FT : Air Liquide: gas group has room for expansion

Air Liquide: gas group has room for expansion
Near-term outlook is gloomy but company’s geographical and product diversity provides some comfort

As a large supplier of industrial gases, France’s Air Liquide cannot escape the ebbs and flows of world economic forces. The near-term outlook is gloomy, particularly for a group based in Europe, where the threat of a recession weighs heavily on shares. A downturn in industrial production will hit demand for its products.

As if to avoid intruding into the private grief of customers, Air Liquide tactfully referred to a “complex macroeconomic environment” in a third-quarter sales update. The key question for investors, as with any mature business these days, is “how defensive is this company?”

Industrial gases is a concentrated industry. That should help Air Liquide pass on cost increases. Exposure to a European manufacturing sector threatened by energy shortages is a bigger problem. The effects of that could take time to emerge. Air Liquide contracts are sometimes as long as 20 years.

Geographical and product diversity provides some comfort. The revenues of the predominant gas and services division were up 7.2 per cent at €7.9bn in the third quarter. In the Americas sales grew almost 13 per cent and more than a tenth in Asia-Pacific.

In the latter, sales to the electronics business helped. Antagonistic pushes by China and the US for chip self-sufficiency should expand Air Liquide’s market.

Air Liquide, whose group net profit rose 5.3 per cent to €1.3bn at the half-year stage, is diversifying its product range, investing €200mn in hydrogen production in China. The gas has a promising future as an energy storage and transport medium, but still has some time before becoming fully commercial.

Shares in Air Liquide trade on an enterprise value to ebitda multiple of about 13 times, a little below rival Linde. This historically German business is pulling its Frankfurt listing in favour of New York.

Air Liquide’s stock has dropped this year, while outperforming the Stoxx 600 industrial goods index. Like some gases it will remain volatile, but the business itself has medium-term scope to expand.

FT : Russia conducts first nuclear weapons drill since its invasion of Ukraine

Russia conducts first nuclear weapons drill since its invasion of Ukraine
Military exercises heighten western fears that Moscow is fabricating a pretext to escalate faltering campaign

Russia conducted its first major nuclear drills since the start of its war on Ukraine and President Vladimir Putin made unfounded claims that Kyiv was seeking to develop a “dirty bomb”, as Moscow continued to ramp up the rhetoric over possible nuclear use in the conflict.

The Russian armed forces on Wednesday practised what defence minister Sergei Shoigu called a “mass nuclear strike with strategic attack forces in response to a nuclear attack by our adversary”, as Putin monitored events via videoconference from the Kremlin.

Addressing security chiefs from a group of ex-Soviet countries after the exercises, Putin said “geopolitical confrontation has sharply increased” and accused the US of using Ukraine as a “battering ram” against Russia.

He repeated claims, without providing evidence, that the US had made Ukraine a “test site for military biological experiments”, complaining that the west was “pumping it up with weapons” and ignoring “provocations” using a dirty bomb, a conventional explosive carrying radioactive material.

Kyiv has vehemently denied the claims and said the Kremlin’s aim was that the spectre of nuclear war would pressure Ukraine’s western backers to accept a peace deal on Russia’s terms.

Ukraine’s defence minister Oleksiy Reznikov said he was “absolutely sure” that Putin’s nuclear rhetoric was part of the “blackmailing of our western partners”, meant to discourage them from providing further weaponry to Kyiv.

Russia’s “Grom” drills tested the three parts of Russia’s nuclear capabilities: the RS-24 Yars intercontinental ballistic missile, the missile-carrying K-114 Tula submarine, and two Tu-95 long-range strategic nuclear bombers.

The drills are taking place alongside Nato’s annual nuclear forces exercise, which the alliance has said is designed to ensure that the western nuclear deterrents are “safe, secure and effective”.

Nato’s “Steadfast Noon” drills, which test airborne nuclear forces but no live-fire elements, began this month and will run until October 30 in Belgium, the UK and over the North Sea.

“Nato will not be intimidated or deterred from supporting Ukraine’s right to self-defence,” Nato secretary-general Jens Stoltenberg said on Wednesday, a day after rejecting suggestions that the two nuclear drills running concurrently could further heighten already fraught tensions over the war.

“It would have sent an absolutely wrong signal if then suddenly we cancelled that exercise. We’ve also been transparent about the fact we’re conducting these exercises, and it was planned long before the Russian invasion of Ukraine,” Stoltenberg said a day earlier.

Brigadier General Patrick Ryder, the Pentagon press secretary, said Russia had notified the US about the drills. “This is a routine annual exercise by Russia,” he said, adding that “in this regard, Russia is complying with its arms control obligations, and its transparency commitments to make those notifications”.

The Russian exercises come amid heightened nuclear rhetoric that western countries fear is an ominous attempt by the Kremlin to fabricate a pretext to escalate Putin’s faltering eight-month invasion of Ukraine.

Ukraine’s counteroffensive continues to inflict humiliating setbacks on Russia’s military, pushing Putin to dial up the rhetoric around the use of nuclear weapons.

