(alleyinsider.com) -- Apple's (AAPL) iPhone was not the most-purchased consumer smartphone in the first quarter, according to research firm NPD Group. That title goes to RIM's (RIMM) BlackBerry Curve 8300 series, which was on sale at more carriers and had the benefit of a buy-one, get-one free sale at Verizon Wireless during the quarter.
Based on U.S. consumer sales of smartphone handsets in NPD's "Smartphone Market Update" report, the first-quarter 2009 ranking of the top-five best- selling smartphones is as follows:
1. RIM BlackBerry Curve (all 83XX models)
2. Apple iPhone 3G (all models)
3. RIM BlackBerry Storm
4. RIM BlackBerry Pearl (all models, except flip)
5. T-Mobile G1
Overall, smartphones made up 23% of U.S. phone sales in Q1, up from 17% during Q1 '08. That's good news for wireless carriers, as smartphone subscribers spend roughly 1.5x as much per month on service per month as people with "dumb" phones.
Read more here
Monday, May 4, 2009
Sunday, May 3, 2009
3M, Kimberly-Clark Among Few to Make Swine Flu Masks
(Bloomberg) -- 3M Co. and Kimberly-Clark Corp. are among the few manufacturers that make respiratory masks sophisticated enough to ward off swine flu, exacerbating a shortage at retailers.
Only masks rated N95 or above, which can filter at least 95 percent of airborne particles, are effective at blocking the H1N1 virus, according to the U.S. Department of Health and Human Services. N95 respirators require sophisticated manufacturing techniques because they contain a filter often made of carbon, health officials said.
“If you are going to wear a mask, the N95 is the one, but it has to be fitted properly and is difficult to breathe from,” said Georges Benjamin, executive director of the American Public Health Association in Washington, in a telephone interview. Regular face masks are loose-fitting and block only large particles, he said in an April 29 interview.
Swine flu has been found in 11 countries and has killed at least 10 people as of May 1, according to the World Health Organization. The U.S. Centers for Disease Control and Prevention has identified 109 cases in 11 states. No mask or respirator can completely halt the contagion, the Atlanta-based CDC said on its Web site.
Other manufacturers include Markham, Ontario-based Alpha Pro Tech Ltd. and Mine Safety Appliances Co. in Pittsburgh, which delivered truckloads of respirators to workers cleaning up after the Sept. 11 terrorist attacks.
Not Enough Capacity
Cantel Medical Corp.’s Crosstex unit received requests for about 1 million N95 masks this week, about twice what it had available, Andrew Whitehead, a company spokesman, said April 30.
“There just isn’t enough capacity in the industry to supply everyone in the country with an N95,” he said. Little Falls, New Jersey-based Cantel had 2008 sales of $249.4 million.
With few manufacturers and high demand, retailers are running out fast. CVS Caremark Corp. and Walgreen Co., the two largest U.S. drugstore chains, are sold out on their Web sites and at some stores. Wal-Mart Stores Inc. and Home Depot Inc. are out of stock at many locations, and only a few types of the mask are still available through Amazon.com Inc., the world’s largest online retailer.
“Whether we will be able to replenish the supply hasn’t yet been determined,” said Tiffani Washington, a Walgreen spokeswoman, said in an April 30 interview. CVS is working with suppliers to meet increased demand for masks, Michael DeAngelis, a company spokesman, said in an April 30 e-mail.
3M rose 28 cents to $57.88 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen less than 1 percent this year. Kimberly-Clark added 61 cents to $49.75 and has declined 5.7 percent this year.
Read more here
Only masks rated N95 or above, which can filter at least 95 percent of airborne particles, are effective at blocking the H1N1 virus, according to the U.S. Department of Health and Human Services. N95 respirators require sophisticated manufacturing techniques because they contain a filter often made of carbon, health officials said.
“If you are going to wear a mask, the N95 is the one, but it has to be fitted properly and is difficult to breathe from,” said Georges Benjamin, executive director of the American Public Health Association in Washington, in a telephone interview. Regular face masks are loose-fitting and block only large particles, he said in an April 29 interview.
Swine flu has been found in 11 countries and has killed at least 10 people as of May 1, according to the World Health Organization. The U.S. Centers for Disease Control and Prevention has identified 109 cases in 11 states. No mask or respirator can completely halt the contagion, the Atlanta-based CDC said on its Web site.
