Briefing highlights
- Huawei forges ahead
- SNC-Lavalin posts hefty loss
- Stocks, loonie, oil at a glance
- What the BoE said as it held steady
- BCE profit jumps in quarter
- LSE strikes deal for Refinitiv
- Thomson Reuters boosts outlook
- Bombardier tumbles to quarterly loss
- Canadian Natural profit climbs
- Required Reading
Huawei forges ahead
Huawei Technologies Co. is forging ahead even in the face of U.S. efforts to hold the Chinese telecom giant down.
It won’t be a smooth ride from here on in – far from it, and Huawei itself admits that – but two recent reports show the company is pushing on.
First, Huawei reported earlier this week that its revenue in the first half of this year surged more than 23 per cent. Then, the latest independent report showed the company grabbing a surprising share of the global smartphone market.
This comes as the U.S. administration frets over Huawei as a security risk in the rollout of new 5G technology.
It also blacklisted Huawei, blocking American companies as suppliers.
Ottawa has been drawn into the fray. Canada is holding Huawei’s chief financial officer as the U.S. seeks extradition, and China is holding two Canadians as relations between the two countries deteriorate.
This week, Huawei reported revenue jumped to the equivalent of more than US$58-billion, while its profit margin for the first half of the year was 8.7 per cent. It cited the blacklist challenges ahead, though.
“Given the foundation we laid in the first half of the year, we continue to see growth even after we were added to the entity list,” Huawei chairman Liang Hua said in a statement.
“That’s not to say we don’t have difficulties ahead. We do, and they may affect the pace of our growth in the short term.”
Huawei chair Liang HuaCHINA STRINGER NETWORK/Reuters
Also this week, U.S. research firm Strategy Analytics reported that Huawei had, surprisingly, grabbed 17.2 per cent of the smartphone market in the second quarter of the year.
That put the Chinese company behind Samsung, with 22.3 per cent, and ahead of Apple, with 11.1 per cent.
“Huawei surprised everyone and grew its global smartphone shipments by 8 per cent annually from 54.2 million during Q2 2018 to 58.7 million in Q2 2019,” Strategy Analytics executive director Neil Mawston said in releasing the research.
Its latest market share reading was up from 15.5 per cent a year earlier.
“Huawei surged at home in China during the quarter, as the firm sought to offset regulatory uncertainty in other major regions such as North America and Western Europe,” Mr. Mawston said.
What happens next is far from clear. As The Globe and Mail’s Steven Chase reports, Canada probably won’t decide on whether to allow Huawei into its 5G networks until after the fall election.
And as Reuters reports, President Donald Trump said he would relax the blacklist while Washington and Beijing tried to negotiate a resolution to their trade war, but that has lacked clarity.
Negotiations are in trouble, too, for that matter.
“Despite plans for a day of negotiations, the breakdown in talks highlights a lack of progress in a trade spat that will likely rumble on for months yet,” said IG senior market analyst Joshua Mahony.
“Donald Trump’s comments had demonstrated a general lack of goodwill between the two sides, and there is now a feeling that China could see the continued trade spat as a means to influence the 2020 U.S. election,” he added.
“Chinese officials will no doubt expect that slower growth and economic troubles portray Trump as being an ineffective leader, yet there is also the threat that Trump sees this standoff as a means to prove he will not budge when defending American interests.”
Read more
- Steven Chase: Ottawa likely won’t make a decision on banning Huawei equipment until after fall election
- Nathan VanderKlippe: Huawei’s CEO has a message for Canada: Join us and prosper in the 5G future
- Little clear progress made in brief U.S., China trade talks
- Editorial: China has dropped the gloves. Should Canada turtle, or fight back?
SNC-Lavalin posts hefty loss
A troubled SNC-Lavalin Group Inc. took it on the chin in the second quarter, plunging to a hefty loss and cutting its dividend.
SNC-Lavalin posted a loss attributable to shareholders of $2.1-billion, or $12.07 a share, compared to a profit a year earlier of $83-million or 57 cents.
That loss included a $1.7-billion goodwill hit. Adjusted, SNC-Lavalin lost more than $234-million.
Revenue dipped to $2.3-billion from $2.5-billion.
Its quarterly dividend goes to 2 cents from 10 cents.
