent due to the relative strength of the U.S. dollar, notably against the Euro. The net impact on EBITDA was one percent.
Read the full interview at http://at.zacks.com/?id=2647.
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