TheChek News Flow

Discord within oil-reliant industry over how to power the workhorses of global trade in the net zero era

The Compagnie Belge Maritime du Congo launched its first steam-powered ship, the SS Leopold, on its maiden trip from Antwerp to Congo in 1895. Today CMB, the colonial-era group’s successor, carries commuters between the Belgian city and nearby Kruibeke on a ferry fuelled by hydrogen.

“This is the fourth energy revolution in shipping — from rowing our boats to sails to steam engine to diesel engine and we have to change it once more,” said Alex Saverys, CMB chief executive and scion of one of Belgium’s oldest shipping families.

Shipping produces about 3 per cent of global greenhouse gas emissions and without action its contribution is likely to rise for decades as global trade grows. The International Maritime Organization, the UN agency that regulates the global industry, wants to at least halve its impact by 2050.

Many industry figures are pinning their hopes on blue or green hydrogen — produced using natural gas with carbon capture or renewable electricity and whose only byproduct when combusted is water — to help steer away from polluting bunker fuel.

“There is no question whether hydrogen will be the energy carrier of shipping in 2050,” said Lasse Kristoffersen, chief executive of Norway’s Torvald Klaveness. “The question is, how do you produce it and which form do you use it as a carrier?”

But other executives operating the huge hulks that criss-cross the planet transporting everything from raw materials to consumer goods are sceptical hydrogen can play more than a bit part in the fuel transition.

While pilot projects such as CMB’s prove the fuel is viable at small scale on set routes with refuelling infrastructure in place, 85 per cent of the sector’s emissions come from bulk carriers, oil tankers and container ships, according to analysis by Royal Dutch Shell. Nothing can power them as efficiently and cheaply as fossil fuels.

“This is not going to be an easy sector to decarbonise,” said Bud Darr, executive vice-president at Mediterranean Shipping Company, the world’s second-largest container shipping group. “Ocean shipping’s need for autonomy requires us to carry a large amount of fuel. We need a range of alternative fuels at scale and we need them urgently. We’re keeping an open mind and exploring all possible solutions.”

Hydrogen has low energy density compared with heavy fuel oil. Storing it in its liquid form below -253C requires heavy cryogenic tanks that take up precious space, rendering it unfeasible for large cargo ships.

“With the current state of technology, we cannot use hydrogen to fuel our vessels,” said Morten Bo Christiansen, head of decarbonisation at AP Moller-Maersk, MSC’s larger rival.

However, the industry has grown increasingly optimistic about using ammonia, a compound of hydrogen and nitrogen, to fuel the workhorses of global trade without belching out greenhouse gases.

Though foul-smelling and toxic, ammonia is easy to liquefy, is already transported worldwide at scale and has nearly twice the energy density of liquid hydrogen.

“The cleanest, most realistic transport fuels of the future are hydrogen-based fuels including green ammonia,” said Rasmus Bach Nielsen, global head of fuel decarbonisation at commodity trader Trafigura.

Engine makers believe the technology is within reach. Finland’s Wärtsilä said it would be ready to scale up ammonia-ready engines by the end of next year, while Germany’s Man Energy Solutions plans to deliver an ammonia-powered oil tanker in 2024. Both said that until supply infrastructure was in place, new engines would also need to be compatible with bunker fuel.

Almost all of the 176m tonnes of ammonia produced a year, mostly for fertiliser, currently uses “grey” hydrogen extracted from natural gas in an energy intensive process that emits CO2.

Producing carbon-free ammonia at scale is a challenging task. About 150m tonnes would be needed to meet 30 per cent of shipping’s fuel demand by 2050, according to a report by catalysis company Haldor Topsoe. That would require 1,500 terawatt hours of renewable energy, roughly equivalent to all of last year’s global wind power output.

Pockets of the shipping industry are now calling for a global carbon levy to accelerate production and adoption of next-generation fuels.

“Technology is there and ready,” said Bach Nielsen. “Now we need regulation.”

However, with the IMO’s 174 member states including oil producers and commodity exporters, reaching agreement on a carbon price is no easy task. The EU is set to make proposals in June to include shipping in its emissions trading scheme but shipping executives believe a global carbon tax would have to be several times higher than the EU’s current record prices above €47 a tonne to make hydrogen-based fuels competitive.