“Since assuming the position of interim CEO on June 11, I have listened carefully to our stakeholders’ concerns and we have rapidly begun executing on a new strategic plan for the company that is focused on de-risking the business and surfacing value in high-growth, high-performing areas of the business,” Ian Edwards said in releasing the results.
“The decisions I have made, I believe are necessary to set us on a more sustainable path going forward,” he added.
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Markets at a glance
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What the BoE said
The Bank of England held its key rate steady at 0.75 per cent today, but had a lot of interesting things to say. Among them:
“Since May, global trade tensions have intensified and global activity has remained soft. This has led to a substantial decline in advanced economies’ forward interest rates and a material loosening in financial conditions, including in the United Kingdom. An increase in the perceived likelihood of a no-deal Brexit has further lowered U.K. interest rates and led to a marked depreciation of the sterling exchange rate.”
“Brexit-related developments, such as stockbuilding ahead of previous deadlines, are making U.K. data volatile. After growing by 0.5 per cent in 2019 Q1, GDP is expected to have been flat in Q2, slightly weaker than anticipated in May. Looking through recent volatility, underlying growth appears to have slowed since 2018 to a rate below potential, reflecting both the impact of intensifying Brexit-related uncertainties on business investment and weaker global growth on net trade”
“Increased uncertainty about the nature of EU withdrawal means that the economy could follow a wide range of paths over coming years. The appropriate path of monetary policy will depend on the balance of the effects of Brexit on demand, supply and the exchange rate.”
“Assuming a smooth Brexit and some recovery in global growth, a significant margin of excess demand is likely to build in the medium term. Were that to occur, the [monetary policy committee] judges that increases in interest rates, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2-per-cent target.”
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Ticker
BCE profit rises
BCE Inc. posted a jump in second-quarter profit attributable to common shareholders of $761-million, or 85 cents a share, from $704-million or 79 cents a year earlier. Operating revenue rose to $5.9-billion from $5.8-billion.
LSE to buy Refinitiv
From Reuters: Britain’s London Stock Exchange has agreed to buy financial information provider Refinitiv in a US$27-billion deal aimed at offering trading across regions and currencies and positioning the company as a competitor to Bloomberg.
Thomson Reuters boosts outlook
From Reuters: Thomson Reuters Corp. raised its sales and core profit outlook for 2019 and 2020 after reporting 4-per-cent organic revenue growth for the second quarter, which it said was its best since 2008 and ahead of its expectations.
Bombardier tumbles to loss
Bombardier Inc. tumbled to a second-quarter loss of US$36-million, or 4 US cents a loss, diluted, from a profit of US$70-million or 2 US cents a year earlier. Adjusted, earnings per share were 4 US cents. Stefanie Marotta reports.
Canadian Natural profit climbs
Canadian Natural Resources Ltd. profit climbed in the second quarter to $2.8-billion, or $2.36 a share, diluted, from $982-million or 80 cents a year earlier. Adjusted, earnings per share came in at 87 cents, down from $1.04.
Manufacturing slumps
From Reuters: Factory activity contracted across Asia and Europe in July, fuelling worries a prolonged U.S.-China trade war and an economic slowdown could tilt the world towards recession, which central banks would have to fight with depleted ammunition.
Shell profit falls
From Reuters: Royal Dutch Shell’s second-quarter profit slumped to a 30-month low on weaker gas prices and refining margins, denting a steady recovery in recent years.
Dupont cuts forecast
From Reuters: Industrial materials maker DuPont cut its full-year forecast for core sales as it reported worse-than-expected revenue for the second quarter, pointing to weak demand in some of the sectors most affected by the U.S.-China trade war.
Required Reading
Moral hazard
By deciding to cut interest rates, the Federal Reserve has positioned itself as a shield, protecting the U.S. economy from its own government’s worst instincts. But, columnist David Parkinson argues, it may have also set itself up to be President Donald Trump’s enabler.
CannTrust reviews options
CannTrust Holdings Inc. has hired the Canadian arm of U.S. investment bank Greenhill & Co. to help it review options, including the possible sale of the company, as the cannabis producer awaits a decision on its fate from Health Canada. Mark Rendell reports.
Fed to the rescue
The apocalypse for overextended borrowers was cancelled on Wednesday, personal finance columnist Rob Carrick writes. Thank the U.S. Federal Reserve, which cut its trendsetting interest rate by one-quarter of a percentage point. In a stroke, the Fed killed the expectation that interest rates would rise back to historically normal levels and crush people with big debts.