Oil industry profits in the spotlight this week - GlaxoSmithKline also due to reveal results

Oil giant BP takes its turn in the spotlight this week as the full-year results season picks up pace, with figures also due from drugs giants GlaxoSmithKline

Royal Dutch Shell's CEO Ben Van Beurden
Royal Dutch Shell's CEO Ben Van Beurden

Oil giant BP takes its turn in the spotlight this week as the full-year results season picks up pace, with figures also due from drugs giants GlaxoSmithKline and AstraZeneca.

Falling oil industry profits will be in focus again tomorrow when BP posts latest figures after a gloomy set of results from rival Royal Dutch Shell. Shell confirmed its recent warning on earnings by revealing a 48% slide in fourth quarter profits to US$2.9bn (£1.75bn), with the full-year figure down 23% to US$19.5bn (£11.8bn).

The group’s new boss Ben van Beurden, who took the helm on January 1, admitted Shell needed to “sharpen up” after losing momentum in its operational delivery.

But many of the issues affecting its downstream business are sector-wide as firms suffer from low refining margins - the amount of money that is made from processing crude oil into petrol and diesel.

BP is also grappling with the vast costs of the Gulf of Mexico disaster in 2010, which left 11 workers dead and sparked the worst oil spill in US history.

Analysts are expecting BP’s fourth quarter profits to sink 27% lower to US$2.7bn (£1.6bn), with full-year results set to decline by 23% to US$13.3bn (£8.1bn).

However, it surprised markets last autumn when third quarter profits fell less than feared, down 26%, which sent shares soaring and left Shell on the back foot after its figures for the same period missed expectations significantly.

BP further pleased investors by announcing a US$10bn (£6.1bn) sale of assets, with plans to hand a big chunk of the proceeds to shareholders, mainly in the form of buy-backs, as well as an improved quarterly dividend.

There was also optimism over its production, which rose 3.4% on an underlying basis, reflecting major new projects in the North Sea and Angola and the absence of seasonal weather-related problems in the Gulf of Mexico.

It said it expected production to be broadly similar in the fourth quarter. But over the full year, production is likely to have been hit by its massive asset sale programme.

Thursday’s update from Thomson and First Choice parent TUI Travel will be looked to for signs of a possible surge in early summer holiday bookings after January’s record rainfall.

Numis Securities analyst Wyn Ellis predicts that the dismal weather, which has seen some parts of Britain suffer the wettest January since records began in 1910, may have spurred many on to secure their fix of summer sun.

It would come as a welcome fillip for TUI, which is up against tough comparisons from a year earlier for the summer season.

The group’s latest quarter is traditionally the weakest for the group, although Numis is pencilling in a slightly smaller loss than the £116m reported a year earlier despite currency headwinds and pressure on the Egypt market.

TUI has sought to minimise the impact from travel restrictions amid the political unrest in Egypt - traditionally a popular winter destination - by cutting its service to the country, which now accounts for less than 5% of its programme.

The group posted its highest ever earnings across the business and in its UK arm for the year to September 30, with overall underlying pre-tax profits surging 21% to a higher-than-expected £473m.

UK underlying earnings rose by more than a quarter - 27% - to £251m as it benefited from the ongoing revival in package holidays.

At the time of the results in early December, it said 60% of its 2013/14 winter holidays were already sold.

Online retailer Ocado delivers annual figures on Tuesday after a bumper year following its tie-up with supermarket Morrisons and a better-than-expected Christmas performance.

Shares in the firm have surged by more than 500% over the past year on the back of its 25-year deal with Morrisons, which has seen it provide the technological know-how for the chain to make its belated debut in internet deliveries.

The service finally began on January 10 and has been hailed as a major coup for Ocado, helping it broaden out from its Waitrose contract.


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