China's Lenovo to cut over 3,000 jobs as net profit halves

Chinese computer giant Lenovo said Thursday it would cut more than 3,000 jobs as net profit for its first quarter fell by more than 50 per cent.

PHOTO: AFP

AUG 13, 201512:49 PM

[HONG KONG] Chinese computer giant Lenovo said Thursday it would cut more than 3,000 jobs as net profit for its first quarter fell by more than 50 per cent.

The world's biggest personal computer maker also saw revenues miss analysts' forecasts in what chairman and CEO Yuanqing Yang described as the "toughest market environment in recent years".

Net profit dropped 51 per cent to US$105 million for the first three months to June 30 - which the firm takes as its first quarter - compared to US$214 million for the same period last year.

Pre-tax profit for the first quarter also plunged by 80 per cent.

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Revenue grew three percent to US$10.7 billion, but fell short of Bloomberg analysts' average estimates of US$11.5 billion.

In a statement to the Hong Kong stock exchange, Lenovo said it would seek to slash costs by US$1.35 billion annually and cut 3,200 staff from its non-manufacturing workforce - around five percent of its worldwide headcount.

It would also restructure its mobile business.

"In the face of financial results that did not meet expectations, Lenovo is undertaking broad, decisive actions - including better aligning its businesses and significantly reducing costs," the firm said in a statement.

Lenovo shares traded in Hong Kong were down almost seven percent in morning trade at HK$7.88 (US$1.42).

Lenovo has suffered from a decline in global demand for PCs, which account for around a third of its revenue despite its efforts to diversify into other sectors, including the smartphone market.

Revenue from its PC business was down 13 per cent year-on-year, while the mobile sector - combining Lenovo and Motorola - was up by 33 per cent.

"In the smartphone business, our strategic shift from China to the rest of world has paid off," Mr Yang said.

But moving towards mobile has presented challenges for the company as demand weakens in China in the face of increased competition from affordable domestic brands.

Lenovo said its share in the worldwide smartphone market had slipped 0.5 per cent in the first quarter, "affected by softer demand and severe competition in the China smartphone market".

It also cited challenges in Brazil and Latin America as slowing momentum for Motorola's business growth.

Lenovo bought Motorola from Google for US$2.9 billion last October, soon after its purchase of IBM's low-end server business as part of its strategy of broadening beyond PCs.

AFP

    

China central bank says no basis for further yuan depreciation, will monitor cross-border flows

China's central bank said on Thursday that there is no basis for further depreciation in the yuan currency given strong economic fundamentals, in a bid to reassure jittery global financial markets after it devalued the currency earlier in the week. 

PHOTO: EPA

AUG 13, 201511:11 AM

[SHANGHAI] China's central bank said on Thursday that there is no basis for further depreciation in the yuan currency given strong economic fundamentals, in a bid to reassure jittery global financial markets after it devalued the currency earlier in the week.

The People's Bank of China (PBOC) said that the country's strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provide "strong support" to the exchange rate.

The PBOC also said that it will monitor "abnormal" cross border flows.

China's yuan fell for a third day on Thursday, after the PBOC shocked markets by pushing its official guidance rate down 2 per cent on Tuesday, the sharpest adjustment in the history of China's foreign exchange market.

The PBOC said at the time that the move was a one-off depreciation, but sources involved in the Chinese policy-making process told Reuters that powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 per cent.

REUTERS

    

Noble's troubles seep into its bonds: Markit

By

Angela Tanangelat@sph.com.sg  

AUG 13, 201511:22 AM

NOBLE Group's troubles have spread from its stocks into its bonds, according to Simon Colvin, a research analyst at financial information services Markit.

Mr Colvin said accusations of accounting irregularities and the continuing global commodities slump have seen the credit markets turn bearish on the Hong Kong-based commodities group.

Noble's Certificates of Deposit's (CDS) spread has tripled in the last 12 months. The latest 5 year CDS spread stands at 714bps, the highest level since 2009.