Other manufacturers include Markham, Ontario-based Alpha Pro Tech Ltd. and Mine Safety Appliances Co. in Pittsburgh, which delivered truckloads of respirators to workers cleaning up after the Sept. 11 terrorist attacks.
Not Enough Capacity
Cantel Medical Corp.’s Crosstex unit received requests for about 1 million N95 masks this week, about twice what it had available, Andrew Whitehead, a company spokesman, said April 30.
“There just isn’t enough capacity in the industry to supply everyone in the country with an N95,” he said. Little Falls, New Jersey-based Cantel had 2008 sales of $249.4 million.
With few manufacturers and high demand, retailers are running out fast. CVS Caremark Corp. and Walgreen Co., the two largest U.S. drugstore chains, are sold out on their Web sites and at some stores. Wal-Mart Stores Inc. and Home Depot Inc. are out of stock at many locations, and only a few types of the mask are still available through Amazon.com Inc., the world’s largest online retailer.
“Whether we will be able to replenish the supply hasn’t yet been determined,” said Tiffani Washington, a Walgreen spokeswoman, said in an April 30 interview. CVS is working with suppliers to meet increased demand for masks, Michael DeAngelis, a company spokesman, said in an April 30 e-mail.
3M rose 28 cents to $57.88 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen less than 1 percent this year. Kimberly-Clark added 61 cents to $49.75 and has declined 5.7 percent this year.
Read more here
Tuesday, April 28, 2009
Bank of America's Lewis braces for shareholder wrath
(MarketWatch) -- Ken Lewis, the beleaguered chief executive at Bank of America Corp., will face a closely watched proxy vote at the company's annual meeting on Wednesday when shareholders decide whether he keeps his board seat as chairman at the banking giant.
There should be plenty of angry shareholders and protest signs at Bank of America's annual meeting in Charlotte, N.C.
Shareholders will vote on the election to the board of a slate of 18 nominees, including Lewis, who is both CEO and chairman. There will also be a vote on whether the post of chairman should be independent.
Lewis has taken considerable flack over the precipitous drop in shares of Bank of America and its most recent ambitious acquisitions: mortgage lender Countrywide Financial and troubled broker Merrill Lynch.
Several shareholder groups and proxy advisers such as Change to Win Investment Group and Risk Metrics have lobbied to vote against Lewis, O. Temple Sloan -- the board's lead director -- and other directors. They have accused Lewis of "empire-building" as well as a shotgun wedding with Merrill in which he failed to disclose risks of the 2008 deal to shareholders.
On Tuesday, a group of seven labor unions said they want the bank to prohibit brokers from casting director-election votes on behalf of investors that don't vote themselves, when shareholders consider the Lewis' fate Wednesday.
The group is focusing its attention, in part, on so called broker-non-votes. In many cases, retail investors don't vote in corporate director elections. Typically, brokers that hold these shares for investors automatically vote the uninstructed stake for the management-backed director slate.
In a letter to Bank of America's board, Change to Win contends that roughly 25% of votes scheduled to be cast at the annual meeting will be "broker votes" based on trends from previous years.
Read more here
There should be plenty of angry shareholders and protest signs at Bank of America's annual meeting in Charlotte, N.C.
Shareholders will vote on the election to the board of a slate of 18 nominees, including Lewis, who is both CEO and chairman. There will also be a vote on whether the post of chairman should be independent.
Lewis has taken considerable flack over the precipitous drop in shares of Bank of America and its most recent ambitious acquisitions: mortgage lender Countrywide Financial and troubled broker Merrill Lynch.
Several shareholder groups and proxy advisers such as Change to Win Investment Group and Risk Metrics have lobbied to vote against Lewis, O. Temple Sloan -- the board's lead director -- and other directors. They have accused Lewis of "empire-building" as well as a shotgun wedding with Merrill in which he failed to disclose risks of the 2008 deal to shareholders.
On Tuesday, a group of seven labor unions said they want the bank to prohibit brokers from casting director-election votes on behalf of investors that don't vote themselves, when shareholders consider the Lewis' fate Wednesday.
The group is focusing its attention, in part, on so called broker-non-votes. In many cases, retail investors don't vote in corporate director elections. Typically, brokers that hold these shares for investors automatically vote the uninstructed stake for the management-backed director slate.
In a letter to Bank of America's board, Change to Win contends that roughly 25% of votes scheduled to be cast at the annual meeting will be "broker votes" based on trends from previous years.
