Closing summary
Time to recap, after a busy day in which BP posted its second-highest quarterly profits ever, and was accused of ‘unfettered profiteering’ as it pumped up its payments to shareholders.
Profits at the UK oil major smashed expectations, tripling to $8.5bn, thanks to strong refinery profits and high energy prices, which intensified calls for a windfall tax on the sector’s profits.
Sharon Graham, the head of the Unite union, said people will be confounded by the latest profits announced by BP.
“The British economy does not work for workers and their families.
Britain’s real crisis isn’t rising prices it’s an epidemic of unfettered profiteering.”
Rachel Reeves, the shadow chancellor, said the “eye-watering profits” showed that the government was “totally wrong” to have given significant tax breaks to oil companies.
However, the government’s Brexit opportunities minister, Jacob Rees-Mogg, said he was not in favour of an extra windfall tax.
BP lifted its dividend by 10% and launched a fresh $3.5bn share buyback, with analysts saying its results were ‘exceptional’.
BP’s earnings mean that the Big Five oil giants have made combined profits of almost $60bn in a single quarter, after ExxonMobile, Shell and Chevron all racked up record earnings in Q2.
While they profited from soaring oil and gas prices, UK households were warned that average energy bills could hit £3,600 this winter. With wholesale gas price around record levels, bills could remain over £3,000 per year until 2024, experts fears.
Rising energy costs also drove more companies to the wall, with the number of voluntary liquidations hitting the highest level on record (going back to 1960).
The cost of living crisis pushed more individuals into personal insolvency too, which may get worse as prices keep outpacing wages, and inflation heads for double-digit levels.
But house prices still kept rising last month, and the super-rich pushed profits at Ferrari to a record.
Energy bills are pushing up costs at Greggs, where customers could face higher prices as food ingredients also become more expensive.
British Airways has extended its suspension of ticket sales for short-haul flights from London’s Heathrow airport to the middle of August.
The two-week halt will cause more disruption for travellers this summer -- and make a last-minute getaway this summer even more expensive,
The unprecedented move is BA’s attempt to head off further disruption and flight cancellations, after Heathrow capped passenger numbers at 100,000 per day, after staff shortages led to long queues, delays and problems with baggage earlier this year.
And Spanish oil production could be hit by fierce heatwaves and a lack of rain this summer:
Updated
Uber’s bookings have hit an all-time high in the last three months as anxiety over Covid-19 eased and workers headed back to the office. Full details here.
More than 1,400 bus drivers in north London employed by bus operator Arriva will be balloted for strike action in a dispute over pay, the Unite union said today.
The ballot opens on Friday and closes on August 26. If the drivers vote for industrial action, strikes could begin next month, the union said.
It’s just the latest in a series of pay disputes across the transport sector, and beyond. Last month, a four-week strike by bus drivers in West Yorkshire ended after Arriva made an improved pay offer.
Rather than simply collecting higher dividends from the oil giants, pension funds could be pushing them to deliver net zeo faster.
Tony Burdon, CEO at Make My Money Matter campaign, explains:
“As the fossil fuel industry posts near-record profits, UK pension funds - key investors in these oil and gas majors - have a huge opportunity and urgent responsibility, to drive emission reductions at these companies.
“If pension funds really want to protect their members’ interests – as well as the planet they will be retiring into – they must use their shareholder power to make sure companies like BP deliver on science based net zero transition plans, including halting new fossil fuel expansion and rapidly increasing investments into renewables.
“Failure to do so will be bad for people, bad for the planet, and long term, bad for savers’ returns.”
Stocks have opened lower in New York, as traders watch whether U.S. House of Representatives Speaker Nancy Pelosi visits Taiwan today.
The prospect of Pelosi landing in Taipei, as widely expected has lifted frictions between Washington and Beijing, with Chinese warplanes buzzing the line dividing the Taiwan Strait earlier today.
Pelosi would be the highest-ranking US official to visit the self-governing island in a quarter-century. China, which claims Taiwan as its own province, has threatened unspecified consequences for the US should Pelosi make the trip, my colleague Lauren Gambino explains.
The S&P 500 index of US stocks has dropped 0.6%, or 24 points, to 4,094 in early trading.
