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FRIDAY, MARCH 16, 2012
FRANKFURT: Lufthansa planes at Frankfurt’s Rhein-Main
airport. Lufthansa AG says yesterday it expects lower
profits this year as high fuel prices and economic uncertainties
weigh on earnings. The company said its operating
profit is expected to slide from euro 820 million ($1.1
billion) in 2011 to a “mid three-figure million euro range”
this year. —AP
Lufthansa sees
underlying earnings
down in 2012
FRANKFURT: German airline Lufthansa said yesterday that
underlying earnings would likely decline this year, depending
on developments in fuel costs and the overall business environment.
It also announced a capital injection at its loss-making
unit Austrian Airlines on condition the carrier undertake further
“drastic” restructuring measures. “The Lufthansa group is anticipating
an operating profit in the mid three-figure million euro
range for the current financial year,” said chief executive
Christoph Franz. That would place operating profit in the region
of 500 million euros ($650 million). By comparison, operating
profit in 2011 amounted to 820 million euros, a drop of 19.6
percent on the year. All divisions would be profitable at an
underlying level, “with operating profits forecast across the
board,” Franz said.
“However, further developments in the business environment-and
fuel prices in particular-will determine precisely how
high group operating profit will be at year-end,” he added. As
reported last week, Lufthansa’s profits fell sharply last year as a
result of high fuel costs, a domestic air traffic tax and losses
from the sale of its British Midland unit.
At the bottom-line, Lufthansa booked net loss of 13 million
euros in 2011, compared with a profit of 1.1 billion euros a year
earlier, while full-year revenues were up 8.3 percent at 28.7 billion
euros. Franz said the airline was already implementing
measures to boost underlying earnings by “at least 1.5 billion
euros over the next three years.” Nevertheless, “we anticipate
that the financial year 2012 will again be plagued by uncertainty.
The economic conditions remain difficult and volatility is still
high, but we are prepared for all weathers,” Franz said. —AFP
LONDON: Home Retail, Britain’s
biggest household goods retailer,
urged the government to take steps in
its budget next week to boost the
incomes of lower and middle earners as
it forecast a fifth consecutive year of
falling profits.
The owner of catalogue-based
Argos stores and the Homebase do-ityourself
chain said on Thursday there
were reasons to be more optimistic
about the retail outlook for the coming
year, with inflation falling and events
such as the Olympic Games in London
and the Queen’s diamond jubilee likely
to boost spending. However, it said it
was planning cautiously after a big
drop in sales at both Argos and
Homebase in the 8 weeks to Feb. 25.
“What we totally agree with is the
increase in the personal allowance,”
chief executive Terry Duddy told
reporters, referring to proposals by
VIENNA: The European Central Bank is
not planning any more measures to
help the battered economy, having
already played its part in fighting the
euro zone crisis, Governing Council
member Ewald Nowotny said yesterday.
He added, however, that it is still too
early to remove central bank support.
This contrasted with separate comments
from fellow ECB policymaker
Erkki Liikanen, who stressed the need
for a timely exit from extraordinary
measures. Late last year, the ECB cut its
interest rates to equal a previous record
low of 1.0 percent and has since fed
banks more than 1 trillion euros ($1.3
trillion) in ultra-long 3-year funds and
has loosened its collateral rules.
All this has pumped money into the
euro zone economy as it struggled
against both an economic downturn
and a debilitating debt crisis.
“Just now we have to see how the
various measures affect the economy,”
Nowotny told Reuters Insider TV in an
interview. “This will take some time; in
the meantime, I do not see any need for
further action,” he said.
He added: “We have done what a
central bank can do ... of course there
are other players who have to do their
part.”
Nowotny also said now was not the
time to worry about removing central
bank support, adding that the chance of
a well-timed exit had been thought
before any measures had been implemented.
“When you start an action, you also
have to think how to end it. Whatever
we do, we also have to take into account
how long we do it, what is the exit strategy,”
he said. “It is not a matter of concern
right now.” Liikanen, who is the
Bank of Finland governor, said that
before one could declare the debt crisis
finished, the ECB needs to quit its
extraordinary measures and have the
economy stand on its own.