Any transition to hydrogen or hydrogen-based fuels is likely to be a lengthy process given the industry’s caution in shifting to a less-polluting fossil fuel. Even now, only 11 per cent of new vessels on order will be primarily powered by liquefied natural gas, according to consultancy Drewry.

Medium-term decarbonisation efforts by the biggest shipping companies are primarily focused on low-carbon synthetic fuels and biofuels.

Maersk, which plans to launch its first carbon-neutral vessel in 2023, is backing methanol — either biomethanol derived from waste matter such as wood or e-methanol produced from captured CO2 and green hydrogen. France’s CMA CGM is investing in biomethane. Both are compatible with existing engines.

Detractors say biomass resources required for biomethanol are limited, and that production can lead to environmental problems such as deforestation and water degradation. They also point to the fact that while synthetic fuels absorb CO2 when produced, they emit it again when burnt.

“Why on earth should we release CO2 into fuels when we have captured it in the first place?” asked Kristoffersen of Torvald Klaveness.

To many minds, that leaves hydrogen in some form at the core of any long-term vision to decarbonise shipping. Few, however, can predict with confidence how quickly it might happen.

“We would expect technical challenges to be solved within the next few years,” said Jan Dieleman, head of ocean transportation at US grain trader Cargill. “The main challenge is the regulatory framework, as even large-scale production of these fuels will always be more expensive than fossil fuels. If we want to decarbonise shipping, we will need regulations to drive the change.”

New prime minister’s close ties with Paris and Berlin reshape EU relationship

Two years ago Italy was at risk of becoming a pariah inside the EU. A furious Emmanuel Macron, France’s president, had recalled his ambassador to Rome after Italy’s deputy prime minister held an unauthorised summit with French “Yellow Vest” protesters. 

At the same time Italy’s then interior minister Matteo Salvini pumped out daily social media tirades against Brussels, and smiled for selfies with French far-right leader Marine Le Pen.

Behind the scenes Italian diplomats found themselves increasingly isolated, their government viewed by many as an unstable and untrustworthy partner led by politicians who wanted to weaken the EU, and flirt with Moscow and Beijing.

But less than three months into the national unity government of prime minister Mario Draghi, not only is Rome’s voice being heard loud and clear in Paris and Berlin, but it is increasingly setting the agenda as the EU attempts to emerge from the Covid-19 pandemic.

“Italy was always seen as the EU’s juvenile delinquent, and now it’s the model European,” Jana Puglierin, senior policy fellow at the European Council on Foreign Relations. 

On Monday Draghi will present Italy’s plans to spend €190bn of EU loans and grants alongside a set of structural reforms seen as critical to the entire credibility of Europe’s post-Covid recovery effort. The former president of the European Central Bank has also announced Italy will run its largest budget deficit since the early 1990s, and has decided to increase borrowing ahead of a call from the IMF for all EU countries to do the same. Financial markets, often worried about the size of Italy’s public debt, for now remain unconcerned — a sign of confidence in the new prime minister.

Previously tetchy relations between Rome and Paris have suddenly blossomed, according to diplomats from both countries. Draghi holds regular calls with Macron, including one last week, to discuss the pandemic and other strategic issues. 

In February Draghi surprised many by becoming the first European leader to block exports of Covid-19 vaccines outside of the EU. The risky move, coming as tensions were flaring between the European Commission and the UK over vaccine supplies, was quickly backed up by Paris. It also provided political cover for commission president Ursula von der Leyen to call for stronger export controls.

Then, following a diplomatic incident in Ankara where an embarrassed von der Leyen was left standing without a chair in a summit with Recep Tayyip Erdogan, Draghi stepped out again. While other European leaders were largely silent, Draghi harshly criticised Erdogan, prompting anger in Turkey but deflecting the focus from the EU’s diplomatic mishap.

Clément Beaune, France’s Europe minister and former Europe adviser to Macron at the Elysée, said the relationship between Draghi and Macron was “good and easy” and dated back to the time when Draghi headed the ECB and Macron was France’s economy minister.

“They know each other well,” said Beaune. “They shared the same line at the last European summit — both insisted on the need to expand the [post-Covid] recovery plan and wanted more ambitious investment proposals. Draghi has the advantage of credibility, of having played a leadership role in a European institution . . . It makes dialogue easier.”

