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CREDIT COMMENTARY
Jul 26, 2013
Anglo results disappoint again
The mid-year earnings season continued with a raft of numbers today, including a disappointing innings from mining firm Anglo American.
Anglo's underlying earnings fell 28% to $1.3bn compared with the same period in 2012 and revenues were down 1% to $16.2bn. Net income for the period also came in significantly lower at $403m.
Anglo has been the worst performing of the world's large diversified mining groups since 2010 and compared to surprisingly upbeat results from both BHP Billiton and Rio Tinto last week, this trend is yet to change.
As with its peers, Anglo has been negatively impacted by lower commodity prices amid a slower growth outlook for China. However the group also has a large proportion of its operations in South Africa, where labour unrest and government pressure are hampering restructuring plans.
Anglo American's newly appointed ceo, Mark Cutifani, unveiled a dramatic recovery plan to slash costs, send expensive projects back to the drawing board and overhaul management.
The basis between CDS spreads on Anglo American and Rio Tinto has more than doubled from 40bps in January 2011 to over 100bps currently. Anglo's spreads tightened by 3bps on Friday to 185bps.
Pearson, publisher of the Financial Times reported a net loss of "8m for the first six months of 2013 against "36m a year earlier. However shares on Pearson were up more than 8% thanks to revenue increasing by 5%.
BSkyB on the other hand reported stellar results for the twelve months ended June 30th, with revenues up 7% and operating profit up 9%. Nevertheless BSkyB traded down almost 4% on Friday following increased investor concerns regarding competition from BT and on-demand content providers.
CDS spreads on BSkyB widened by 2bps to 68bps, which was in line with equity markets, while Pearson tightened 3bps to 70bps.
Meanwhile across the Atlantic CDS spreads on Haliburton widened by 5bps to 48bps after stating that it would plead guilty to destroying computer simulations that BP wanted to use in its legal battles over the disaster off the Louisiana coast.
The Markit iTraxx Europe index is trading flat from yesterday at 103bps while the Markit CDX.NA.IG index is 2bps wider at 78bps.
Frans Scheepers, CFA
Vice President
Markit
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