American Airlines Slashes Profit Forecast Due to Failed Sales Strategy

LOCAL MARKET COMMENTARY

The Top 40 index and the All Share index closed 0.12% and 0.10% higher on the stock market, reaching 73,687 and 80,678 points, respectively. South Africa's producer inflation remained steady at 4.6% year-on-year in June. Headline consumer inflation eased to 5.1% in June from 5.2% in May, raising hopes of an interest rate cut by the South African Reserve Bank. Anglo American posted underlying earnings of $4.98 billion, a 3% drop from the previous year, and aims to complete a significant restructuring by the end of next year despite setbacks in its coal and diamond businesses.

EUROPEAN MARKET COMMENTARY

European shares closed lower on Thursday, pressured by disappointing earnings reports across tech and luxury sectors, while a global move towards safe haven assets intensified losses. Investors sought less risky assets like short-dated bonds, driving the yield on the German two-year bond to its lowest level since February. Additionally, a survey of around 9,000 managers revealed that German business morale unexpectedly dropped in July, reflecting growing pessimism about the performance of Europe's largest economy.

US MARKET COMMENTARY

The S&P 500 and Nasdaq Composite closed lower on Thursday, unable to recover from the previous day's tech-driven sell-off, as investors remained uncertain about the future of megacap stocks. The Dow Jones Industrial Average, however, finished higher thanks to unexpectedly strong U.S. GDP data, which showed a 2.8% expansion in the second quarter, above the 2% estimate. Despite disappointing earnings and ongoing political and economic uncertainty, recent data indicates a resilient U.S. economy, with inflation subsiding and expectations for a Federal Reserve rate cut in September still in place.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly rebounded this morning following Thursday’s sell-off, which saw some indexes in the region hit their lowest levels in months. Traders in Asia focused on July inflation data from Tokyo, viewed as an indicator of national trends. Japan's Nikkei 225 hovered near the flatline as Tokyo's headline inflation slightly decreased to 2.2% in July from 2.3% in May, with core inflation remaining steady at 2.2%, matching expectations. Taiwan’s markets reopened after a two-day closure due to a typhoon. In Singapore, the monetary authority announced it will maintain its current monetary policy, keeping the exchange rate settings for the Singapore dollar unchanged.

CURRENCY MARKET COMMENTARY

The South African rand strengthened against a weaker dollar on Thursday following U.S. economic data that supported expectations of a Federal Reserve interest rate cut in September. Despite an earlier rise in the dollar driven by a stronger-than-expected Q2 GDP report, it balanced out previous losses.

COMMODITY MARKET COMMENTARY

Gold was set for a weekly loss despite firming up this morning ahead of a crucial U.S. inflation report, which could provide insights on the timing of potential Federal Reserve interest rate cuts. Meanwhile, oil prices saw a slight increase this morning, driven by stronger-than-expected U.S. economic data, boosting investor expectations for higher crude oil demand from the world's largest energy consumer.

British American Tobacco PLC (BTI) +5.41%

Revenue decreased by 8.2%, largely due to the sale of businesses in Russia and Belarus and unfavourable exchange rates. Organic revenue fell by 0.8% due to investments in U.S. commercial actions and negative effects of wholesaler inventory changes. New Categories revenue was down 0.4% but up 7.4% on an organic constant rate basis. The second half of the year is expected to improve with product innovations and better U.S. commercial performance. Revenue from smokeless products rose to 17.9% of the Group's total, with a £165 million increase in New Categories contributions. Despite strong pricing in Combustibles, overall profit from operations dropped by 28.3%, mainly due to higher amortization charges and previous comparisons including Russia and Belarus. Adjusted organic profit from operations fell by 0.9%, while reported diluted EPS rose by 13.8% due to one-off credits. Adjusted organic diluted EPS increased by 1.3%. The company announced a sustainable share buy-back program and an interim dividend of 235.52p per share for 2023, payable in four equal quarterly instalments in 2024 and 2025.

Anglo American PLC (AGL) +0.88%

For the six months ended June 30, 2024, the company reported revenue of $14,464 million, an 8% decline from $15,674 million in the same period in 2023. Underlying EBITDA decreased by 3% to $4,980 million, with the EBITDA margin improving to 33% from 31%. Attributable free cash flow rose to $506 million from a negative $466 million last year. The company posted a loss of $672 million attributable to equity shareholders, compared to a profit of $1,262 million in the previous year. Basic underlying earnings per share dropped 23% to $1.06, while basic earnings per share swung to a loss of $0.55 from a profit of $1.04. The interim dividend per share decreased by 24% to $0.42. Group attributable return on capital employed (ROCE) fell to 14% from 18%.

Hammerson PLC (HMN) -4.26%

For the six months ended June 30, 2024, the company reported a gross rental income of £94.4 million, down from £106.3 million in 2023. Adjusted net rental income decreased to £72.7 million from £85.1 million, while adjusted earnings from Value Retail fell to £11.7 million from £13.4 million. Adjusted net finance costs improved to £(18.7) million from £(25.1) million, and adjusted earnings decreased to £49.5 million from £55.9 million. The company experienced revaluation losses of £(47.8) million, compared to £(43.8) million in 2023. The loss for the period was £(516.7) million, significantly higher than the £(1.2) million loss in the previous year. Adjusted earnings per share dropped to 1.0p from 1.1p, while the basic loss per share was (10.4)p, down from 0.0p. The interim dividend per share increased to 0.756p from 0.72p.

American Airlines Group Inc. (AAL) +4.23%

American Airlines has lowered its annual profit forecast due to a previous sales and distribution strategy that alienated corporate travellers, impacting revenue. The airline also cited excess capacity in the domestic market affecting pricing power. Shares dropped 5.4% to $9.63 in pre-market trade. While it expects to break even in the current quarter, full-year adjusted profit is now forecasted to be between 70 cents and $1.30 per share, down from the previous estimate of $2.25 to $3.25 per share. The airline reported an adjusted profit of $1.09 per share, beating analysts' estimates of $1.05 per share, with second-quarter operating revenue up 2% to $14.33 billion, slightly below expectations of $14.36 billion.

Universal Music Group N.V. (UMG) -23.54%

Universal Music Group lost about $15 billion in value on Thursday after reporting lower-than-expected streaming and subscription revenue for the second quarter. The shares plummeted 30% at one point and were down 26% by mid-morning GMT, marking their biggest one-day loss ever and wiping out 13.6 billion euros ($14.75 billion) in value. Second-quarter subscription revenue growth slowed to 6.9% from 12.5% in the first quarter, missing the 11.1% estimate, while streaming revenues were 343 million euros, falling short of the 387 million euros expected.

TotalEnergies SE (TTE) -0.78%

French oil major TotalEnergies reported a 6% drop in second-quarter earnings, falling short of expectations due to lower refined product and gas sales, and declining European refining margins. Adjusted net income for the quarter was $4.7 billion, down from $4.96 billion a year earlier and $5.1 billion in the first quarter, against analysts' expectations of a flat outcome. Despite this, Total confirmed plans to buy back up to $2 billion in shares in the third quarter and maintained its net investment guidance of $17-$18 billion for the year. Total's shares fell 1.22% to 61.7 euros. While income from oil production rose 14%, earnings were down 36% in its refining and chemicals unit, and 13% in its integrated LNG business. The company's average refining margin dropped 37% from the first quarter to $44.90 per metric ton, with CEO Patrick Pouyanne anticipating long-term margins around $40 to $45 per ton.

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