And in Berlin, Draghi’s first months in office have been welcomed as a return by Italy to the heart of policymaking inside Europe. “Italy is back in Europe,” said Alexander von Lambsdorff, foreign policy spokesman for Germany’s liberal Free Democratic party. “And a strong Europe needs a strong Italy.”

Von Lambsdorff said Draghi was seen in Berlin as a “European who sets great store by European institutions — as can be seen by the support he has shown the commission on vaccines and vaccine exports”. 

Enzo Moavero Milanesi, Italy’s foreign minister under the first government of Giuseppe Conte, the man Draghi replaced, said the perception that Italy was now seriously addressing its economic weakness would increase the country’s international stature.

“Italy, notably within the EU, has been perceived as a country with strong potential but weak performance, and this weakens your impact on foreign policy,” he said. “That the Italian government is now led by someone with vast professional experience dealing with foreign governments and counterparts is itself an important element of change.” 

Another factor working in his favour is that Draghi commands a huge parliamentary majority in a year where a post-Merkel Germany is preparing for elections, and Macron eyes national polls in 2022. While at least one of his counterparts in Germany and France will change, Draghi, as long as he retains the support of Italy’s political parties, will be expected to stay on until Italy’s next general election in 2023.

“Draghi coming on to the EU scene is one of the big game-changers,” said Georgina Wright, head of the Europe programme at the Paris-based Institut Montaigne. 

Others believe that there is a risk that expectations of what Draghi can realistically achieve have already become too high.

“The Italian establishment tends to fall in love with leaders, and right now it is in a phase of Draghi being seen as the man who walks on water,” says Nathalie Tocci, director of the Institute for International Affairs in Rome. “We will not do him any favours by painting him as infallible. He is capable of making mistakes.”

The designer was best known for his spectacular rejuvenation of Lanvin, and his ebullient personality.

Alber Elbaz, the designer best known for his spectacular rejuvenation of Lanvin from 2001 to 2015, died on Saturday at a Paris hospital. He was 59.

His death was confirmed by Compagnie Financière Richemont, his joint venture partner in AZ Factory, his latest fashion venture.

The cause of death has yet to be communicated.

An ebullient character prized for his couture-like craft, Elbaz took a five-year hiatus after being ousted from Lanvin and just launched AZ Factory, hinged on solutions-driven fashions, entertainment and tech.

While his name was not on the label, the startup was steeped in Elbaz’s personality, humor, and his inimitable flair for soigné fashions.

“I have lost not only a colleague but a beloved friend,” Richemont founder and chairman Johann Rupert said in a statement, expressing his shock and sadness at Elbaz’s sudden passing.

“Alber had a richly deserved reputation as one of the industry’s brightest and most beloved figures. I was always taken by his intelligence, sensitivity, generosity and unbridled creativity,” Rupert said. “He was a man of exceptional warmth and talent, and his singular vision, sense of beauty and empathy leave an indelible impression.

“It was a great privilege watching Alber in his last endeavor as he worked to realize his dream of ‘smart fashion that cares.’ His inclusive vision of fashion made women feel beautiful and comfortable by blending traditional craftsmanship with technology – highly innovative projects which sought to redefine the industry,” he added.

Born in Morocco and raised and educated in Israel, the designer moved to New York in the mid-Eighties. After a stint at a bridal firm, he landed at Geoffrey Beene, working as his senior assistant for seven years.

Elbaz came onto the international radar when he was recruited by Ralph Toledano to helm Guy Laroche in Paris in 1996, a stint that won raves, media attention and the job offer of a lifetime: to succeed couture legend Yves Saint Laurent at the helm of Rive Gauche ready-to-wear.

After three seasons, Elbaz was fired in the wake of Gucci Group’s takeover of YSL, with Tom Ford picking up the design reins. Elbaz subsequently did one season with Krizia in Milan before sitting on the sidelines of the business for one year.

He eventually landed at Lanvin in 2001, and Elbaz embraced the coziness of a small, privately held company — and a brand that was under the radar.

Not for long: His elegant, feminine designs and pulse-pounding runway shows, which had a carnival spirit, catapulted Lanvin to become a top Paris fashion house.