Raffi Boyadjian, lead investment analyst at XM, says news of Pelosi’s trip has knocked risk sentiment in the markets:
Pelosi is currently on a tour of Asian countries and although it had been rumoured that she would make a stopover to Taiwan, her trip was only confirmed late on Monday, sparking threats of retaliation by Chinese officials.
Fears of a reprisal from Beijing have upset the market calm. Only on Friday, the VIX volatility index had fallen to the lowest in three months as the rebound on Wall Street got onto a more solid footing. But the VIX index has jumped higher today and US stock futures declined, pointing to a second straight session of losses for the S&P 500.
FT: BA extends suspension of Heathrow short-haul ticket sales to August 15
British Airways has extended its suspension of ticket sales for short-haul flights from London’s Heathrow airport to the middle of August, the Financial Times is reporting.
That will cause further disruption for travellers hoping for a last-minute getaway this summer.
BA had initially suspended ticket sales on short-haul flights from Heathrow until 8 August, but has now added a second week.
The FT says:
The carrier, the largest operator at Heathrow, confirmed on Tuesday that it would suspend sales until August 15 — a week longer than first announced just 24 hours earlier.
BA blamed the move on Heathrow’s decision last month to impose a cap that limits the number of passengers at the airport to 100,000 a day.
BA reiterated its previous statement that as a result of Heathrow’s “request to limit new bookings” it had decided to “take responsible action and limit the available fares on some Heathrow services to help maximise rebooking options for existing customers, given the restrictions imposed on us and the ongoing challenges facing the entire aviation industry”.
BA extends suspension of Heathrow short-haul ticket sales to August 15 https://t.co/mbyc58lBlB
— Financial Times (@FT) August 2, 2022
Here’s an explainer of what’s going on:
Updated
Swedish alt-milk brand Oatly has slashed its sales forecsts, blaming inflationary pressures, the pandemic and economic uncertainty from the Ukraine invasion.
Oatly told investors it was updating its outlook for the year due to the challenging operating environment today, caused by “the war in Ukraine, COVID-19, and inflationary and supply chain pressures”.
Toni Petersson, Oatly’s CEO, said macroeconomic uncertainty in EMEA (Europe, Middle East and Africa) was slowing the expansion of its distribution footprint in foodservice and new markets, while “converting new consumers from dairy to plant-based milk is taking longer than we had hoped for”.
Covid-19 related restrictions are hitting growth in China, he added.
It now expects revenues of between $800m-$830mn down from previous guidance of $880m-$920m.
Oatly floated last May in New York, and initially saw its value jump as investors bet on soaring demand for plant-based food alternatives. But having floated at $17 per share, they’ve fallen to just $3.40 today (down 13% in early trading).
Construction equipment maker Caterpillar has missed sales forecasts, as slowing construction activity in China and a halt in Russia operations weighed on revenues.
Caterpillar, famous for its yellow diggers, has also been hurt by supply-chain problems that dented demand for heavy equipment.
Second quarter sales did rise 11% year-on-year, but at $14.25bn were shy of missing analysts’ expectations of $14.35bn.
The strong dollar also hurt Caterpillar’s earnings, as it made overseas sales less valuable in dollar terms.
The G7 is looking at all options to improve global energy stability and prevent Russia from profiteering from energy prices, Reuters reports.
This could include blocking the transportation of Russian oil unless it was purchased at or below a set price, its foreign ministers said on Tuesday.
A joint statement, published on the British government website said.
“We remain committed to considering a range of approaches, including options for a comprehensive prohibition of all services that enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners,”
“In considering this and other options, we will also consider mitigation mechanisms alongside our restrictive measures to ensure the most vulnerable and impacted countries maintain access to energy markets including from Russia.”
Many people are finding it hard enough to afford a home, let alone a supercar, as rising bills eat into their incomes.
But despite this squeeze, Nationwide reported this morning that house prices continued to rise last month, lifting the annual pace of house price inflation to 11%.
The average price of a home was £271,209 last month, up 0.1% from June, with shortages of properties on the market keeping prices high.
Nationwide chief economist, Robert Gardner, said.
The housing market has retained a surprising degree of momentum given the mounting pressures on household budgets from high inflation, which has already driven consumer confidence to all-time lows.
“While there are tentative signs of a slowdown in activity, with a dip in the number of mortgage approvals for house purchases in June, this has yet to feed through to price growth.”