“Central bank measures can be used
to calm the financial markets, but a permanent
solution to the debt crisis will
require both successful fiscal and structural
policies and a controlled and timely
exit from the temporary central bank
measures,” Liikanen said.
He did not give any time frame for
the exit beyond stating it would have to
be done when the time was ripe.
When Nowotny was asked about
potential strife between the German
Bundesbank and the ECB regarding support
measures, Nowotny said “This is not
true ... Of course you have discussions.”
The Bundesbank and its head Jens
Weidmann have expressed concerns
about looser lending rules which it uses
to accept guarantees in exchange for
loans. The German central bank used
most of its last year’s profits to boost its
Business
ECB in wait-and-see
mode, says Nowotny
Official douses hopes of further measures
Britain’s coalition government to raise
the threshold at which people start
paying income tax. “We think that’s an
important factor and would lead to an
easing for the circumstances that people
have got where they’ve just seen
disposable income falling.”
Britain’s retailers are mostly struggling
as disposable incomes have been
squeezed by rising prices, muted
wages growth and austerity measures,
and shoppers fret about rising unemployment,
a shaky housing market and
the euro debt crisis.
Argos has been particularly hard hit
because its mainly low-income customers
have suffered most and
because it also faces stiff competition
from grocers, specialists and the internet.
Sales at Argos stores open over a
year dropped 8.5 percent in the eight
weeks to Feb. 25, broadly in line with a
drop of 8.9 percent over the 52 weeks
ATHENS: A homeless person begs in Syntagma square, backdropped by the
Greek parliament, in central Athens, yesterday. — AP
ending on the same date.
Duddy said shoppers were particularly
cutting back spending on electrical
goods like televisions and video
games, with sales of the latter down 35
percent in the eight-week period. Likefor-like
sales at Homebase, Britain’s
No.2 home improvements retailer
behind Kingfisher’s B&Q, slumped 6.5
percent in the quarter, worse than the
full-year decline of 2 percent as sales of
furniture, kitchens and bathrooms suffered.
The firm said it was on track to
meet analysts’ expectations for a fullyear
underlying profit of around 100
million pounds, which would be down
sharply from 254 million the year
before. Finance Director Richard
Ashton said it was reasonable to expect
another, albeit more modest, decline in
the current financial year, noting that
analysts’ average forecast was for an
underlying profit of around 80 million
risk buffers. Asked about the possibility
of further interest rate cuts, Nowotny,
who also heads the Austrian central
bank, said they were not being discussed
right now.
He also said there were no indications
of inflation risks at the moment.
Liikanen, on the other hand, repeated
the ECB line that inflation was expected
to stay above 2 percent this year, before
falling to be in line with the central
bank’s target of just below 2 percent.
Nowotny also said there were clear
signs of stabilization in the financial markets
after the ECB’s cash. Liikanen also
offered the central bank a pat on the
back, saying the injection had had “decisive
impact”. The ECB itself said in its
March monthly bulletin published yesterday
that it might take several months
before the impact of 3-year money is felt
and credit rebounds. — Reuters
Home Retail urges help for consumers
pounds. “There are people who’ve said
they could get to some cautious optimism
in the second half,” Duddy said,
referring to falling inflation and events
like the Olympics and jubilee.
“We wouldn’t disagree with them,
but from our point of view we’d be better
with a cautious plan rather than
banking to upsides that may or may
not occur,” he added.
Espirito Santo analysts said it was
good news Home Retail had avoided
another profit warning, but saw little
scope of a quick recovery.
“Trading remains tough and there is
a long way to go before we begin to
see margins recover at Argos, in our
view,” they wrote in a research note.
Home Retail shares, which have lost
nearly half of their value over the last
year, were down 0.7 percent to 114.2
pence by 0850 GMT, lagging a flat
European retail sector. — Reuters