His rejuvenation of the brand was built on a woman-first ethos and the cocktail dress, which ranked as one of the most important items of the Aughts, thanks partly to him. “I said, ‘It’s all about zip-in and zip-out,’” he said in an interview in 2014.

“It was just about giving ease to women,” he said of his dresses with industrial zips and raw edges, two of the design signatures he established for Lanvin. Dressy sneakers with grosgrain laces, ballet flats and chunky costume jewelry were among his other hit designs.

During his tenure, he transformed a business largely dependent on men’s wear into a leading designer brand for women, part of the vanguard in Paris that launched an enduring trend of couture-influenced French elegance — and gave the French capital new buzz.

Meryl Streep famously accepted her Oscar for Best Actress in 2012 for “The Iron Lady” wearing a draped, gold lame gown by Elbaz. Other celebrity fans included Demi Moore, Nicole Kidman, Catherine Deneuve, Kate Moss, Uma Thurman, Julianne Moore and Gwyneth Paltrow.

Fond of musings on fashion, Elbaz often returned to the word “desire,” something he felt instinctively when he first visited the archive of the founding couturier, whose dresses from the Thirties are marvels of delicate femininity.

“I said, ‘You know we are going to make collections for women, we are going to actually emphasize the desire, the desire in fashion, the desire in design,’” he said in a 2012 interview. “I was very much into design because I came from the house of Geoffrey Beene, which was all about design, and then we pushed it also to desire, to women, to reality, to be relevant. I think to be relevant is the story of my life.”

While Elbaz always talked a good talk, and was among the most quotable designers in the business, he also trusted his gut.

“I work mostly by intuition. Every time I think too much and try to rationalize every issue, it doesn’t work. I think that intuition is the essence of this métier,” he said in 2014.

He also never dabbled in men’s wear, appointing a deputy, Lucas Ossendrijver, when he was at Lanvin.

“Our job as designers is to listen, to understand. All my career I always worked with women and for women,” he said in 2019.

Indeed, Elbaz thought about women incessantly: their lifestyles, wardrobe needs, emotions. “I’m not here to make one look,” he explained in a 2007 interview. “You have to follow their needs. That’s the whole idea of design.”

Known for draping fabrics directly on the body and using them to their best advantage, Elbaz also frequently emphasized the human hand in fashion by leaving stray threads, a riposte to the flurry of Instagram posts and e-commerce sites that had given fashion a high-tech, impersonal sheen.

After being ousted from Lanvin in October 2015 and before partnering with Richemont, Elbaz busied himself with speaking engagements and small design projects at various price points, including a collaboration with Tod’s on shoes; a Converse sneaker; a limited-edition makeup line with Lancôme; a range of travel bags and accessories with LeSportsac, and a fragrance with French perfumer Frédéric Malle.

He returned to the fashion spotlight last January during couture week in Paris, though he was loathe to call it a comeback. Via a humorous mini movie, he unveiled three “projects,” the first of which — form-fitting dresses dubbed My Body — went on sale immediately on the AZ Factory website, Farfetch.com and Net-a-porter.com, the Richemont-owned e-tailer.

Key elements of the AZ Factory project were cutting-edge “smart” fabrics, a new business model hinged on projects rather than collections, and with storytelling, problem-solving and entertainment embedded in design, distribution and communications.

Carmaker’s Spanish brand Seat says higher second quarter losses are likely if supply chain woes bring more stoppages

Volkswagen has warned top managers to brace for a bigger production hit in the second quarter than the first because of the global chip shortage, according to the head of the company’s Seat brand.

“We are being told from the suppliers and within the Volkswagen Group that we need to face considerable challenges in the second quarter, probably more challenging than the first quarter,” Wayne Griffiths, president of VW’s Spanish brand, told the Financial Times.

The warning raises the possibility of higher losses for the world’s second-largest carmaker, which said last year it expected production output to fall by 100,000 vehicles in the first quarter of 2021 because of semiconductor shortages.

VW has already warned it does not have the factory capacity to recoup lost output later in the year.

Griffiths said that the shortage was the “biggest challenge” the company faces at the moment.

The steepening toll from the crisis is being felt across the industry, with shortages expected to hit production until the second half of the year.

