Shell Q3 profit falls 62 pct, to cut 5,000 jobs

Discussion in 'Stocks' started by S2007S, Oct 29, 2009.

  1. S2007S


    Shell Q3 profit falls 62 pct, to cut 5,000 jobs
    Shell third quarter profit down 62 percent to $3.25 billion, will cut jobs amid weak recovery

    * By Toby Sterling, AP Business Writer
    * On 7:15 am EDT, Thursday October 29, 2009

    AMSTERDAM (AP) -- Royal Dutch Shell PLC, Europe's largest oil company, reported Thursday a 62 percent fall in profit for the third quarter due to lower oil prices, and said it plans to cut 5,000 jobs to cope with continuing weakness in the global economy.

    Shell said net profit was $3.25 billion (euro2.21 billion), down from $8.45 billion in the same period a year ago. Sales fell 43 percent to $75.0 billion.

    Shell Chief Financial Officer Simon Henry said the company is not expecting a swift economic recovery and will this year cut around 5 percent of its work force, some 5,000 jobs, primarily in middle managment.

    "In Europe there are few if any signs of demand the United States if anything there's some bottoming, improvment in one or two subsectors but not yet firm enough to call a recovery," he said.

    The job cuts come on top of 500 layoffs among senior managment earlier this year. Around 15,000 employees will also be forced to apply to keep their jobs, and cuts among the rank and file are possible in 2010, he said.

    He said the company will take a restructuring charge of "several hundreds of millions" in the fourth quarter.

    The results were slightly ahead of analysts' expectations, but shares fell 2.7 percent to euro20.62 in early trading in Amsterdam.

    Analysts noted that Shell appeared to be behind the curve in restructuring for the downturn compared to its main European rival BP, which reported strong earnings this week, and ExxonMobil of the U.S, which reports earnings later Thursday.

    "In comparative terms, Shell was always going to have a mountain to climb following BP's stellar performance earlier in the week," said analyst Richard Hunter of Hargreaves Lansdown in a note.

    "Unfortunately these numbers leave it some way short of the summit."

    Analyst Alexandre Weinberg of Petercam Bank agreed, citing weak earnings from oil production.

    "Clearly this does not compare well to results of peer BP," he said.

    However, he said the bottom line was still better than estimates and repeated an "Add" advice on shares, on hopes that the company's production is set to rise quickly next year.

    Shell pumped 2.93 million barrels of oil per day in the third quarter, flat from a year ago and up slightly from the second quarter. Shell has invested heavily in new production to reverse a decade-long declining trend, and has vowed production increases by next year.

    The company's earnings from production fell 82 percent to $1.54 billion, reflecting the fall in oil prices. Shell sold oil at $63 per barrel in the third quarter from $111 a year ago.

    Henry said the recent recovery in oil prices to around $78 per barrel is speculative.

    "Fundamentally we don't see demand turning yet and there's plenty of supply available," he said.

    "So while I might see reasons why the prices might be higher, I simply can't plan a balance sheet" on the assumption that they will remain at current levels, he said.

    Shell's refining earnings fell 47 percent to $1.29 billion, including a gain of $536 million because of a rise in the estimated value of inventories. Shell said refining margins worsened due to lower demand.