Russia held the previous exercise in February just days before Putin launched his invasion of Ukraine and warned the west of “consequences you have never encountered in your history” if it tried to stop him.

Last month, he said Russia would use “all the means at our disposal” to defend itself after annexing four regions of Ukraine and warned that the US created “a precedent” when it dropped nuclear bombs on two Japanese cities at the end of the second world war.

Since then, Ukraine has continued to claw back territory Putin has only just claimed as part of Russia and closed in on Kherson, the only regional capital Moscow has captured throughout the war.

The Grom drills followed calls by Shoigu to his counterparts in China and India, where he repeated the dirty bomb claims. These calls followed similar warnings he made over the weekend to the defence ministers of the US, UK and France — Nato’s three nuclear powers — as well as Turkey, which does not have nuclear weapons but has sought to carve out a role as a mediator in the war.

Ukraine believes Putin has not abandoned his goal to essentially destroy the country in its current form and that he was not prepared to negotiate with Kyiv in good faith.

Russia has left swaths of Ukraine without power after stepping up air strikes on the country’s critical infrastructure facilities such as power plants.

Kyiv had pleaded for help to combat Russia’s onslaught from cruise missiles, air strikes and Iran-made drones. Ukraine is set to receive its first batch of Nasams air defence systems from the US, the most sophisticated air defence system provided to Ukraine so far, according to manufacturer Raytheon.

>>> US Early premarket gappers


Early premarket gappers

  • Gapping up:
    • AGYS +7.5%, CHX +7%, UHS +6.5%, FCF +6.2%, ENPH +6.2%, WIRE +5.7%, WFRD +5.7%, JNPR +4.8%, OLMA +4.5%, EQC +4.2%, ATRA +4.1%, TNET +3.2%, AZN +3%, FE +3%, NCR +3%, CC +2.8%, TENB +2.4%, HIW +2.2%, CSGP +2.1%, TMO +2%, EXEL +1.7%, WTRG +1.5%, MXL +1.4%, TER +1.3%, V +1.3%, UMC +1.3%, EQR +1.2%, MDLZ +1%, ET +1%, CNI +0.9%, PCVX +0.8%, BYD +0.8%, TRMK +0.8%, MTDR +0.7%, BG +0.6%
  • Gapping down:
    • TSHA -14.8%, SKX -13.7%, NEX -10.6%, LRN -8.1%, GOOG -6.2%, MSFT -6%, MAT -5.9%, AIZ -5.7%, SPOT -5.3%, TXN -4.9%, NAVI -4.2%, VICR -4.1%, HA -3%, CANO -2.4%, POR -2.4%, GTY -2.1%, VBTX -1.7%, DB -1.6%, KRC -1.5%, FFIV -0.9%, VRT -0.9%, HLT -0.8%, AGR -0.7%, BCS -0.7%, OTIS -0.7%, BMY -0.5%

>>> Europe : Brokers Upgrades & Downgrades - 26th of October 2022 V2(+)

>>> Up
* Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
* HSBC Raised to Neutral at Exane; PT 600 pence
* Imerys Raised to Buy at AlphaValue/Baader

>>> Down
* Billerud Cut to Hold at Handelsbanken
* Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
* Gestamp Cut to Equal-Weight at Barclays; PT 4 euros
* Neoen PT Cut to 31.90 euros from 37 euros at Citi
* Renta Corp Real Estate Cut to Neutral at JB Capital Markets (+)
* SSAB Cut to Hold at Handelsbanken
* Viaplay Cut to Hold at SEB Equities; PT 248 kronor

>>> Initiation
* Fresenius SE Reinstated Equal-Weight at Morgan Stanley

>>> Call
* Adidas Fighting ‘Too Many Fires;’ RBC Cuts to Sector Perform
* Barclays’ Cau Sees Opportunity in UK Assets Post ‘Record’ Exodus (+)
* BioMerieux 3Q a Beat, Shares May Get Modest Boost: Jefferies
* Covestro Double-Upgraded at Citi With More Bad News Unlikely
* Deutsche Bank Reports Good Set of Operational Results: KBW (+)
* Goldman Sachs Says US Equity Bottom Conditions Are Not There Yet
* Michelin 3Q Sales Beat; Guidance May Weigh on the Shares: RBC
* Porsche Among Potential Replacements for Linde in DAX: JPM (+)
* Puma Results ‘Fairly Robust’ on 3Q Beat, Outlook Reassures: RBC (+)
* Santander 3Q Profit Beat Driven by Net Interest Income, RBC Says
* SBB Downgraded as Citi Sees Tougher Property Market Correction
* Skanska 3Q Is a Big Beat on Profitability, Morgan Stanley Says (+)
* SocGen Strategists Say European Earnings Are Resilient So Far (+)
* Thales Delivers Strong Quarter on Both Orders, Sales, Citi Says (+)
* Uniper’s Loss May Mean Bigger Capital Increase Needed: Citi (+)