Ford has in the last week closed a dozen facilities in North America and Europe, some for months, while Jaguar Land Rover will this week shut two of its UK factories.

Renault last week suspended production guidance completely, saying there was too much uncertainty in its supply chain, while Daimler cut the hours of more than 18,000 staff in Germany to cater to lower production levels.

Carmakers have already lost out on making hundreds of thousands of vehicles in the opening months of this year, with most large manufacturers announcing stoppages to production that analysts expect to cost the industry billions of dollars over the course of the year.

The crisis, which began last year but was exacerbated by the Texas storms and a fire at a Renesas chip factory in Japan, comes just as manufacturers were banking on a recovery in demand after the pandemic.

Griffiths, who took on the role last October, said that production at Seat’s Martorell plant outside Barcelona was currently “hand to mouth”, with the brand deciding which cars to build only after it receives chips from suppliers.

“The name of the game this year will be flexibility,” he said. Once the company receives its chips, it can decide which models to build, flipping between hybrid and traditional cars depending on the components it receives.

“We have to try to build when we get [chips] available,” he added.

Across the VW group, the company has announced stoppages at several plants, including last week partially halting output from its Slovakia plant that builds many of the company’s largest sport utility vehicles.

Something was bubbling in mutual funds. Funds “specializing in growth and scientific stocks hit the jackpot in the closing weeks of September,” Barron’s wrote on Nov. 1, 1965. Turning up regularly among the funds’ biggest holdings were names like IBM, Xerox, Eli Lilly, General Electric, and Gillette.

A few months later, funds that had “packed their portfolios” with “glamour stocks” were enjoying “a sparkling market performance,” we wrote. Led by companies like Johnson & Johnson, Eastman Kodak, 3M, IT&T, Polaroid, Revlon, and Sears, the funds “have been outpacing the Dow Jones Averages by the widest margins in years.”

Welcome to the Nifty Fifty, the 1960s-70s version of today’s FAANGs— Facebook, Apple, Amazon.com, Netflix, and Google parent Alphabet. It was a group of well-known stocks that everybody loved despite wildly high valuations that had little basis in market fundamentals.

Some observers, such as Barron’s columnist Alan Abelson, thought such irrational investing would lead to a fall, and it did. The 1973-74 recession, accompanied by a bear market, would be the longest since 1930, later to be topped by the Great Recession caused by the bursting of the housing-market bubble, also preceded by the dramatic rise of a few corporate giants.

Will things end any differently this time?

The Nifty Fifty was an informal designation for a group of blue-chip stocks that seemed so solid they gave rise to the popular idea of buy-and-hold investing. Their high price/earnings ratios—often over 50—became selling points, seals of market approval.

Abelson had his doubts. In 1968, he called Xerox “a first-class outfit by any measure,” and cited its strong quarterly earnings. But, he wondered, “does a 15% growth rate warrant a 50-plus P/E?”

The Nifty Fifty was still flying in May 1972 when Abelson estimated that the Dow Jones Industrials as a group had a P/E of 15. That was dwarfed by those of “growth issues” such as Eastman Kodak, 42 times earnings; Burroughs, 42; Avon, 60; Xerox, 53; Kresge (later renamed Kmart), 40; Coca-Cola, 42; and Polaroid, 90.

Things would turn quickly. By November of 1972, Barron’s reported that net mutual-fund redemptions would top $1 billion for the year. The bear market officially began in January 1973, and the Nifty Fifty didn’t escape the pain. T. Rowe Price’s Growth Stock fund would drop 50% in two years.

In July 1974, after a particularly bad week in the market, Lawrence A. Armour, writing the The Trader column, observed that “even greater damage was inflicted over in the glamour category, where the old Nifty Fifty—now known as the Dirty Thirty—took another beating.” Kodak, Honeywell, IBM, and Texas Instruments were among those that got clobbered.

By the end of the decade, “ ‘Nifty Fifty’ was a byword of ridicule, a reminder of Wall Street’s follies,” Barron’s wrote. “A bear market and a decade of inflation had crushed the premium price/earnings multiples.”

Or had it?

In March 1999, our Andrew Bary pondered “the phenomenal ascent” of stocks like Microsoft, Cisco Systems, Dell Computer, Pfizer, and Wal-Mart. “Not since the fabled Nifty Fifty market of the early 1970s has a favored group of stocks came close to reaching the heights now occupied by the current leaders,” Bary wrote. The dot-com bubble soon burst.