"This jump came in two waves which occurred in March, when Iceberg's allegations first came to light, and July when the commodities slump started in earnest,'' he said.

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The bearish sentiment seen by Noble's CDS spread has also been felt by Noble's bonds, which have seen their yields shoot up in recent weeks. The entirety of the firm's yield curve has widened in the last 12 months, according to Markit's evaluated bond service.

Markit noted that the widening has been most extreme at the long end, where the 30 year yield recently jumped above the 8 per cent mark for the first time ever in the closing week of July. This means that Noble's longest dated bond, the 6.95 per cent 2045 issue, is now yielding 8.3 per cent after having seen its price fall to 85 cents on the dollar since listing in March, according to Mr Colvin.

"This increased bearish sentiment towards Noble's bonds could limit the firm's strategic options going forward as both the equity and debt portion of its balance sheet have come under pressure,'' the analyst said.

Noble has lost more than half of its market value since February this year when Iceberg Research questioned its accounting policies as well as criticised the firm's poor disclosure and lack of transparency.

Noble eventually engaged PricewaterhouseCoopers (PwC) to review the valuation of its contracts. On Monday, PwC said "Noble has adopted an approach to valuations which is consistent with the relevant criteria in all material respects".

But the assurance provided little comfort to the market, which continued to sell the stock. Critics said the PwC review revealed nothing new and failed to address major concerns. The controversial accounting treatment and valuation of its Australian subsidiary Yancoal was not covered at all by PwC.

At 11:11am on Thursday, Noble was trading around S$0.50 a share, down half a Singapore cent, or almost 1 per cent. More than 36 million shares changed hands.

      

Oil prices steady after US stock draw, but China outlook drags 

Oil prices steadied on Thursday, supported by lower US stockpiles and a firm demand outlook, but worries over China's economy continued to weigh. 

PHOTO: REUTERS

AUG 13, 201512:36 PM

[SINGAPORE] Oil prices steadied on Thursday, supported by lower US stockpiles and a firm demand outlook, but worries over China's economy continued to weigh.

A 1.7-million barrel drop in US stockpiles last week helped to at least temporarily halt a price slide that has lasted since May and seen WTI and Brent lose over a quarter of their value.

A relatively bullish outlook by the International Energy Agency (IEA) on Wednesday also supported prices.

US crude was trading at US$43.35 per barrel at 0410 GMT, up 5 cents from Wednesday's close. Brent futures were 12 cents higher at US$49.78 a barrel. "Prices recovered overnight after initial declines, supported by an IEA announcement and a weaker dollar," ANZ bank said on Thursday.

The IEA said global oil demand growth in 2015 would be the strongest in five years, although it added that global oversupply would last through 2016.

But analysts said there were some doubts around a bullish demand forecast, especially in Asia where China's economy is showing increasing signs of weakness, with the devaluation of its yuan currency potentially denting demand for imports of fuel. "All is not well with the Chinese economy," Howie Lee, investment analyst at brokerage Phillip Futures, told the Reuters Global Oil Forum on Thursday. "There is just so much pessimism attached to this move (yuan devaluation). For China to emerge and start a fresh currency war when they previously didn't, smacks of desperation," he added.

China's yuan opened slightly weaker on Thursday but the gap between the guidance rate and the traded rate closed sharply as the central bank tried to slow a sharp selloff that saw the currency lose around 4 per cent in just two days.

China's implied oil demand fell in July from the previous month amid a continuing drop in the nation's vehicle sales that could mute growth further in the second half of 2015.

China consumed roughly 10.12 million barrels per day (bpd) of oil in July, down more than 4 per cent from June, although the implied use was up from 9.72 million bpd a year ago, according to calculations based on preliminary government data.

The month-on-month fall came as Chinese auto sales dropped 7.1 per cent in July from a year earlier, the fourth straight monthly decline and biggest since February 2013.

REUTERS