Read more here
Monday, April 27, 2009
Chicago Missing Swaps Swagger; Melamed Vows Comeback
(Bloomberg) -- Leo Melamed helped create the first contracts almost 40 years ago in what would become the $20 trillion financial futures market. In the 1980s he pushed for electronic trading, propelling his Chicago-based CME Group Inc. to dominate U.S. futures exchanges.
“We think we’re better than everybody else,” said Melamed, CME Group’s chairman emeritus.
In the $28 trillion world of the credit-default swap market, though, the Chicago swagger is less certain. Six months after announcing its plan to back credit-default swaps with its clearinghouse, and six weeks after gaining regulatory approval, CME Group hasn’t processed a single dollar of the contracts. It’s losing to the 9-year-old Intercontinental Exchange Inc., which is about to hit the $100 billion mark.
CME Group’s stumble in this new market has forced the world’s largest futures exchange to admit mistakes and change course. Melamed, 77, and his colleagues got fresh evidence of the need to do so last week when the company reported a 30 percent drop in first-quarter profit because trading in its largest contract, interest-rate futures, fell 53 percent.
“We started a little wrong,” Melamed said in an April 22 interview in his office, where photographs of him with Federal Reserve Chairman Ben S. Bernanke and every president back to Gerald Ford hang on the wall. “We said you had to trade with us to go to our clearinghouse. That was wrong. We’ve now adjusted that, and that was a big difference.”
Lehman Fallout
CME Group is battling to penetrate the credit-default swap market where regulators are demanding more transparency after Lehman Brothers Holdings Inc., one of the largest swaps dealers, filed the biggest bankruptcy in U.S. history last September with $613 billion of debt. American International Group Inc.’s bad bets using the contracts led to four attempts by the U.S. to salvage the insurer in a rescue package valued at $182.5 billion.
A clearinghouse that backs the contracts spreads the counterparty default risk among the members that capitalize it by becoming the buyer to every seller and seller to every buyer. It also creates one location for regulators to see prices and positions in the market.
Credit-default swaps are derivatives used to hedge against losses or speculate on companies’ ability to repay their debt. The swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent.
110-year History
While clearing credit-default swap trades is a goal of CME Group, the exchange has its eye on the broader over-the-counter business, which is the world’s largest derivative market with a notional value of $684 trillion.
“We think that’s the next frontier,” Melamed said, adding that the CME Group eventually would prevail in attracting customers to its clearinghouse. “If one were to choose where one wants to go with credit-default swaps, how about the place that has a 110-year history without default?”
Intercontinental Exchange, based in Atlanta, is an upstart compared with that pedigree, having begun in 2000 with a system to guarantee over-the-counter energy transactions. The company has since grown to the second-largest U.S. futures market, owning exchanges in New York, London and Winnipeg.
CME Group fell $9.02, or 3.8 percent, to $230.78 in Nasdaq Stock Market trading. Intercontinental Exchange gained $3.31, or 3.9 percent, to $87.70 in New York Stock Exchange composite trading. CME had risen 11 percent his year while ICE was up 6.4 percent.
Read more here
“We think we’re better than everybody else,” said Melamed, CME Group’s chairman emeritus.
In the $28 trillion world of the credit-default swap market, though, the Chicago swagger is less certain. Six months after announcing its plan to back credit-default swaps with its clearinghouse, and six weeks after gaining regulatory approval, CME Group hasn’t processed a single dollar of the contracts. It’s losing to the 9-year-old Intercontinental Exchange Inc., which is about to hit the $100 billion mark.
CME Group’s stumble in this new market has forced the world’s largest futures exchange to admit mistakes and change course. Melamed, 77, and his colleagues got fresh evidence of the need to do so last week when the company reported a 30 percent drop in first-quarter profit because trading in its largest contract, interest-rate futures, fell 53 percent.
“We started a little wrong,” Melamed said in an April 22 interview in his office, where photographs of him with Federal Reserve Chairman Ben S. Bernanke and every president back to Gerald Ford hang on the wall. “We said you had to trade with us to go to our clearinghouse. That was wrong. We’ve now adjusted that, and that was a big difference.”
Lehman Fallout
CME Group is battling to penetrate the credit-default swap market where regulators are demanding more transparency after Lehman Brothers Holdings Inc., one of the largest swaps dealers, filed the biggest bankruptcy in U.S. history last September with $613 billion of debt. American International Group Inc.’s bad bets using the contracts led to four attempts by the U.S. to salvage the insurer in a rescue package valued at $182.5 billion.