Here’s the full story:
Plus some reaction:
Nationwide reports a 0.1% monthly rise and an 11% annual one in UK house prices. Amazing when you consider the present economic circumstances...
— Shaun Richards (@notayesmansecon) August 2, 2022
The Stamp Duty lighter fuel that kicked off house price hysteria. @AskNationwide “Total housing market transactions in the 3mths to May were c.20% below the elevated levels resulting from the stamp duty holiday, but 5% above pre-pandemic levels” pic.twitter.com/WsEZGLKZxV
— Emma Fildes (@emmafildes) August 2, 2022
Record profits at Ferrari as wealthy snap up supercars
While millions of families face the misery of rising inflation and unaffordable energy bills, the wealthy have drive sales and profits at Ferrari to record levels.
The supercar maker has posted its best ever quarterly revenues and EBITDA earnings, and lifted its full-year forecasts.
Ferrari saw strong demand in the last quarter for its Portofino M model (which will set you back £175,360, AutoExpress reported last year) and the F8 family (where the Tributo coupé starts at £203,476, according to The Car Expert, and the Spider begins at around £226,000).
Despite such huge price tags, new orders also hit a record in April-June.
There was also an increase in revenues from personalizations, as customers spent more on individual features for their new motor.
Benedetto Vigna, CEO of Ferrari, says:
“Ferrari continues a phase of strong growth, with quarterly record results in terms of revenues, EBITDA and EBIT.
The quality of the first six months and the robustness of our business allows us to revise upward the 2022 guidance on all metrics. Also the net order intake reached a new record level in the quarter” .
Ferrari’s adjusted EBITDA rose 15% in the April-June period to €446m ($456m), ahead of forecasts, while shipments rose almost 29% to 3,455 units in Q2.
Updated
Nearly 29,000 individuals in England and Wales filed for insolvency in the last quarter, due to being unable to repay their debts.
That’s 7% more than a year ago, although 10% less than in January-March this year, as people’s budgets came under rising strain from inflation. Those figures could rise as energy bills jump this winter, and interest rates rise.
Paul Rouse, partner at Mazars, warns:
“Ramping up interest rates to slow surging inflation is the kind of strong medicine that is inevitably going to lead to more bankruptcies.
At some point the dam will break – it’s only a question of when.”
Three-quarters of these were individual voluntary arrangements (IVAs), where people reach an agreement with their creditors over how to handle their debts.
There were also 5,772 debt relief orders and 1,596 bankruptcies.
In addition, more than 75,000 registrations for breathing space from debts have been recorded since the government scheme began in May last year.
That programme gives those in debt a two-month break from debt collectors and bailiffs, with their interest, fees and charges frozen.
And with households facing a tough winter ahead and soaring energy bills, more may be forced to consider insolvency as an option.
Christina Fitzgerald, president of insolvency and restructuring trade body R3:
“Price increases across the board mean that the impacts are being felt differently by different types of consumers.
For those on the lower end of the income scale, budgeting can only stretch so far and it is worrying that, for some, credit cards and other types of debt may feel like the only option to cover even the essentials.”
Fitzgerald said that, with the energy price cap due to rise again later this year and a very tough winter ahead for many individuals and families:
“Many more may be forced to consider an insolvency option to help resolve their financial issues.”
BP CEO Bernard Looney, and chief financial officer Murray Auchincloss have both decided to donate their £400 energy bill discounts to charity, The Times’s Emily Gosden reports, after she asked them about their plans.
Those discounts will arrive for every home in the autumn, as part of the government’s cost of living support package; ex-chancellor Rishi Sunak had already urged rich people to give them to charity.
Here’s how the decision unfolded:
I asked Bernard Looney, BP's chief executive, if it was right that multi-millionaires like him would get a taxpayer-funded £400 energy bill discount this winter
— Emily Gosden (@emilygosden) August 2, 2022
"I actually don't know the specifics of what you're talking about," he said
I explained to Looney that every household was getting £400 off their bills
— Emily Gosden (@emilygosden) August 2, 2022
He said: "These things are decisions for governments"
Sure, but you could say you're not accepting it/giving it to charity?
