Pan European Weekly News

Week ended 27 January 2011

Basic Resources: BHP Billiton received conditional approval to expand capacity at its harbour in Western Australia to boost iron ore exports to China. Rio Tinto became the major shareholder of Canada’s Ivanhoe Mines, which has expanding gold and copper assets in Asia.

Consumer Goods: GKN ended its joint venture in Thailand but will continue operations in the country. AG Barr had a strong final quarter with sales rising 12%. Barry Callebaut signed a long-term contract with Unilever, which will double its volume and supply 70% of the latter’s global cocoa and chocolate needs. Hornby warned that lacklustre Christmas sales would hurt full-year profits. Although PZ Cussons half-year results reflected good revenue growth, it suffered margin pressure from high raw materials costs.

Financials: Nordea Bank’s fourth-quarter profits rose by 2.1% as higher income compensated for bad loans.

Industrials: Morgan Sindall won several Scottish public sector projects. Ultra Electronics will supply Rolls Royce with reactor control systems for Royal Navy submarines. Chemring’s full-year earnings improved despite narrower margins; it proposed a larger dividend payout and a share buyback. RPC’s third-quarter trading was boosted by organic sales growth and the acquisition of Superfos. Weir will pay US$176 million to acquire Novatech, a US manufacturer of pump valves for upstream oil and gas applications, which has also been its long-standing supplier.

Pharmaceuticals: Novartis posted decent full-year results with healthy cash flow despite lower sales of its pandemic flu vaccine. Roche’s hostile bid for leading DNA-sequencing technology provider Illumina, triggered a shareholder rights plan to oppose the offer. Elsewhere, Roche’s study on the use of Avastin for the treatment of colorectal cancer was positive.

Technologies: Aveva saw healthy demand for its products in the oil and gas sector, while its enterprise solutions business secured several important contracts. Despite the challenging economic environment of its European customers, Sage’s trading met our expectations.

Telecoms: Ericsson’s fourth-quarter earnings were worse-than-expected because of margin dilution in Europe and delayed investment in its network.

We hold all the companies highlighted above.