A clearinghouse that backs the contracts spreads the counterparty default risk among the members that capitalize it by becoming the buyer to every seller and seller to every buyer. It also creates one location for regulators to see prices and positions in the market.
Credit-default swaps are derivatives used to hedge against losses or speculate on companies’ ability to repay their debt. The swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent.
110-year History
While clearing credit-default swap trades is a goal of CME Group, the exchange has its eye on the broader over-the-counter business, which is the world’s largest derivative market with a notional value of $684 trillion.
“We think that’s the next frontier,” Melamed said, adding that the CME Group eventually would prevail in attracting customers to its clearinghouse. “If one were to choose where one wants to go with credit-default swaps, how about the place that has a 110-year history without default?”
Intercontinental Exchange, based in Atlanta, is an upstart compared with that pedigree, having begun in 2000 with a system to guarantee over-the-counter energy transactions. The company has since grown to the second-largest U.S. futures market, owning exchanges in New York, London and Winnipeg.
CME Group fell $9.02, or 3.8 percent, to $230.78 in Nasdaq Stock Market trading. Intercontinental Exchange gained $3.31, or 3.9 percent, to $87.70 in New York Stock Exchange composite trading. CME had risen 11 percent his year while ICE was up 6.4 percent.
Read more here
Thursday, April 23, 2009
Steven Rattner's next headache
(Fortune) -- Steven Rattner, the New York banker-turned-Obama Administration car czar, has been much in the news lately. Riding high in early April thanks to laudatory profiles in the Wall Street Journal and the New York Times, Rattner's name has been in the press this week in connection with a scandal involving a New York State retirement fund.
What's gotten short shrift in all the coverage, though, is the complicated situation that Rattner left behind for his former partners and himself at Quadrangle Group, a New York-based private equity firm that Rattner co-founded.
On this Friday, April 24, Quadrangle's investors are scheduled to vote on whether they want to keep funneling money into a Rattner-free Quadrangle. Rattner's departure from the firm on February 23 came at a precarious moment for Quadrangle thanks to less than stellar returns and some high-profile flops like an investment in Alpha Media, the parent company that brings you Maxim and the recently shuttered music magazine Blender.
A 'key man clause'
The catalyst for the vote is that Rattner's departure triggered what on Wall Street is known as a "key man clause." The way the provision works is that if the key man (in this case Rattner) decides to leave the firm, Quadrangle's investors have the opportunity to block any further investments that can be made with capital they had previously committed. So a "nay" vote effectively terminates the funds' ability to do new deals from scratch (although some capital still could be invested in existing portfolio companies.)
The recent barrage of publicity about Rattner, 56, has the remaining partners of Quadrangle concerned about the vote's outcome. There was a meeting March 31 so that Quadrangle executives could answer investors' questions about the management and performance of the fund and to get "candid input on changes you thought were necessary to reflect the changed circumstances at our firm and the world more generally," is how Quadrangle's leadership phrased their position in a subsequent letter to investors.
Rattner started the firm in March 2000, shortly after he left his position as Deputy CEO of Lazard Frères in New York. He was joined by three of his former Lazard partners: Josh Steiner, a Clinton-era Treasury Department chief-of-staff; Peter Ezersky, Rattner's longtime number two in Lazard's hugely successful media banking group; and David Tanner, a former partner at Warburg Pincus and the only one of the four men with actual experience making private equity investments (including achieving an IRR of 145% in six investments at Lazard Capital Partners), a fact touted by the group to raise money.
With a lot of hard work by the Monument Group, a private equity fundraising firm, and a few phone calls by Rattner to his former Lazard media clients -- such as Comcast CEO Brian Roberts, Craig McCaw, the billionaire telecom investor, and IAC Interactive CEO Barry Diller -- Quadrangle was able to relatively quickly raise a $1 billion first fund (in which I am an investor). As it was on its way to being fully invested in 2004, the Quadrangle team hit the road to raise money for a second fund, which closed with $2 billion in March 2005. (It was Rattner's efforts to raise capital for this fund that have landed him in a recent SEC complaint about a "pay-to-play" scandal in New York State. Rattner is not a defendant in the SEC case that focuses on the kickbacks that a former deputy comptroller and a prominent political advisor allegedly received from investment management firms seeking to manage investment assets held by the New York State Common Retirement Fund.)