"I'd have to look at that... government policy is a matter for government"
BP calls to say that Bernard Looney, chief executive, and Murray Auchincloss, chief financial officer, have both now decided to donate their £400 energy bill discounts to charity https://t.co/394HlWHwSI
— Emily Gosden (@emilygosden) August 2, 2022
Back on BP, chairman Bernard Looney has said the company will increase its spending on new oil and gas by $500m in response to the global supply crunch.
“We will direct more investment towards hydrocarbons to help with energy security in the near term,” Looney said.
“We’ll probably direct about a half a billion dollars for hydrocarbons.”
The jump in company failures in England and Wales in the last quarter driven by the ending of government imposed pandemic protective measures, agrees Jeremy Whiteson, Partner in Fladgate’s Restructuring and Insolvency practice:
Whiteson points out that several protections were wound down by the end of March 2022.
That included restrictions on creditor actions (particularly winding up petitions and landlord remedies) as well as cash flow funding assistance (including bounce-back loans, CBILs and more sector specific assistance).
The end of these schemes would inevitably increase insolvencies.
Whiteson is also concerned that creditors’ voluntary liquidations hit their highest level since 1960, led by construction, wholesale retail and food services firms.
With economic storm clouds gathering this is a concerning situation. Inflation, recession fears, constriction of fuel and food supply and world geo-political risks all threaten to worsen the position for business in England and Wales.
In Germany, the benchmark electricity price for delivery next year has surged to an alltime high, reports Bloomberg’s Javier Blas:
BREAKING: Germany 1-year forward baseload electricity surges >€400 per MWh for the first time ever.
— Javier Blas (@JavierBlas) August 2, 2022
We are truly into crunching territory for the country's energy-intensive manufacturing industry.
The current price is ~1,000% higher than the €41.1 per MWh 2010-2020 average.
Prices climbed as fears of gas shortages this winter ripple through European energy markets, to levels that will be extremely painful for energy-intensive companies as well as households.
The European gas price curve is on the move again, re-pricing higher (green line is price on July 27 and orange is Aug 1).
— Javier Blas (@JavierBlas) August 2, 2022
While spot prices for TTF are now about the same than last week (actually, a touch lower), the 2023 and 2024 part of the price curve has moved upwards. pic.twitter.com/azvJ007iZ2
Voluntary liquidations in England and Wales hit record high
Rising energy bills are driving some companies into insolvency, as firms struggle to cope with higher costs, and the withdrawal of Covid support from the government.
Corporate insolvencies in England and Wales jumped by over 80% year-on-year in the last quarter, with the number of firms choosing to be liquidated hitting its highest level in at least 60 years.
Insolvency Service figures show there were 5,629 company insolvencies in April-June, up 13% on the last quarter, and 81% more than a year ago.
This includes 4,908 creditors’ voluntary liquidations (CVLs), where a company which can’t pay its debts decides to fold.
The number of CVLs increased to the highest quarterly level since the start of the series in 1960, the Insolvency Service reports.
John Cullen, business recovery partner at accountancy firm, Menzies LLP, warns that corporate insolvencies are now “rising rapidly,”:
This is indication of the severe cashflow pressures that many businesses are facing, which are exacerbated by soaring energy and fuel costs. Inflation is testing the viability of businesses across industry sectors and with interest rates expected to rise again this week, the cost of borrowing is also set to rise.
“At the same time as facing significant cost increases, many businesses are being hampered by supply and staff shortages, which are limiting revenues at a critical time, just as demand levels are recovering or back to pre-pandemic levels.
Many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate, explains Christina Fitzgerald, President of insolvency and restructuring trade body R3:
Fitzgerald adds:
“With household disposable income dropping for the eighth consecutive month in June, consumers are having to prioritise household bills before they can think about spending their money elsewhere – and this will have a knock-on effect to businesses that simply won’t see the footfall they are used to.
“This, coupled with a combination of soaring costs across the board, supply chain issues, and a tight labour market, has meant an uphill battle for many businesses, especially for those still reeling from the pandemic.
Updated
Five energy firms make $60bn profits in last quarter
Five of the world’s largest energy companies have now raked in almost $60bn in profits between them, in just the second quarter of 2022.
Shell smashed its profit record; last week reporting adjusted earnings of $11.5bn in April-June, while France’s TotalEnergies tripled its adjusted net income, to $9.8bn.