>>> Stoxx 600 Pre-Market Indications

DAX:
  • Deutsche Bank (DBK TH) +4%
    • Deutsche Bank Lifts Revenue Outlook as Rising Rates Fuel Trading
  • Puma (PUM TH) +3.6%
    • Puma Maintains FY Ebit Forecast
  • Symrise (SY1 TH) +2.9%
    • Symrise Boosts FY Organic Revenue Forecast
  • Mercedes (MBG TH) +2.5%
    • Mercedes Hikes Profit Goal With Demand Outstripping Supply (1)
  • Covestro (1COV TH) +1.3%
    • Covestro Double-Upgraded at Citi With More Bad News Unlikely
  • Fresenius SE (FRE TH) -0.5%
    • Fresenius Will Factor in Elliott’s Strategy Ideas, CEO Tells FAZ
  • Infineon (IFX TH) -1%
    • Ivy Science & Tech Adds KLA Corp, Exits GlobalFoundries
  • Fresenius Medical (FME TH) -2.3%
    • Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
MDAX:
  • Bechtle (BC8 TH) +2.1%
    • Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
  • Commerzbank (CBK TH) +1%
    • Commerzbank Unit Sweetens Deals for Franc Borrowers in Poland
  • Evotec SE (EVT TH) +0.8%
  • Aroundtown (AT1 TH) +0.7%
  • K+S (SDF TH) +0.5%
  • Lufthansa (LHA TH) -0.6%
  • Delivery Hero (DHER TH) -0.6%
  • Varta (VAR1 TH) -0.8%
  • Deutsche Wohnen (DWNI TH) -1%
  • Aixtron (AIXA TH) -1.1%
SDAX:
  • Ceconomy (CEC TH) +2.6%
    • Ceconomy 4Q Sales Beats Estimates
  • Heidelberger Druck (HDD TH) +0.9%
  • SMA Solar (S92 TH) +0.6%
  • Instone Real Estate (INS TH) +0.5%
    • Instone Real Estate to Boost Share Buyback Program
  • Hamborner REIT (HABA TH) +0.3%
  • Deutsche PBB (PBB TH) Flat
  • Nordex (NDX1 TH) -0.3%
  • Uniper (UN01 TH) -3.1%
    • Watch European Utilities as Uniper Warns of €3.2 Billion Loss

>>> Stoxx 600 Pre-Market Indications

  • Deutsche Bank (DBK TH) +3.7%
    • Deutsche Bank Lifts Revenue Outlook as Rising Rates Fuel Trading
  • Symrise (SY1 TH) +2.7%
    • Symrise Boosts FY Organic Revenue Forecast
  • Puma (PUM TH) +2.5%
  • Telefonica (TNE5 TH) +2.4%
    • Telefonica To Record €1.3 Billion Spanish Tax Refund in 4Q (1)
  • Dassault Systemes (DSYA TH) +2.4%
    • Dassault Systemes 3Q Non-IFRS Operating Margin Misses Estimates
  • Mercedes (MBG TH) +2.1%
    • Mercedes Hikes Profit Goal With Demand Outstripping Supply (1)
  • Bechtle (BC8 TH) +2.1%
  • UniCredit (CRIN TH) +2%
    • UniCredit Boosts Targets a Second Straight Quarter on Rates (1)
  • Santander (BSD2 TH) +1.8%
    • Santander Profit Beats Estimates on Tailwind From Rate Hikes (1)
  • Covestro (1COV TH) +1.3%
    • Covestro Double-Upgraded at Citi With More Bad News Unlikely
  • Aixtron (AIXA TH) -1.1%
  • Carl Zeiss Meditec (AFX TH) -1.1%
  • Hexagon (HXG TH) -1.2%
  • Glencore (8GC TH) -1.3%
  • UMG (0VD TH) -1.5%
  • Infineon (IFX TH) -1.8%
  • Heineken (HNK1 TH) -2.1%
    • *HEINEKEN 3Q ORG. BEER VOLUME +8.9%, EST. +11.8%
  • Fresenius Medical (FME TH) -2.6%
  • ASML (ASME TH) -3.2%
    • Watch European Tech Stocks as Microsoft, Google, TI Disappoint

>>> Europe : Brokers Upgrades & Downgrades - 26th of October 2022

>>> Up
* Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
* HSBC Raised to Neutral at Exane; PT 600 pence
* Imerys Raised to Buy at AlphaValue/Baader

>>> Down
* Billerud Cut to Hold at Handelsbanken
* Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
* Gestamp Cut to Equal-Weight at Barclays; PT 4 euros
* Neoen PT Cut to 31.90 euros from 37 euros at Citi
* SSAB Cut to Hold at Handelsbanken
* Viaplay Cut to Hold at SEB Equities; PT 248 kronor

>>> Initiation
* Fresenius SE Reinstated Equal-Weight at Morgan Stanley

>>> Call
* Adidas Fighting ‘Too Many Fires;’ RBC Cuts to Sector Perform
* BioMerieux 3Q a Beat, Shares May Get Modest Boost: Jefferies
* Covestro Double-Upgraded at Citi With More Bad News Unlikely
* Goldman Sachs Says US Equity Bottom Conditions Are Not There Yet
* Michelin 3Q Sales Beat; Guidance May Weigh on the Shares: RBC
* SBB Downgraded as Citi Sees Tougher Property Market Correction