Now, those heights are occupied by the FAANGs. Are things really different this time? Maybe. In October 2018, Al Root wrote that tech stocks in 2000 traded at a 200% premium to the market, while the FAANG premium was just 30%.

And though growth stocks have been getting “crushed” this year, as Barron’s wrote on April 7, “more-mature growth companies” such as Apple, Facebook, and Alphabet continue to flourish.

As for the Nifty Fifty, the news isn’t all bad. Many of those big-name companies continue to survive and thrive. And a study by Jeremy Siegel showed, according to Barron’s in 1999, that “an investor paying top dollar for the Nifty Fifty in late 1972 would have earned nearly the same returns over the next 25 years as someone holding the S&P 500.”

Not much of a return for “growth issues,” to be sure, and a cautionary note for those buying and holding the FAANGs.

Investors are paying closer attention to railroad shares these days, for a quartet of good reasons. Earnings look solid, the business outlook is improving, Wall Street is getting more positive on the stocks, and mergers are reshaping the sector.

The latest piece of positive news came from CSX (ticker: CSX), which reported its first-quarter numbers after the close of trading Tuesday. The railroad earned less than Wall Street had anticipated, but sales were better than expected.

CSX earned 93 cents a share from more than $2.8 billion in sales, while analysts had projected 96 cents a share and just a hair under $2.8 billion of sales.

J.P. Morgan analyst Brian Ossenbeck didn’t think the miss mattered, saying in a research note on Tuesday that investors likely would chalk it up to terrible first-quarter weather in places such as Texas.

He seems to have been right. CSX stock rose 4.7% in midday trading Wednesday, while the S&P 500 and Dow Jones Industrial Average, for comparison, were up 0.3% and 0.5%, respectively.

Part of that gain may stem from an upbeat call on the stock from BMO. Analyst Fadi Chamoun upgraded the shares to Buy from Hold and increased his target for the stock price to $105 from $95 a share. CSX closed Tuesday at $98.45.

“Consistently strong execution, significant cyclical tailwinds....improving pricing outlook, benign cost inflation, low capital intensity,” all stand to benefit the company, he said. Not only are things are getting better for railroads as the global economy recovers, but all the factors Chamoun cited mean more free cash flow and better returns for investors.

Chemicals Maker Johnson Matthey Is Pivoting to Sustainable Technologies. It May Have Found the Right Formula for Its Stock.

Johnson Matthey, the world’s largest maker of catalysts that filter pollution from diesel engines, took an earnings hit from Covid-19’s impact on the automotive market.

While slumping demand was behind the 90% fall in the half-year profit through last September, the metals refiner and chemicals maker this month credited a strong recovery in China’s auto market for lifting its operating-profit range ahead of annual earnings set to be announced in May.

Yet Johnson Matthey’s stock may be undervalued because concerns over the shrinking market for diesel cars has blinded the market to the company’s other growth opportunities.

The company manufactures products that control oil and gas pollution, and makes materials for cathodes used in electric vehicles. Johnson Matthey has announced an agreement with Finnish Minerals Group to locate a second commercial plant for sustainable battery-materials production in Finland.

Shares of the London-listed company (ticker: JMAT: United Kingdom) are up 16.8% since January, to 32.13 pounds ($44), compared with a gain of about 4% at BASF (BASF: Germany), and a 2.1% increase at W.R. Grace (GRA).

The company, which has a market value of £5.8 billion, fetches a low multiple of 14.4 times this year’s expected earnings and is valued at a 10% discount to its peers. Andy Douglas, an analyst at Jefferies, estimates shares could increase to £41.

“The market is too skeptical about the impact of the shift from internal combustion to electric vehicles on Johnson Matthey’s catalysts business and underrates its growing exposure to energy transition materials, including batteries,” he wrote in a note.

Bernstein analyst Gunther Zechmann, who has a £38 price target, says the company’s next leg of growth will come from its business making fuel cells used in car batteries, which isn’t reflected in the share price. “We would pay 17.8x price to earnings for the next 12 months on our target price whereas the market is currently paying 14.9x,” he wrote.