Quadrangle offers to take a haircut
For the first fund, Rattner's departure and the tripping of the "Key Man" provision is moot (the fund was fully invested). The key man event is very much operative, though, for the second fund, which still has around $500 million to invest and to call from its investors. In a letter to Quadrangle's investors, Rattner wrote that he hoped they would decide not to block the balance of the money in the second fund from being invested because of his departure. He added, "My family will enthusiastically fulfill its capital commitment to QCP II and looks forward to participating in the continuing investments and portfolio value creation of the firm." The Rattners, as well as the other members of the general partners of Quadrangle, had $55 million invested in the first Quadrangle fund and have another $120 million in capital commitments to the second fund.
On April 17, as an inducement to convince investors to stay the course, Quadrangle's remaining partners decided to take what in Wall Street parlance is known as a "haircut" following their discussions with limited partners. Quadrangle leaders voluntarily agreed to take a reduction of the fund's management fees from 1.75% of the $2 billion -- $35 million a year -- to 1.7% for the remainder of 2009, 1.65% for the first half of 2010 and 1.55% for the second half of 2010. Quadrangle also agreed to decrease to 15% the amount of the fund that could be put in any one fund investment and agreed to escrow 25% of all after-tax carry proceeds.
Read more here
What's gotten short shrift in all the coverage, though, is the complicated situation that Rattner left behind for his former partners and himself at Quadrangle Group, a New York-based private equity firm that Rattner co-founded.
On this Friday, April 24, Quadrangle's investors are scheduled to vote on whether they want to keep funneling money into a Rattner-free Quadrangle. Rattner's departure from the firm on February 23 came at a precarious moment for Quadrangle thanks to less than stellar returns and some high-profile flops like an investment in Alpha Media, the parent company that brings you Maxim and the recently shuttered music magazine Blender.
A 'key man clause'
The catalyst for the vote is that Rattner's departure triggered what on Wall Street is known as a "key man clause." The way the provision works is that if the key man (in this case Rattner) decides to leave the firm, Quadrangle's investors have the opportunity to block any further investments that can be made with capital they had previously committed. So a "nay" vote effectively terminates the funds' ability to do new deals from scratch (although some capital still could be invested in existing portfolio companies.)
The recent barrage of publicity about Rattner, 56, has the remaining partners of Quadrangle concerned about the vote's outcome. There was a meeting March 31 so that Quadrangle executives could answer investors' questions about the management and performance of the fund and to get "candid input on changes you thought were necessary to reflect the changed circumstances at our firm and the world more generally," is how Quadrangle's leadership phrased their position in a subsequent letter to investors.
Rattner started the firm in March 2000, shortly after he left his position as Deputy CEO of Lazard Frères in New York. He was joined by three of his former Lazard partners: Josh Steiner, a Clinton-era Treasury Department chief-of-staff; Peter Ezersky, Rattner's longtime number two in Lazard's hugely successful media banking group; and David Tanner, a former partner at Warburg Pincus and the only one of the four men with actual experience making private equity investments (including achieving an IRR of 145% in six investments at Lazard Capital Partners), a fact touted by the group to raise money.
With a lot of hard work by the Monument Group, a private equity fundraising firm, and a few phone calls by Rattner to his former Lazard media clients -- such as Comcast CEO Brian Roberts, Craig McCaw, the billionaire telecom investor, and IAC Interactive CEO Barry Diller -- Quadrangle was able to relatively quickly raise a $1 billion first fund (in which I am an investor). As it was on its way to being fully invested in 2004, the Quadrangle team hit the road to raise money for a second fund, which closed with $2 billion in March 2005. (It was Rattner's efforts to raise capital for this fund that have landed him in a recent SEC complaint about a "pay-to-play" scandal in New York State. Rattner is not a defendant in the SEC case that focuses on the kickbacks that a former deputy comptroller and a prominent political advisor allegedly received from investment management firms seeking to manage investment assets held by the New York State Common Retirement Fund.)
Quadrangle offers to take a haircut
For the first fund, Rattner's departure and the tripping of the "Key Man" provision is moot (the fund was fully invested). The key man event is very much operative, though, for the second fund, which still has around $500 million to invest and to call from its investors. In a letter to Quadrangle's investors, Rattner wrote that he hoped they would decide not to block the balance of the money in the second fund from being invested because of his departure. He added, "My family will enthusiastically fulfill its capital commitment to QCP II and looks forward to participating in the continuing investments and portfolio value creation of the firm." The Rattners, as well as the other members of the general partners of Quadrangle, had $55 million invested in the first Quadrangle fund and have another $120 million in capital commitments to the second fund.
