Key Takeaways

Markets

  • Stocks in Asia edged lower Wednesday following a late rally in US shares in a volatile session after Federal Reserve Chair Jerome Powell rebuffed an opportunity to tamp down investor optimism
  • Nikkei Index -0.4%; Shanghai Index -0.3%; Hang Seng Index -0.0%
    • Japan’s Nikkei 225 index lagged its peers on Wednesday, losing 0.4% after disappointing results from Nintendo Co Ltd, Softbank Group Corp, and Sharp Corp. The three stocks tumbled between 5.9% and 11.2% after logging surprise declines in their quarterly earnings
  • Powell’s sober comments echoed those made after last week’s FOMC meeting, soothing traders who were expecting the Fed chief to push back on the loosening of financial conditions and Friday’s bumper jobs report
    • Powell highlighted that disinflation has begun, and that further hikes will likely be needed if the jobs market remains strong
    • Minneapolis Fed President Neel Kashkari said the Fed would likely have to raise interest rates to 5.4% at the top of its target range given the strength in the US jobs market
  • S&P 500 Index +1.3%; Nasdaq Index +1.9% yesterday
    • Microsoft is revamping its Bing search engine and Edge Web browser with artificial intelligence

 

Commodities

  • Brent for April is down USD 0.1/b at USD 83.6/b this morning after increasing by USD 2.7/b the last trading day
  • China’s oil market is making a comeback after a torrid year, driven by rising consumption at home and abroad that could help lift global prices
  • The industry-funded American Petroleum Institute reported that US commercial crude inventories declined by 2.2 mb last week, while stockpiles of gasoline and diesel increased
  • TTF gas and UK nat. gas price decreased by 5% the last trading day
    • Morgan Stanley seeing room for an even deeper retreat as healthy stockpiles ease a historic energy crisis
    • Traders are also waiting for news on the reopening of the Freeport LNG plant in the US, formerly a major supplier to Europe before an explosion last summer shuttered shipments

Company & Sector News

  • Yara 4Q22 report:
    • Yara continued to demonstrate its resilient business model and once again delivered a quarter with figures significantly above expectations.
    • Revenues of USD 5.5bn, were not far from USD 5.7bn expected by us and USD 5.6bn consensus projections.
    • EBITDA on the other hand was significantly stronger at USD 1.07bn vs USD 897m in our estimates and USD 988m consensus projection.
    • Yara even managed to surpass the stellar 3Q with its 4Q figures even though nitrogen market was rather weak during the quarter.
    • NOK 55/sh dividends were proposed after NOK 10/sh were paid in 4Q22. This is a very attractive 11.8% yield and higher than NOK 40/sh in our projections and NOK 47/sh estimated by the market.
    • Interestingly, energy costs are forecasted to be USD 320m lower in 1Q23 YoY.
    • All in all, a very strong report yet again from Yara in an uncertain environment. We, however, believe that only near-term estimates are going to be lifted, while long-term worries remain. Thus, we are not likely to turn more bullish on the case following the report.

 

  • Equinor 4Q22 results
    • Adj. EBIT USD 15.1bn, 2.9% above our estimate and 4.5% above the consensus.
    • Adj. EBIT after tax USD 5.8bn, 42% above our estimate and 46% above the consensus.
    • Adj. EBIT guidance for the MMP segment is increased from USD 250-500 to 400-800m per quarter, based on an increasingly flexible asset portfolio, and continued volatility in the markets.
    • Renewables ambition remains at 12-16 GW of installed capacity by 2030, and still expects project base returns of 4-8%.
    • In 2023 Equinor expects a production growth of around 3% in oil and gas, compared to 2022 (we assumed 3.5%).
    • Equinor expects organic capex of USD 10-11 billion in 2023, and an annual average of around USD 13 billion for 2024-2026.
    • Raises ordinary cash dividend to USD 0.30/sh. for 4Q, up from USD 0.20/sh. for the previous quarter, plus an extraordinary cash dividend of USD 0.60/sh. Hence, total dividend level of USD 0.90/sh. is unchanged from 3Q despite the drop in gas prices.
    • Also increases the USD 1.2bn share buy-back programme with up to USD 4.8bn, resulting in up to USD 6.0bn in 2023, same as in 2022.
    • Total capital distribution for 2023, including share buy-back, is expected at USD 17bn by Equinor.