In its update, Johnson Matthey says adjusted operating profits are expected to come in at the top end of the £405 million to £502 million consensus. For the year ended March 31, 2020, pretax profit was £455 million, down from £523 million from the prior year. Annual revenues were £4.17 billion.

Chief Executive Officer Robert MacLeod, in a statement to Barron’s, said the company is “driving cash flow from more established businesses to invest in our suite of exciting sustainable technologies” to enable decarbonization.

That includes products for the next generation of zero-emission vehicles, including high nickel cathode battery materials and hydrogen technologies, he said.

MacLeod launched a cost-cutting drive last June to save £80 million in annual costs for the next three years while also investing £400 million on climate change and sustainable technology.

Johnson Matthey has sites in 30 countries and dates back more than 200 years from a gold assaying business set up by pioneering metallurgist Percival Norton Johnson.

The company says its health division is under strategic review as it aims to focus resources on areas that maximize shareholder value. The division produces pharmaceutical ingredients including opium alkaloids, an active ingredient in some painkillers, and medications that attack cancer cells and regulate heartbeats. It has a pipeline of 31 drugs.

Johnson Matthey’s business has survived two centuries and the stock may now be a modern sustainability play for investors.

Buy This Shipping-Company Stock. It’s Worth More Than the Sum of Its Parts.

In the middle of England, in the county of Leicestershire, a new warehouse is pushing the technological boundaries of automation and hoping to redefine global logistics for a post-Covid-19 world. Inside the 638,000-square-foot space, machines on rails zip between tightly stacked shelves and robot arms pluck various products from tight spaces, while pallets are automatically wrapped for loading in trucks.

The products, which include boxes of biscuits and chocolate bars, are from Nestlé (ticker: NESN.Switzerland), which occupies the space. But the warehouse was built, owned, and operated by a division of XPO Logistics (XPO) dubbed GXO Logistics, which is set to be spun off during the second half of 2021.

XPO, a leading provider of trucking services, announced the split in December. The company is the creation of Bradley Jacobs, who spent billions of dollars on dozens of acquisitions over the past two decades to build the firm into a global logistics company. XPO stock has returned 31% a year on average over the past 10 years, including reinvested dividends, more than double the 14% return of the S&P 500 index. But it could always be better.

By splitting in two, XPO hopes to unlock value in its shipping business while creating new value with GXO as a play on the trend toward outsourced logistics. If all goes as planned, both stocks could be worth more alone than they are together—and both are worth owning into the split.

After the spin, Jacobs will continue to run XPO, which will focus on less-than-truckload, or LTL, shipping and brokering shipping for customers. Unlike truckload shippers, which transport trailers filled to the brim with consumer goods, LTL shippers typically have shorter hauls and ship industrial products.

It’s a good time to be in the shipping business. With the global economy improving, XPO is predicting that its earnings before interest, taxes, depreciation, and amortization, or Ebitda, will improve by more than 25% in 2021 to about $1.8 billion—up 8% from the $1.7 billion it earned in prepandemic 2019. (Many companies use Ebitda as a key financial metric, especially ones with higher-than-average debt, like XPO.)

XPO typically realizes roughly two-thirds of Ebitda in its transportation division and one-third in its soon-to-be independent logistics business. That works out to roughly $1.2 billion from the LTL business. That business is a lot like Old Dominion Freight Line (ODFL), which is probably the most efficient and successful LTL shipper. Old Dominion stock has returned 32% a year on average over the past 10 years, and is currently trading at about 20 times estimated 2021 Ebitda.

FULL ARTICLE ATTACHED

Leaked letter sets off latest scandal to hit longstanding governor as country’s economic and financial crisis worsens

Switzerland’s attorney-general is investigating allegations that Lebanon’s central bank governor and his brother embezzled more than $300m from that institution through transactions to a mysterious offshore company.

“Since April 2002 at least, it appears the central bank governor, Riad Salame, with help from his brother, Raja Salame, organised embezzlement operations, . . . exceeding $300m to the detriment of the Banque du Liban [BdL],” the Swiss attorney-general’s office wrote in a letter to the Lebanese authorities requesting mutual legal assistance.

