Tag Archives: Basic Materials/Resources

Food Is Still Noble As The Pandemic Fades, Inflation Rises | Instant News


Packaged food companies have been the main beneficiaries of the pandemic as food at home soars. Now investors are worried about the sale will start to wobble when people get back to eating, even when margins hit increasing input costs. Both of these worries began to look excessive.

On Thursday,

Kraft Heinz

KHC 3.90%

reported organic sales growth – which eliminates the impact of acquisitions, divestments and currency movements – of 2.5% from a year earlier in the first quarter. That compared with analyst expectations for growth of around 1%, according to Visible Alpha. Keep in mind that sales compared to the start of the kitchen storage wave in the first quarter of last year when Kraft Heinz organic sales jumped 6.4%.

The company said it expects single-digit cost inflation for the rest of the year, in line with similar guidance from peers including

General Factory

and

Conagra brand,

as food inputs are increasingly expensive, along with shipping and logistics. Prices of soybeans, wheat and sugar futures have risen 82%, 40% and 73% respectively over the past 12 months, according to FactSet.

Investors don’t have to worry too much about this. Barclays analyst Andrew Lazar says history shows that food companies have generally been able to weather periods of inflation, even after the lull, through a combination of rising customer prices and cutting costs. When commodity costs fall, the increase in prices persists, leaving the company in a better position in the long run.

This pattern was evident during the last two waves of commodity price inflation around 2007 to 2008 and 2012 to 2014. Kraft Heinz doesn’t exist in its current form, but looking at colleagues like General Mills,

JM Smucker

and

Campbell soup,

they generally come out of both episodes with a higher operating margin after the initial drop. At General Mills, for example, profit margins before interest and taxes fell from 16.6% in the fiscal year ended May 2008 to 15.4% in fiscal 2009. Then they jumped to 18% in fiscal 2010, according to S&P Global Market Intelligence. .

Meanwhile, on the demand side, evidence is mounting that households continue to consume significantly more food at home than before the pandemic, even though it has reopened. It could happen at least in part because they have invested in kitchen equipment and improved their cooking skills over the past year.

This is true even for people who are fully vaccinated, according to research firm Numerator, based on a panel of 100,000 buyers. In the three weeks to April 10, purchases by vaccination buyers of “store-center” groceries – essentially packaged foods – were up 7.6% from the same period in 2019, said Numerator. That’s less than the 11.6% growth among all panelists, but it’s still impressive.

Not all pandemic recipients will look good during recovery. However, food stocks are likely to challenge skeptics.

Will the coronavirus pandemic cause long-term changes in how we shop for food? To better understand the challenges facing grocery stores, WSJ’s Alexander Hotz spoke with industry insiders, store owners, and Walmart executives.

Write to Aaron Back in [email protected]

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Food Prices Have Soared. Here are some stocks to play with the trend. | Instant News


Investors often miss spikes in food prices because economists tend to focus on inflation data that removes food and other volatile categories. This, Brooklyn, NY grocery store.

Spencer Platt / Getty Images

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Travel and leisure topped list of evolving corporate credit ratings during pandemic | Instant News


The COVID-19 pandemic has been disrupting not only lives and businesses around the world for over a year, but also the credit ratings of major corporations. Corporate credit ratings are a key measure of creditworthiness, but can also determine borrowing costs. They range from AAA to blue chip companies like Johnson & Johnson JNJ, -0.39% and Microsoft Corp. MSFT, + 1.34% to D for defaulting companies. Increasingly, credit ratings may also point to a potential path of recovery for industries hard hit by the protracted public health crisis. Take, for example, travel and recreation, an industry that has seen half of all blue chip companies in the world transition to high yielding, or “junk” status during the pandemic, according to a new report from Credit Benchmark . Even as parts of Europe remain stranded to contain the coronavirus, travel and leisure has seen the highest share of ‘fallen angels’ (at 11.1%) revert to investment grade status during the crisis (see graph below). Fallen Angels, Rising Stars Credit Benchmark The report identified 1,051 fallen angels out of 6,895 companies sampled around the world, or about 15% of the total. He found that about 5% went back to the investment grade. The retail, oil and gas, and auto and parts sectors have also been volatile on the credit ratings front over the past year, according to the report, with migrations between the two main tranches being now a key objective for investors. Read: The next rising stars in the debt world? Probably the Fallen Angels of Businesses Upgrades and downgrades can make a big difference to a business in terms of borrowing costs. The average yield on bonds issued by investment grade US companies is now in the 2.21% range, while it is almost double for those in speculative grade territory at around 4.21%. These rates are important, especially in the past year, as cruise lines including Carnival Corp CCL, -1.52%, Royal Caribbean Group RCL, -1.37% and Norwegian Cruise Line Holdings Ltd NCLH , -2.20%, borrowed billions because their ships were largely idle. See: White House pushes back cruise industry efforts to restart in July, as Florida sues Biden administration But with other ‘clawback’ deals, Carnival shares rose 31.9 % year-to-date Thursday, while those of Royal Caribbean and Norwegian were up about 20%, according to FactSet data. This compares to the Dow Jones Industrial Average’s DJIA, + 0.17%, up 9.5% for the same period, while the S&P 500 SPX Index, + 0.42% was up 9.1%. .



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Probes Brazil Braskem Bribery Claims in Mexico | Instant News


Braskem TO

has opened an internal investigation into allegations of bribery made last year by the former chief executive of Mexico’s state-owned oil company, according to securities disclosures.