 

  • Salmon Evolution 4Q22 results
    • Revenues NOK 28.4m vs. NOK 26.2m predicted
    • 340 tonnes HOG harvested
    • Bottom line NOK -6.5m vs. NOK 7.9m predicted
    • Other operating expenses of NOK -26.5m brought the results down
    • Phase 1 to be completed in 1Q23
    • Accumulated capex to date is NOK 1,578m, in line with the previous guidance of the range of NOK 1,560-1,590m
    • Following Phase 1, the company prepares to start the building process for the second phase, but it has not been formally initiated yet and Salmon Evolution is currently in advanced discussions with banks for debt financing.
    • Salmon Evolution has initiated a process with the aim of expanding its farming operations into North America and at the same time raising its production capacity target to 100,000 tonnes HOG by 2032
    •  
  • SpareBank 1 SMN’s 4Q22 results:
    • NII landed 18.5% higher on QoQ basis and 16% above our estimate. We remind that MING’s NII was subdued last few quarters probably due to pricing and lag effects
    • Lending to retail borrowers remained strong and rose by 1.0% in 4Q (1.3% in 3Q22) and 6.7% YoY, while corporate loans increased by 1.4% (2.4% in 3Q22) and 11.1% YoY
    • Fee income were down YoY as in the previous quarters due to reduced commissions from Boligkreditt.
    • The deviation in other income and costs is explained by the fact that SpareBank 1 Markets has been classified as held for sale from 4Q
    • The bank booked loan losses of NOK 19m (0.05%) or twice lower than awaited by us
    • Problem loans (defaulted and other doubtful) continued to reduce QoQ from 1.02% in 3Q to 0.97% in 4Q
    • Overall, ROE landed at 13.1% for 4Q or better than our and consensus awaited 10.9-11.5%
    • The bank proposed a dividend of NOK 6.50/EC broadly spot our estimate

 

  • Sandnes Sparebank’s 4Q22 results:
    • 4Q NII was unchanged QoQ and 2% below our estimate
    • Fee income disappointed as was 10% below estimate, while costs came in 5% higher than awaited
    • Loan losses were reported slightly higher at NOK 6.6m vs projected NOK 5.4m. In addition, net non-performing and doubtful loans slightly increase QoQ to 0.88% from 0.77% in 3Q22)
    • The bank booked negative MtM items of NOK 3.7m, which further dragged down EPEC or 15% below our estimate
    • Overall, SADG delivers weak ROE of 5.9% in 4Q vs estimate 7.4%
    • The bank proposed max dividend payout of 75%, implies a dividend of NOK 6.05/EC and decent yield of 6.6%

 

  • SpareBank 1 SR-Bank’s 4Q22 results:
    • SRBNK’s 4Q NII of NOK 1,286m rose 15% QoQ and beat our estimate by 12%
    • Net commission income landed slightly weaker, but costs were also 4% lower
    • SRBNK recognized low loan losses of NOK 36m vs our and consensus awaited NOK 63m. Individual losses of NOK 0.6m were recognised as costs, while IFRS 9 impairment provisions increased by NOK 35.8m in 4Q. IFRS 9 impairments includes a NOK 200m uncertainty premium for the corporate market portfolio, due to the macroeconomic uncertainty going forward, an increase of NOK 100m from the previous quarter.
    • Loans in Stage 3 in % of gross loans slightly fell QoQ to 1.35% from  1.39% in 3Q22
    • Overall, the bank reported 35% strong EPS and ROE of 14.6%, well above our and consensus estimates
    • The bank proposed a dividend of NOK 7.0/EC, higher than our awaited NOK 6.0/EC primarily due to stronger 4Q results

 

  • JAREN’s 4Q22 results:
    • 4Q NII came strong at NOK 87.7m, 14% above our estimate and impressive 18% up QoQ. Volume growth (incl. EBK) was at 1.6% vs. 0.6% in 3Q22
    • In 2022, lending growth was at 5.5% (incl. EBK) YoY, where retail market rose 5.6%, while corporate volumes increased by 5.2% YoY
    • Fee income fell below our expectation by 25% and was 27% down YoY on weaker fee income from EBK
    • Adj. total costs came in-line, however we adjust for NOK 12.1m in one-off costs linked to the new core banking solution
    • The bank posted five times larger loan losses than expected by us. However, stage 3 loans declined to 48bps from 51bps of total exposure in 3Q22. We also note an increase in stage 2 loans to 9.4% from 5.1% of total exposure previously
    • The consolidated CET1 ratio strengthened further by 40bps to 19.3%
    • Adj. ROE for the quarter came at 9.3%, 2%p above our estimate
    • The bank declared a dividend of NOK 12.50/EC vs. NOK 13.00/EC expected by us. This implies a dividend yield of 5.1% and a dividend payout of ~65%. The board also proposed to pay a customer dividend of NOK 56.4m based on the same payout ratio.