The letter, sent in November last year, was leaked and is publicly available online on a Lebanese news site. A Lebanese official confirmed the authenticity of the letter. The Swiss attorney-general’s office confirmed to the FT a “criminal investigation into suspicions of aggravated money laundering . . . in connection with possible embezzlement to the detriment of the Banque du Liban”, and that it had requested help from Lebanese “competent authorities”. It declined to comment further.

In an interview with the FT this week, the central banker did not deny the transactions took place. But he said “not one dollar that was in the operations you mention was at the detriment of the BdL,” adding: “all these transactions were approved by the [BdL’s] central board”.

It is the latest scandal to hit Lebanon’s powerful longstanding central bank governor, once hailed for steadying the fragile nation through regional wars and the global financial crisis. But Salame, who claims he is the victim of a “smear campaign,” has been under fire since the collapse of the local currency, unleashing hyperinflation. With the country suffering its worst financial and economic crisis for three decades, many Lebanese blame him, as well as the nation’s politicians, for mismanaging monetary policy and reserves.

Switzerland’s attorney-general is scrutinising transactions worth more than $330m made between 2002 and 2015, from an account at BdL to a HSBC Switzerland account in the name of “Forry Associates”, according to the letter. Swiss investigators alleged that this obscure offshore company was controlled by Salame’s brother, Raja. Hundreds of millions were then funnelled from Forry to Swiss bank accounts controlled by both Salames, the investigators alleged in the letter.

The BdL had awarded Forry a non-exclusive brokerage contract in 2002, the letter states, signed by both Riad and Raja Salame. Four former senior Lebanese bankers, familiar with bond-trading at the time Forry was contracted by the BdL, said they had not heard of the company.

Of the $333m dollars transferred to Forry, $248m was funnelled to Raja Salame’s personal account at HSBC, Swiss investigators told their Lebanese counterparts in the letter, details of which have been widely reported in Swiss and Lebanese media. Just under $10m went to two accounts which investigators alleged were controlled by Riad Salame, under the name of Panama-registered “Westlake Commercial Inc” at Julius Baer, and Swiss-registered “SI 2 SA” at EFG Bank in Zurich. More than 7m Swiss francs flowed from SI 2 SA to a UBS account under the name “Red Street 10 SA,” which was used to buy Swiss property, the investigators alleged. Red Street translates to “Sharia Hamra” in Arabic, the Beirut street where BdL headquarters is located.

Riad Salame refused to clarify who ran Forry, if his brother signed the contract, or if he was behind Westlake or SI 2 SA. He said the BdL account which paid Forry was a “clearing account”, and that the money came from “participants of the operation”.

“[T]he amount you are talking about is over 14 years, not in one shot or one deal, so the average doesn’t exceed $20m per year,” added Salame. Denying conflict of interest, Salame said Forry “had no exclusivity and therefore there is no special treatment”. When pressed that this business had earned millions of dollars, Salame said: “Is this illegal? What would be illegal [is] if we [ie. BdL] were paying the commission.”

Registered in the British Virgin Islands in 2001, Forry was dissolved in 2016, BVI records show. Leaked documents show Forry was owned by Nomihold, another BVI-registered company with hidden owners. The FT was unable to contact Nomihold.

Raja Salame, who sits on the board of Lebanese real estate giant Solidere, declined to comment on the allegations. “My integrity has never been questioned. I have always earned my money legitimately,” he told the FT.

Four former BdL central board members, who served during the relevant period and spoke on condition of anonymity, said they did not remember approving transactions to Forry. Riad Salame declined to show records confirming central board decisions, citing banking secrecy.

Swiss investigators, who attributed around $50m in Swiss-held liquid assets to Riad Salame, are also probing some $15m of transactions from bank accounts at BdL to Salame’s personal accounts at UBS, Credit Suisse and Banque Pictet & CIE between 2012 to 2019. Salame said the BdL accounts belonged to him, transferred his own money, and he denied transfers were made in 2019. He said the source of his personal wealth derived from $23m that he earned as a banker before becoming governor in 1993.

Credit Suisse, HSBC Switzerland, UBS and Julius Baer said they were not permitted under Swiss law to comment on client matters. In a statement, Pictet & Cie said: “Our policy is not to comment on matters that are still the subject of an ongoing investigation, particularly when names of persons are at stake.” It said it was co-operating with the authorities.