US oil giants also had a record breaking quarter, with ExxonMobil making an unprecedented $17.85bn profit for Q2, nearly four times as much as the same period a year ago, and Chevron made a record $11.62bn.
Back in June, president Joe Biden singled out Exxon for criticism, saying:
Why don’t you tell them what Exxon’s profits were this year? This quarter? Exxon made more money than God this year.
Add today’s $8.5bn adjusted profit at BP, and it’s clear that the jump in oil and gas prices due to the Ukraine invasion has resulted in jaw-dropping earnings for the energy giants, as many millions of families struggle.
Energy analysts at SP Angel say:
The five remaining Majors (Exxon, Chevron, Shell, BP & Total) have announced c.$59bn in 2Q22 profits, up almost 100% y/y, and returned c.45% of this to shareholders during the quarter.
Based on their aggregate $1.1 trillion market cap, this quarter would represent an implied annualised profit margin in excess of 20%.
Unite accuses BP of ‘unfettered profiteering’
Sharon Graham, the head of the Unite union, has accused BP of ‘unfettered’ profiteering.
“People will be confounded by the latest profits announced by BP. In three months, in April to June this year, the oil giant’s profits soared to almost £7 billion. Yet predictions are that household energy bills are to rise to a calamitous £3,600 a year. How can this contrast continue time after time?
“The British economy does not work for workers and their families.
Britain’s real crisis isn’t rising prices it’s an epidemic of unfettered profiteering.”
People will be confounded by the latest profits announced by @bp_plc. In three months, in April to June this year, the oil giant’s profits soared to almost £7 billion. 1/2 #energy https://t.co/Tfcw6STOkU
— Sharon Graham (@UniteSharon) August 2, 2022
Yet household energy bills are to rise to a calamitous £3,600 a year. How can this contrast continue time after time? The British economy does not work for workers and their families. Britain’s real crisis isn’t rising prices it’s an epidemic of unfettered profiteering. 2/2
— Sharon Graham (@UniteSharon) August 2, 2022
BP: what the analysts say
Oil companies’ surging profits are becoming a ‘political risk’, says Stuart Lamont, investment manager at Brewin Dolphin, as calls for a new windfall tax grow louder.
“BP has mirrored Shell’s exceptional results last week – albeit, with the disposal of its stake in Rosneft hanging over the first six months of 2022. The energy company is in a great position, with sales soaring, strong profits, and debt falling.
Shareholders will be pleased that this is being converted into returns, with 60% of surplus cashflow being distributed to them through dividends and share buybacks.
However, BP’s and its peers’ results are also likely to attract further political attention, which is becoming a real risk for the future.”
Allegra Dawes, senior analyst for Industrials, Materials & Energy at global primary research firm Third Bridge, predicts BP will keep handing cash back to shareholders:
Despite today’s elevated oil and gas pricing environment, our experts don’t expect BP to alter its investment plans in the next 12-18 months. Should they decide to accelerate spending there will face significant challenges, especially for large scale projects.”
“Investors expect more share repurchases and dividends from BP and other oil supermajors thanks to record-breaking profit and cash flow levels.”
“BP is likely to stay committed to £18bn investment in the North Sea despite the windfall tax imposed by the British Government.
Our experts say the North Sea remains strategically critical to BP with a resilient hydrocarbon business in the West of Shetland, CCUS on the Northeast coast, and wind projects with various partners in England and Scotland. Some of those investments come with significant tax incentives.”
But Chris Beauchamp, chief market analyst at IG Group, predicts BP could have eached a ‘high water’ mark, as oil has fallen back from this spring’s peak.
While there is plenty of good news in BP’s numbers, as cash generation surges and a rise in the dividend is planned, there is also a sense that this could be a high water mark for now.
The boost has come from comparisons with last year’s much weaker performance, and is unlikely to be repeated for much longer. In addition, oil prices are well off their June highs and seem in no hurry to rise again. Those expecting today’s update to support a charge to the [share price] highs of 2019 may be disappointed.
Full story: BP profits triple to £7bn as oil prices surge because of Ukraine war
BP will hand billions of pounds to shareholders after tripling its profits to nearly £7bn in the second quarter of the year amid high oil prices during Russia’s invasion of Ukraine, even as families struggle in a cost of living crisis.
The FTSE 100 oil company’s preferred measure of profit, which it describes as its underlying replacement cost profit, rose to $8.5bn (£6.9bn) between April and June.
That is up from $6.2bn in the first three months of the year, and three times BP’s underlying profits of $2.8bn in the second quarter of 2021.
It was the second highest quarterly profit in BP’s history, behind only its $8.8bn underlying profit in the summer of 2008.
Rachel Reeves, the shadow chancellor, said the “eye-watering profits” showed that the government was “totally wrong” to have given significant tax breaks to oil companies.
BP also said it would hand investors $3.5bn through a share buyback programme, while it increased its total dividend payout by 10% to about $1.1bn.
Oil companies in the UK and beyond have enjoyed booming earnings in recent months on the back of rising energy prices as households around the world have struggled with soaring bills.
As Russia’s invasion grinds on, the research firm Cornwall Insight predicts the energy price cap on bills in Great Britain is on track to rise to £3,615 a year from January.
Here’s the full story:
Friends of the Earth is pushing for a new tough windfall tax on oil and gas firms.
Campaigner Sana Yusuf said the money generated could be used to lower household bills, and fund the rollout of better insulation to homes, lowering energy use.
“Ministers must impose a much tougher windfall tax on massive oil and gas firm profits. It beggars belief that these companies are raking in such huge sums in the midst of a cost-of-living crisis.
The money raised should be used to help hard-up households with soaring energy bills and provide funding for a free home insulation programme - focusing on those most in need.
“It’s astonishing that energy efficiency has been given such a low priority. A nationwide insulation programme would cut bills, reduce energy-use and slash climate-changing emissions.”
BP should be paying reparations for its role in the climate crisis, argues Daniel Willis, Policy Lead on Climate at Global Justice Now, the social justice group.
“BP’s latest sickening profits are fuelling the cost of living crisis in this country and driving the climate emergency around the world. As their shareholders line their pockets once again, communities in the global south are already facing the devastating impacts of this company’s actions over many years.
“BP’s 40,000 mega-tonnes of historic emissions are four times those of all low-income countries combined. It’s high time we started talking about how they are going to pay for the damage they’ve caused. Instead of making billions in profit every few months, they should be paying billions in climate reparations.”
Updated
BP is choosing to funnel its surplus cash to investors, rather than spend more in the green energy transition, points out ITV’s Joel Hills.
It’s raining oil and gas money at BP with no let-up in sight.
— Joel Hills (@ITVJoel) August 2, 2022
Company reports a near-record profit of $8.45 billion (£6.9bn) between April and June.
Average price of barrel of oil over period was $114 vs $70 a year earlier.
BP expects oil + gas prices to “remain elevated”. pic.twitter.com/NAxFefE8o5
BP’s business is throwing off “surplus cash” at an astonishing rate. $6.5 billion (£5.3 bn) between April and June.
— Joel Hills (@ITVJoel) August 2, 2022
BP is using this money to buy back shares and reduce debt. Interesting, it is not using the windfall to increase investment in the transition to Net Zero.
BP is planning to invest up to £18bn in the UK energy system by 2030, including in offshore wind generation and electric car charging network.
On Monday, it said it would invest up to £50m in an electric vehicle (EV) battery testing centre and analytical laboratory at its operations in Pangbourne, Berkshire.
Brexit opportunities minister Jacob Rees-Mogg has voiced opposition to a fresh windfall tax on energy firms, even though they are enjoying such large profits.
Speaking after BP’s profits soared amid the cost-of-living crisis, Rees-Mogg told LBC radio:
“I’m not in favour of windfall taxes. The energy industry is enormously cyclical.
“You need to have a profitable oil sector so it can invest in extracting energy.”
The £5bn windfall tax (or ‘profits levy’) announced by former chancellor Rishi Sunak in May included a 90% tax break on firms who invested in oil and gas extraction in the North Sea.
Liz Truss, Sunak’s rival to become prime minister, rejected suggestions of another windfall tax on the profits of energy companies last week, after British Gas owner Centrica reported bumper earnings.
The surge in energy prices are also driving up costs for companies such as Greggs.
Greggs customers could face further price rises after the bakery chain warned this morning that its costs would rise by 9% this year – four percentage points more than predicted at the start of 2022.
In its latest results, the company said cost inflation “increased significantly” in the first half of the year led by pricier food ingredients and packaging.
