TheChek News Flow

The French media group said revenue for the first quarter rose 5.4%

Vivendi VIV 0.86%increase; green up pointing triangle said first-quarter revenue rose, boosted by strong growth at its three core businesses, Canal+ Group, Lagardere MMB 0.15%increase; green up pointing triangle and Havas.

The French media group said Monday that revenue for the period rose 5.4% at constant currency and perimeter to 4.275 billion euros ($4.57 billion) from EUR2.29 billion euros, driven by the consolidation of Lagardere as well as revenue growth at Canal+ Group and Havas.

Vivendi is in the process evaluating a break-up into four businesses that would be structured around its Canal+ television unit, its Havas advertising business, a company grouping its publishing and distribution assets including recently acquired Lagardere, and an investment company.

Canal+ revenue grew 2.6% at constant currency and perimeter to EUR1.54 billion in the first three months of the year, with revenue at its TV operations in mainland France increasing 5.1%, or 3.5% at constant currency and perimeter, driven by growth in the subscriber base and average revenue per user. International operations revenue rose 5.8%, or 4.1% at constant currency and perimeter, reflecting continued growth in the subscriber base, particularly in Africa.

Net revenue at Havas rose 4.8% to EUR617 million, or 2.0% on an organic basis, one of the strongest growth rates in the communications sector and confirming its operating momentum, the company said.

IAG—which houses British Airways, Iberia and Vueling among others—agreed with Air Europa in February last year on a full acquisition valued at €400 million

International Consolidated Airlines Group’s proposed $427.7 million acquisition of Air Europa could reduce competition, the European Union said late Friday.

The European Commission—the legal arm of the EU—said the deal could restrict competition in the market for passenger air-transport, in particular for routes within, to and from Spain.

IAG IAG 0.09%increase; green up pointing triangle—which houses British Airways, Iberia and Vueling among others—agreed with Air Europa in February last year on a full acquisition valued at 400 million euros ($427.7 million).

The commission is concerned that customers could face increased prices and decreased quality of services following the transaction, it said.

It has issued a statement of objections—a formal step in an investigation where the parties are informed in writing of the concerns.

To address the concerns, IAG is working on remedies that creates a more competitive market and benefits consumers, it said in a statement.

“Compared with the remedy package we submitted in our previous attempt to acquire Air Europa, we are doubling our offer in terms of divested capacity,” it said.

IAG can submit remedies at any time in the proceedings until the remedy deadline on June 10.

EU would need 50% tariffs to curb imports of Chinese electric cars

Report says punitive action being mooted in Brussels would not be enough to deter carmakers

The EU would need to impose huge tariffs of about 50 per cent to stem the flow of cheap Chinese electric vehicles into the bloc, according to new analysis. 

Brussels’s blockbuster anti-subsidy investigation into Chinese electric cars is expected to conclude within weeks, but researchers at the Rhodium Group say any punitive action is likely to be too timid to deter Chinese carmakers.

“We expect the European Commission to impose duties in the 15-30 per cent range. But even if the duties come in at the higher end of this range, some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe because of the substantial cost advantages they enjoy,” the report says. 

“Duties in the 40-50 per cent range — arguably even higher for vertically integrated manufacturers like BYD — would probably be necessary to make the European market unattractive for Chinese EV exporters.”

BYD’s Seal U, for example, sells for €20,500 in China and €42,000 in the EU. The estimated profit is €1,300 and €14,300 respectively, giving a strong incentive to export, Rhodium says.

Imports already pay a 10 per cent EU tariff rate, amounting to roughly €2,100 a vehicle.

“According to our calculations, a 30 per cent duty would still leave the company with a 15 per cent (€4,700) EU premium in relation to its China profits, meaning that exports to Europe would remain highly attractive,” the Rhodium report said.

BYD could even lower its prices to hit its target of capturing 5 per cent of the EU market by 2025 and 10 per cent by 2030, the report says. “Many other Chinese EV models would still enjoy a strong EU profit premium.”

Rhodium calculated that the average punitive duty across all sectors where the EU has found subsidies is 19 per cent, if the affected companies co-operate, as Chinese carmakers BYD, SAIC and Geely have done. 

Brussels announced its investigation in October after a surge in imports threatened domestic producers that are switching from combustion engine vehicles to electric ones.

Imports of EVs from China, including from non-Chinese manufacturers with plants there, increased from $1.6bn in 2020 to $11.5bn in 2023. The market share of Chinese brands rose more than fourfold in that time to 8 per cent last year.

That is set to hit 11 per cent this year, rising to 20 per cent by 2027, according to estimates from Transport & Environment, an NGO.

German and US carmakers, which manufacture in China and sell in the EU, are also vulnerable to higher tariffs. Rhodium says 15 per cent duties would wipe out profits for Tesla’s exports from China to the EU.

Beijing has denounced the investigation as protectionist, saying its companies are simply more competitive.

EU officials told the FT that preliminary duties could come as early as May, although the deadline is July. Permanent duties would have to win the support of a majority of EU member states, and would be imposed in November.

Rhodium said massive investment in factories meant that Chinese carmakers were obliged to export to make a satisfactory return. 

By 2026, BYD’s annual production capacity in China will reach 6.6mn EVs up from 2.9mn at the end of 2023. To absorb that capacity domestically BYD would need to more than double its sales in a slowing market.

With countries including the US already imposing tariffs and restrictions, the EU has become the market of choice. 

Rhodium predicts that EU policymakers in Brussels could use other means to protect domestic industry. They could restrict Chinese imports on security grounds, given how much data the vehicles collect, or focus consumer subsidies for electric vehicles on EU-made models.