 

  • Aurskog Sparebank’s  4Q22 results:
    • The bank’s 4Q NII turned out ~7% higher than our expectation with a impresive ~10% growth QoQ. The net interest margin has increased to 2.02% vs. 1.87% in 3Q22
    • NCI results disappointed and came in with a 32% decline YoY
    • Adj. total costs came in higher than expected by 11%, implying a 23% increase YoY. This is partly due to the increasing number of employees in the bank. We adjust for booked one-off costs of NOK 3.4m in connection to the change of the data center
    • Aurskog booked a whooping reversal on loans losses at NOK 10.7m vs. our loan losses projection of NOK 2m. The reversal is mainly due to a reduced additional provision in stage 2 loans. Stage 3 loans of gross lending came at 20bps vs. 18bps in 3Q22
    • The approximate consolidated CET1 ratio is at 18.2%
    • The bottom line implies a very strong ROE of 12.5%
    • The bank will pay a dividend of NOK 10/EC for 2022 – lower than our expected dividend of NOK 12/EC. The dividend payout ratio is under 65%

 

  • TECO 2030 announce that the HyEkoTank project has started together with Shell and the other consortium partners
    • The project has been awarded a EUR 5m grant under the European funding scheme HORIZON EUROPE
    • The project has started February 1st and is planned to last for 3 years, with the ultimate goal of eliminating emissions during voyage and in port
    • The HyEkoTank project will retrofit a 18.600 DWT product tanker with a 2.4 MW fuel cell system and 4000 kg compressed hydrogen storage for demonstration in 2024
  • Aker Solutions 4Q22 results:
    • Revenues NOK 12,455m (NOK 8,666m 4Q21)
    • Adj. EBITDA NOK 999m (NOK 593m 4Q21)
    • Pretax profit NOK 564m (NOK 166m 4Q21)
    • Proposed dividend NOK 1.0 per share
  • Elkem 4Q22 results:
    • Revenues NOK 10,404m (NOK 9,772m consensus)
    • EBITDA NOK 1,787m (NOK 2,002m consensus)
    • The board of Elkem proposes a dividend of NOK 6.0 per share, corresponding to 40 per cent of the result in 2022
  • Multiconsult 4Q22 results:
    • Revenues NOK 1,127m (NOK 1,068m 4Q21)
    • EBIT NOK 95m (NOK 90m 4Q21)
    • Pretax profit NOK 93m (NOK 84m 4Q21)
    • The board of Elkem proposes a dividend of NOK 9.0 per share
  • XXL 4Q22 results:
    • Revenues NOK 2,264m (NOK 2,609m 4Q21)
    • EBITDA NOK -236m (NOK 403m 4Q21)
  • Storebrand 4Q22 results:
    • Pretax profit NOK 841m (NOK 935m consensus)
    • Proposed dividend NOK 3.7 per share
    • Based on the solvency ratio of 184 per cent, the board proposes to continue the buyback program with a further half a billion kroner, pending approval from the Financial Supervisory Authority
  • Pyrum Innovations AG: Reactors installed in units 2 and 3 – expansion of the main plant in Dillingen/Saar thus nearing completion
    • New facilities greatly expand production capacities in future to around 20,000 tonnes of end-of-life tyres per year
  • Kraft Bank 4Q22 results:
    • NII NOK 35m (NOK 36m 4Q21)
    • Pretax profit NOK 10.3m (NOK 11.3m 4Q21)
    • The bank expects a return on equity after tax of 12 per cent for 2023
  • Wallenius Wilhelmsen 4Q22 results:
    • Revenues USD 1,350m (USD 1,356m consensus)
    • EBITDA USD 488m (USD 306m consensus)
    • EBIT USD 261m (USD 289m consensus)
    • The proposed dividend for 2022 is USD 360 million, which corresponds to 45 percent of net profit
  • ABGSC 4Q22 results:
    • Revenues NOK 508m (NOK 803m 4Q21)
    • EBIT NOK 125m (NOK 276m 4Q21)
    • Net profit NOK 93m (NOK 201m 4Q21)
    • During 4Q, equity markets improved slightly, supporting some equity capital raising activity and M&A processes. The market for high yield debt issuance was open for limited periods during the quarter (Corporate financing revenue decrease from NOK 427m in 4Q21 to NOK 124m 4Q22)

Norne Daily embedded slides

Norne-Daily-08.02.2023