On April 17, as an inducement to convince investors to stay the course, Quadrangle's remaining partners decided to take what in Wall Street parlance is known as a "haircut" following their discussions with limited partners. Quadrangle leaders voluntarily agreed to take a reduction of the fund's management fees from 1.75% of the $2 billion -- $35 million a year -- to 1.7% for the remainder of 2009, 1.65% for the first half of 2010 and 1.55% for the second half of 2010. Quadrangle also agreed to decrease to 15% the amount of the fund that could be put in any one fund investment and agreed to escrow 25% of all after-tax carry proceeds.
Read more here
Wednesday, April 22, 2009
LG Household Rises to Three-Month High on Goldman Sachs Rating
(Bloomberg) -- LG Household & Health Care Ltd., a South Korean maker of cleaning and personal-hygiene products, rose to the highest in more than three months in Seoul trading as Goldman, Sachs & Co. advised investors to buy the stock.
LG Household & Health Care shares gained 4.5 percent to 174,000 won as of 10:43 a.m. on the Korea Exchange, set for the highest close since Jan. 2. The benchmark Kospi stock index rose 0.3 percent.
Goldman Sachs raised its recommendation to “buy” from “neutral” and lifted its 12-month share-price estimate by 11 percent to 200,000 won in a report today. Net income will be 146 billion won ($108 million) in 2009, compared with Goldman Sachs’s earlier estimate of 141 billion won, the brokerage said.
Read more here
LG Household & Health Care shares gained 4.5 percent to 174,000 won as of 10:43 a.m. on the Korea Exchange, set for the highest close since Jan. 2. The benchmark Kospi stock index rose 0.3 percent.
Goldman Sachs raised its recommendation to “buy” from “neutral” and lifted its 12-month share-price estimate by 11 percent to 200,000 won in a report today. Net income will be 146 billion won ($108 million) in 2009, compared with Goldman Sachs’s earlier estimate of 141 billion won, the brokerage said.
Read more here
Monday, April 20, 2009
Putin’s Tariffs Stall Russian Growth for Caterpillar
(Bloomberg) -- Prime Minister Vladimir Putin’s trade measures are starting to keep Deere & Co. combines and Caterpillar Inc. trucks out of Russian wheat fields and coal mines, dimming the companies’ prospects for expansion abroad.
Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.
Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.
“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”
Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.
“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.
‘Low’ Expectations
Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.
Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.
Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.
Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.
Loan Program
The deal is for loans made through OAO Sberbank, Russia’s largest lender, and Rosselkhozbank, the Russian Agricultural Bank, which both have local offices that farmers rely on for financing, Michael Considine, director of EurAsia issues for the Washington-based Chamber of Commerce, said in an interview.
“If a Russian farmer had the cash to buy a Deere combine, it would cost substantially more because of the tariff increase,” Considine said. “And if you didn’t have the money, you could just forget about it because you’d only be able to get the money to buy something made in Russia.”
Putin undertook the measures after a December visit to Rostov, Russia-based Rostselmash, the country’s leading combine maker.
Putin’s press secretary Dmitry Peskov wasn’t available for comment. Valeriy Khromthenkov, a Russian official in Washington with oversight of agricultural issues, declined to comment. A spokesman for Finance Minister Alexei Kudrin, who also is deputy prime minister, wasn’t available to comment.
Read more here
Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.
Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.
“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”
Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.
“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.
‘Low’ Expectations
Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.
Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.
Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.
Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.
Loan Program
The deal is for loans made through OAO Sberbank, Russia’s largest lender, and Rosselkhozbank, the Russian Agricultural Bank, which both have local offices that farmers rely on for financing, Michael Considine, director of EurAsia issues for the Washington-based Chamber of Commerce, said in an interview.
“If a Russian farmer had the cash to buy a Deere combine, it would cost substantially more because of the tariff increase,” Considine said. “And if you didn’t have the money, you could just forget about it because you’d only be able to get the money to buy something made in Russia.”
Putin undertook the measures after a December visit to Rostov, Russia-based Rostselmash, the country’s leading combine maker.
Putin’s press secretary Dmitry Peskov wasn’t available for comment. Valeriy Khromthenkov, a Russian official in Washington with oversight of agricultural issues, declined to comment. A spokesman for Finance Minister Alexei Kudrin, who also is deputy prime minister, wasn’t available to comment.
Read more here
Subscribe to:
Posts (Atom)