The European Commission said it would complete inspection visits by the end of April and was “assessing the verified data and information”.

Poland and others push to be exempt from ‘excessive deficit procedure’ owing to their high defence spending

Eleven EU countries including France and Italy are set to be reprimanded by the European Commission over excessive government spending once new fiscal rules enter into force this year.

These countries last year ran budget deficits larger than the 3 per cent of GDP threshold allowed under EU rules. The commission will determine in June whether to launch so-called excessive deficit procedures (EDP) in each case. Countries in the eurozone could face fines if they don’t course-correct, while the non-euro countries face reputational risks.

France, Italy and Belgium, whose deficits are in excess of 3 per cent and do not plan to return to compliance over the next few years, are almost guaranteed to be sanctioned.

These fiscal rules were suspended during the Covid-19 pandemic and are now being reapplied after being reformed, including clauses giving more leeway for defence investments.

The new rules have been given extra bite by the European Central Bank, which said it could exclude countries from its new but untested bond-buying programme if they do not act on EDP recommendations.

Some countries, including Spain and the Czech Republic, argue their deficit will return at or under 3 per cent this year, and should not be punished for a temporary breach.

“There may be borderline cases,” Valdis Dombrovskis, the commission’s executive vice-president for economic affairs, told the Financial Times. “If there is a country whose excessive deficit is close to 3 per cent but temporary we might decide not to use the excessive deficit procedure. The 2024 budget can come into play.”

Non-eurozone member Romania is currently the only country in an EDP.

Poland and Romania, as well as eurozone member Slovakia are pushing for an exemption on the grounds that military spending caused by Russia’s full-scale invasion of Ukraine has pushed them above the threshold. 

“Poland has the highest defence spending among Nato countries, higher than the US. This is an extraordinary situation that should be considered when assessing excessive deficit procedure and the new EU fiscal rules are made for that,” Andrzej Domański, Polish minister of finance, told the Financial Times.

Poland ran a deficit above 5 per cent in 2023, and spent 3.9 per cent of its gross domestic product on defence in the same year, meaning its non-defence related deficit was below the 3 per cent threshold.

“We have been in dialogue with the commission and there is a broad understanding that such investments need to be properly taken into account,” Domański said.

Defence spending “is one of the relevant factors” determining whether or not to open an excessive deficit procedure, Dombrovskis said.

But not all defence spending qualifies for lenient treatment. Under reformed EU budget rules, “the increase of government investment in defence” can be discounted, but not recurrent defence spending.

“In the negotiations it was clear this would be a topic. Soldiers’ salaries versus tanks,” said an EU diplomat, noting that it was up to the commission to establish what could be exempt.

The commission in the past came under criticism for failing to enforce the deficit rules, especially in the case of France. Stricter enforcement was a key demand of Germany and others during negotiations on reforming the rules.

“We will be watching quite closely,” said one EU ministry official.

One likely outcome is that the countries will still be placed in EDP, but that the budgetary adjustment the commission will prescribe in autumn will be smaller. 

“Clear rules govern the EDPs,” said Dombrovskis. “These main parameters have not been changed. Three per cent of GDP remains the relevant threshold for starting an EDP.”

Europe’s largest digital marketplace for vintage clothes enjoyed rapid revenue growth in 2023

Vinted has posted an annual profit for the first time as Europe’s largest online marketplace for used clothes also enjoyed rapid revenue growth amid the rising interest in buying and selling of second hand fashion.

The Lithuanian start-up, much loved by fashionistas across the continent, made a net profit of €18mn last year versus a loss of €20mn in 2022. Sales increased by 61 per cent to €596mn.

“Second-hand fashion is still a relatively immature market and only a tiny proportion of fashion overall. Our performance in 2023 was not only proof that we can deliver strong growth but that we are at the forefront of a market with huge potential,” said Thomas Plantenga, Vinted’s chief executive.

Founded in 2008, Vinted was last valued at €3.5bn in May 2021. It has been looking at options for its capital structure including a secondary share sale ahead of a potential stock market listing.

It is positioning itself as Europe’s leading player in the sustainable fashion market, aiming both to get more customers in more countries to buy and sell used clothes and to improve logistics for delivering goods between consumers.

“Growing consumer-to-consumer second-hand fashion is an impactful way to mitigate the harm of the fashion industry and the reason behind our mission to make second-hand the first choice,” added Plantenga.

Investors and bankers say that start-ups looking to float need to be profitable, unlike in the previous decade when low interest rates led to shareholders being more seduced by growth prospects.

Plantenga stressed that Vinted had historically invested heavily, and still saw “many opportunities on the horizon”. It secured a €50mn revolving credit facility at the end of last year from BNP Paribas and ING Bank for future investment or expansion plans, including takeovers.

The Vilnius-based group is present in countries from the US and UK to France, Germany and Italy. It started in Denmark, Finland and Romania last year.

It is moving away from purely being a marketplace to offering other services such as Vinted Go, a shipping service that has its own lockers for customers to deliver and collect clothes in France. Vinted added that it would invest heavily in Go in France, the Netherlands, and Belgium in particular this year.

Last year it secured an electronic money institution licence from the Lithuanian central bank to allow it to offer customers payment services as well as acquiring a verification service for luxury clothes in 2022 in an aim to make buying and selling high-value items safer.

Plantenga said: “We see many opportunities ahead, so we’ll continue to balance profitability against investment opportunities to accelerate towards our mission.”

DAX:

MDAX:

SDAX: