BA expected to report rise in interim profits

BRITISH Airways and Tate & Lyle will be among firms reporting this week during another busy few days for corporate results.

BRITISH Airways and Tate & Lyle will be among firms reporting this week during another busy few days for corporate results.

Analysts are expecting a healthy increase in interim profits from British Airways on Friday despite a turbulent quarter for the company.

The company, which has more than 1,000 staff at Newcastle Business Park and Newcastle International Airport, hit the headlines in August after being hit with £270m in fines from the US Department of Justice and Office of Fair Trading for collusion over passenger fuel surcharges.

But at the operating level, half-year numbers should benefit from comparison with last year’s August terrorist scares, which caused the carrier serious disruption – costing it £100m – as well as frustration for millions of passengers.

This summer’s poor weather also hindered the carrier in July, while in September record oil prices will have put the airline’s costs under strain.

Despite the problems, consensus forecasts for the carrier’s half-year operating profits range from £533m to £563m, after the firm posted profits of £263m for the first quarter back in August.

Collins Stewart analyst Andrew Fitchie estimates profits will be around 19% higher at £548m. He said: "We’ll be looking out for what they’ll say about full-year guidance, and whether they reiterate their margin target, also the impact of higher oil prices and any costs they’ve managed to take out of the business."

Sugar and ingredients group Tate & Lyle has already braced the City for the worst from Wednesday’s interim results after a profits warning in September triggered a dramatic collapse of nearly 30% in the company’s share price.

Analysts slashed forecasts after the company warned of a host problems including a small loss for its sugars business, and flat half-year results for sugar substitute Splenda.

The weakness of the US dollar has also slashed profits by £12m – with a further currency hit expected in the second half results.

Other reasons for pessimism for Tate include significantly higher maize costs which have the potential to increasingly hit profits at its European ingredients division.

Deutsche Bank analyst Sara Welford is predicting adjusted pre-tax profits of around £115m for the six months to September 30, more than 30% below last year’s £169m as market confidence is affected by a recent profit warning.

Just as GlaxoSmithKline reported disappointing sales of some key products in its third quarter results, rival AstraZeneca will be forced to address similar concerns when it posts results on Thursday.

While sales of key products should have grown in the quarter, analysts are concerned about the company’s long-term prospects, given that all five of its top-selling products face generic challenge within the next decade.

Astra has already said the company, as well as the industry, needs to face up to the challenges posed by patent expirations and pricing pressures brought about by governments and private sector firms.

The industry has responded with a wide-scale efficiency drive, which recently saw Astra announce a three-year cost-cutting campaign that could result in the loss of 7,600 jobs worldwide.

Charles Stanley stockbrokers expects quarterly sales of £3.42bn, up from £3.18bn a year earlier. Key products include cholesterol- lowering product Crestor. Profits are likely to be lower at £878.5m, against £1.06bn a year earlier.

The UK’s largest nightclub operator Luminar has so far shrugged off fears that a nationwide smoking ban would lead to a slump in the number of revellers visiting its venues. An improved performance will result in impressive half-year figures tomorrow.


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