Greggs added 5p to 10p to the price of its products at the start of 2022 and raised prices again in May as it said the cost of ingredients was increasing. At the start of the year, the group predicted prices would rise by 5% and upgraded that to 7% in March before the latest increase.
Fears of shortages of cereals and sunflower oil from Ukraine as well as petrochemicals from Russia have added to existing inflation caused by energy and fuel price rises, and a bounce-back in demand since pandemic restrictions eased in many parts of the world. More here.
TUC: BP profits are an insult to struggling families
BP profits are “an insult to families struggling to get by” in the cost of living crisis, says unions.
TUC General Secretary Frances O’Grady said:
“Every family should get a fair price for the energy they need. But with energy bills rising much faster than wages, these profits are an insult to families struggling to get by.
“For a fair approach to the cost of living crisis, price hikes and profits should be held back. Ministers must do more to get wages rising across the economy. And we should bring energy retail firms into public ownership so we can reduce bills for basic energy needs.”
British energy bills could hit £3,600 a year this winter, experts warn
Energy bills could reach more than £3,600 a year this winter with soaring wholesale prices expected to continue to push household costs up at least until 2024.
The research firm Cornwall Insight has upped its forecast that show the energy price cap is on track to rise to £3,615 a year from January, an increase on its previous estimate of £3,363 made last month.
The cap on bills in Great Britain, which is now being set quarterly by the energy industry regulator, Ofgem, was at £1,400 a year as recently as October last year.
“What we are seeing is the extent to which there is so much uncertainty regarding the ongoing availability of gas from Russia to the European Union as winter approaches,” said Craig Lowery, a principal consultant at Cornwall Insight, speaking on the BBC Radio 4 Today programme on Tuesday.
“Frankly it has not been uncommon to see our forecasts to change by as much as £100 a day as a consequence of this. We really have seen throughout spring and summer this progressive trend upwards in our forecasts.
But crucially what we are seeing is the level of increases in these forecasts is continuing well into 2023 and at this point we don’t see any sign of it easing off going into 2024.”
Updated
Creating a state energy provider would help UK protect consumers from surging prices, argues Miatta Fahnbulleh, the head of the New Economics Foundation.
Fahnbulleh points out that France’s government capped price rises (and is now fully nationalising state provider EDF), which limited the cost of living squeeze on French households.
In the news today:
— Miatta Fahnbulleh (@Miatsf) August 2, 2022
💰 @bp_plc reports quarterly profits of $8.45bn, the highest in 14 yrs
📈 UK #EnergyBills set to rise even more by new year - to £3,615
We must make the #energymarket more competitive to protect ourselves. We could do this by creating a state provider.
1/2 pic.twitter.com/9PAm5gzNsc
🇫🇷 French state energy provider, @edfenergy, has only raised prices by 4%.
— Miatta Fahnbulleh (@Miatsf) August 2, 2022
🇬🇧 In the UK, private companies have increased prices by 54% so far (& 78% in Oct)
Creating a state energy provider is a no-brainer. That is, unless you want to protect company profits over people.
2/2
BP shares jump
Shares in BP have jumped 3% at the start of trading in London, after it tripled its profits in the last quarter and lifted its dividend to shareholders by 10%.
Updated
Labour: More eye-watering profits for oil and gas producers
BP has reported ‘eye-watering profits’ at a time when the public are very worried about their energy bills jumping in the autumn, says Rachel Reeves MP, Labour’s Shadow Chancellor.
“People are worried sick about energy prices rising again in the autumn, but yet again we see eye-watering profits for oil and gas producers.
“Labour argued for months for a windfall tax on these companies to help bring bills down, but when the Tories finally u-turned they decided to hand billions of pounds back to producers in tax breaks. That is totally wrong.
“It’s clear people need greater protection from rising bills. That’s why Labour would use this money now to help people get through the winter.
“But we can’t carry on like this. Labour would bring down energy bills for good with a green energy sprint for home-grown power, and a 10-year warm homes plan to cut bills for 19 million cold, draughty homes.”
Today’s results show that bp continues to “perform while transforming”, the company’s CEO Bernard Looney says:
Our people have continued to work hard throughout the quarter helping to solve the energy trilemma - secure, affordable and lower carbon energy.
We do this by providing the oil and gas the world needs today - while at the same time, investing to accelerate the energy transition.
