Good Afternoon
Well the first week drags to a frozen close….
Today we had a pleasant surprise from Aer Lingus who announced that due to slightly higher yields achieved in H2 as a result of capacity cuts particularly on long-haul, that they will make a small profit in the second half. The small profit was a peasant surprise especially as the expectation had been for a further loss in the region of 17m to 20m for the second half. The overall loss for the year is still going to be a whopping 90m so the cost reduction programme which the market has been growing weary waiting for really needs to deliver. A loss of c.€90m for 2009 now suggests that the 2010 loss is likely to be in the €80-100m range before taking account of any savings that may arise from the cost restructuring plan which the company is seeking to implement. We will not formally review our 2010 forecasts until there greater clarity emerges on the cost cutting plan over the next month.
Aer Lingus confirmed that it is reducing capacity in its Gatwick base from five aircraft to three (a 40% reduction). Capacity cutting at this base is disappointing given it has a non-legacy cost base and is barometer for the prospects for Aer Lingus' ability to successfully develop non-Irish bases. The rationale for the cuts is weak consumer and operating environment in the UK. The other bit of news was that two short-haul aircraft deliveries scheduled for Oct/Nov 2010 have been deferred (at no additional cost) to Apr/May 2011, which means Aer Lingus will not have to deploy the additional capacity until summer 2011 instead of the earlier and seasonally weaker winter 2010/11.
C&C was the other story of the day with the release of UK cider off trade data for the four weeks to 26 December 2009 which showed Magners volumes declined 18.4% y/y and increased 65.5% m/m. This performance follows two months of volumes declines (November -22% y/y and October -7.7% y/y). In contrast, Bulmers volumes increased 77% y/y and 123.8% m/m. In the last few two months, Magners average pricing has increased by 9.37% y/y in November and 4.84% y/y in December. Bulmers pricing in December fell 8.2% y/y and 14.3% m/m indicating significant discounting activity by Bulmers in the four week period. However, even allowing for this competitor behaviour, we believe Magners volume performance is disappointing in an important volume month for the industry. The overall LAD market grew 7.9% y/y and the cider category increased 12.8% y/y. December is one of the most seasonally strong months of the year, hence the strong m/m volume growth rates. For this reason, we believe that annual growth rates are a more appropriate measure of individual brands' performance. In value terms, Magners declined 14.4% y/y (increased 56.5% m/m). Bulmers value increased 64% y/y and 92.9% m/m.
The US employment number initially scared the market with a -85k jobs vs expectations of no decline. There has been some further analysis suggesting that the very cold weather led to layoffs in the outdoor and construction related sectors and indeed job losses in this category is the highest in several years. The hours worked statistic remained constant which does lend some credence to the possibility that the economy is still on the turning point once the seasonal factors are stripped out.
The unemployment rate in Ireland has also started to tick up again but gently with a further 3000 additions to live register. The seasonally adjusted Live Register figure rose by 3,300 in December to stand at 426,700 from November's total of 423,400. The unemployment rate remains constant at 12.5%.
Have a good and snowy weekend ,
Liam
__________________________________________
Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
www.merrion-capital.com
Disclaimer www.merrion-capital.com/disclaimer.html
Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.
No comments:
Post a Comment