The Brazilian petrochemical company said in filings Friday that it hired an unnamed US law firm to review claims by Emilio Lozoya, former CEO of Petróleos Mexicanos, also known as Pemex.

The testimony Lozoya provided to Mexico’s attorney general, including allegations involving parent company Braskem, was leaked to the press last year, adding fuel to what had happened. the widest-reaching corruption investigation in the modern history of Mexico.

Braskem and its parent, construction giant Odebrecht SA, paid a combined $ 3.5 billion to settle widespread bribery allegations with US, Brazilian and Swiss authorities in 2016. A Braskem spokesman declined to comment further on the disclosures. Odebrecht did not respond to a request for comment.

In his filing, Braskem said the allegations of illicit payments centered on the ethylene project with Pemex. Mr. Lozoya said he was taking bribes from Odebrecht, according to a complaint filed with Mexican prosecutors previously reviewed by The Wall Street Journal.

Braskem and a joint venture subsidiary in Mexico opened an investigation into allegations of compliance with its global compliance and governance guidelines, the petrochemical company said.

Pemex earlier this month said it had reached an agreement with a subsidiary, Braskem Idesa, to change the terms under which Pemex supplies ethane to petrochemical plants in southern Mexico. The 2010 contract renegotiation came after the decline in Pemex’s production meant that the company was unable to supply the gas in the amount used to make plastics that was originally stipulated in the agreement.

Former Braskem chief executive, José Carlos Grubisich, faces criminal charges in the US over the 2016 company’s settlement. A Grubisich lawyer last month said executives were in discussion with prosecutors to settle the charges.

Write to Dylan Tokar at [email protected]

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Vaccines spice up travel stocks | Instant News


Illustration by Elias Stein Text size For much of the past year, travel-related companies have been posters for the companies that have been most disrupted by Covid-19. Although bets on an economic recovery rose, stocks remained severely depressed. Recently, they have shown a bit of pizzazz. The US Global Jets exchange-traded fund is up 17% this year, compared to 3% for the S&P 500 index. The latest bump came as vaccines were more widely distributed and airlines moved. started to see an improvement, albeit modest, in operational parameters. Investors seem increasingly optimistic that travel will recover significantly as the pace of vaccinations picks up. Airlines are lining up more money from Washington, with $ 14 billion in aid likely as part of the $ 1.9 trillion stimulus bill. Domestic traffic, revenues and bookings are all increasing, says UBS analyst Myles Walton, who sees the situation improving further. Investors are also betting that domestic flights will rebound before international routes and that leisure travel will recover before business. The biggest winners of the year were US-focused carriers such as Spirit Airlines and JetBlue Airways, up 48% and 29%, respectively. Norwegian Cruise Line Holdings, Carnival and Royal Caribbean Group also grew at least 23% in 2021. Carnival has raised capital twice this year, selling $ 1 billion in stocks and $ 3.5 billion in non-debt. guarantees to consolidate its liquidity. Unsecured debt means lenders haven’t demanded collateral, betting Carnival will be able to repay its loans out of profits. Equity investors want to own part of the business and don’t see it going into insolvency. Inflation Fix Last Week The S&P 500 had its biggest day since June Monday, with all 11 sectors up, led by the 3.2% rise in tech. But questions about bond yields, inflation and the Federal Reserve persisted. Volatility rose, as tech stocks slipped, then indexes plunged after the Fed’s Jerome Powell stuck to his easy money policy, then rallied despite big jobs numbers that did raise bond yields. Over the week, the Dow industry rose 1.8% to 31,496.30; the S&P 500 edged up 0.8% to 3,841.94; and the Nasdaq Composite fell 2.1%, to 12,920.15.A Vaccine Deal The Food and Drug Administration has approved the Johnson & Johnson Covid-19 vaccine, while the White House negotiated a deal with Merck for the ‘help produce it. President Biden announced that there will be enough vaccine to immunize all American adults by the end of May. He also prioritized teachers and school staff for vaccinations by the end of March. Texas and Mississippi abandoned mask mandates and opened businesses; Biden called the movements “Neanderthal”. The relief bill, meanwhile, has been sent to the Senate and discussions continue on the minimum wage. Climate change The American Petroleum Institute has approved a price for carbon emissions. Exxon Mobil has added two new board members, activist investor Jeffrey Ubben and former Comcast CFO Michael Angelakis, leaving out activist Engine No.1, who had sought four seats. And Texas’ largest cooperative electricity supplier, Brazos Electric Power, has filed for bankruptcy after being hit by $ 2.1 billion in bills following the recent freeze. the “gamification” of stock trading – a response to the GameStop episode – and the increasing concentration of retail execution. Almost all of Biden’s nominees have been approved. The exception: Neera Tanden, whose leadership appointment in the Office of Management and Budget was withdrawn by the White House after failing to get the votes. Buffett on Berkshire Hathaway’s Warren Buffett buyouts in his annual letter was down on fixed income and up on share buybacks, praising one of the company’s “four gems”, Apple, for its buyback program. Berkshire has stepped up its own buyouts. Annals of Deal-Making It’s been a great week for Apollo Global Management. The private equity giant pocketed Las Vegas Sands for $ 6.3 billion as the casino company left Vegas; said he was taking private Michaels craft chain for $ 3.3 billion, the chain’s second buyout; and talked about taking the online photo company Shutterfly public through a PSPC. And it found itself competing for the assets of bankrupt Greensill Capital, after SoftBank-backed fintech filed for insolvency in the UK and German regulators took the case to court. Write to Nicholas Jasinski at [email protected] and to Daren Fonda at [email protected]



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