This is BP’s highest profit in 14 years, Reuters points out -- just as families face winter energy bill pain.
As households face another rise in energy bills this winter #BP announces quarterly profits of $8.45 billion - 2nd highest profit in its history - 3 times as much as last year. We discuss #WorldBusinessReport 0745 @BBCWorld https://t.co/IYZAvvbL8Y
— Sally Bundock (@SallyBundockBBC) August 2, 2022
BP will also funnel profits to shareholders through a new share buyback programme.
The company has announced it will conduct $3.5bn of share buybacks -- a way of returning cash to shareholders.
BP can afford this because it generated surplus cash flow of $6.6bn in the last quarter, saying:
bp has now announced share buybacks from 2021 and first-half 2022 surplus cash flow equivalent to 60% of the cumulative surplus cash flow.
BP also executed share buybacks of $2.3bn in the last three months.
BP’s profits soared to $8.5bn due to strong refining margins, continuing “exceptional” oil trading performance and higher energy prices.
BP boosts dividend
BP is lifting its payout to shareholders by 10%, as investors reap the rewards from its jump in profits.
The company will pay a dividend of just over 6 cents per share, up from 5.46 cents per share in the first quarter of the year.
The $8.5bn profits which BP made in the last quarter is significantly higher than analyst forecasts (of $6.8bn).
So far this year, BP has made underlying replacement cost profits of $14.7bn -- almost triple the $5.4bn in the first half of 2021.
BP profits triple to $8.5bn
BP has tripled its underlying profits in the last quarter, as it benefitted from soaring energy price.
The energy giant has reported underlying replacement cost profit of $8.45bn (£7bn) in April-June, up from $2.8bn in the second quarter of 2021.
That’s also even higher than the underlying replacement cost profit of $6.2bn it made in Q1, which was the highest for 10 years.
Updated
Laura Hoy, an equity analyst at Hargreaves Lansdown, predicts (via the Daily Mail):
‘BP will continue to reap the reward of elevated oil prices in the second quarter with healthy profits expected.
‘BP has promised further share buybacks to the tune of $2.5billion (£2.1billion) in the second quarter, to return a portion of surplus cash flow to investors, though no shareholder returns are guaranteed.’
Introduction: BP to post high profits
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
BP’s chief executive Bernard Looney famously, or notoriously, described his company as a ‘cash machine’ last November. And today, we discover how much profits BP made in the last quarter as the Ukraine war drove up energy costs.
BP could report its highest profit in more than a decade, reigniting controversy over energy companies making money during an energy crisis.
The industry has benefited from soaring oil and gas prices that have left millions of UK households struggling to pay their bills, which are set to soar over £3,000 per year this winter.
Analysts predict BP’s underlying earnings could hit $6.8bn for the three months to June, more than double the $2.8bn of a year earlier. We’ll find out when BP’s results are released at 7am.
That’s even higher than the $6.2bn ‘underlying replacement cost profit’ BP made in the first quarter of the year, due to high operating-cash generation, strong oil-and-gas trading and a significant improvement in refining margins.
BP’s fellow oil supermajors have already reported eye-watering earnings for the last quarter, with Shell making adjusted profits of $11.5bn...and Exxon reporting an unprecedented $17.85bn.
Also coming up today
High street bakery Greggs, drinks group AG Barr, pizza delivery firm Domino’s building materials supplier Travis Perkins are also reporting results, while building society Nationwide is releasing its latest house price data.
British Airways has reportedly suspended the sale of short-haul flights from Heathrow for at least a week, adding to the problems facing holidaymakers this summer.
Thousands of seats being removed from sale, as BA complies with Heathrow’s cap of 100,000 passengers per day. It will push already high prices up further across the industry, points out The Times.
Stock markets are somewhat jittery this morning, as traders brace for US House Speaker Nancy Pelosi’s expected arrival in Taipei this week, as tensions between Washington and Beijing rise.
Brent crude has dropped below $100 per barrel overnight, as recession fears also rise after weak factory growth figures yesterday.
The agenda
- 7am BST: BP Q2 results released
- 7am BST: Greggs, AG Barr, Travis Perkins and Domino’s also report results
- 7am BST: Nationwide house price index for July
- 3pm BST: US JOLTS survey of job openings in June
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