Market Summary #11

Chip shortage crisis in the automotive sector deteriorates

Chip shortage worsens for carmakers around the world, with companies on three continents announcing production cuts. BMW AG succumbs to shortages after
months of managing to maintain production, saying it will halt production of Mini cars at its factory in Oxford, England. It is joined by Honda Motor Co., which will halt production at three plants in Japan for about five- or six days next month, and Ford Motor Co., which cut its full year profit forecast because of the debilitating chip
shortage.

EBay warns pandemic sales boom could soon disappear

EBay Inc. warned investors that its sales momentum tied to the pandemic and government stimulus checks may be coming to an end. The online marketplace issued a
revenue forecast for the current quarter that suggests spending on the site may slow as more people are vaccinated, businesses reopen, and stimulus checks run out. The company ended the quarter with 187 million active shoppers, up 7% from a year earlier.

Corporate giants to support India during Covid crisis

Reliance Industries Ltd., controlled by Asia’s richest man Mukesh Ambani, global pharmaceutical companies such as Gilead Sciences Inc. and technology firms such as
Alphabet Inc. are rushing to contribute supplies and funds. Blackstone Group Inc. chairman Stephen Schwarzman said his private equity firm is committing $5 million to support Covid’s relief and vaccination services in India for “marginalized communities”. State-owned refineries Indian Oil Corp. and Bharat Petroleum Corp. also contributed oxygen production.

Olam will buy a US spice company ahead of the IPO of its food ingredients unit

Commodities trader Olam International Ltd said on 22 April that its soon-to-be-listed food ingredients business will buy US spice company Olde Thompson for $950 million. The company plans to separate and list Olam Food Ingredients (OFI), which includes cocoa, coffee and edible nuts, in the first half of next year. Olam International, majority owned by Singaporean state investor Temasek, is one of the largest traders of agricultural products and operates in 60 countries.

General Motors Expands Mexico presence

Starting in 2023, General Motors will extend their production of electric vehicles to Mexico, with an investment of $1 Billion. The new venture, which will start in the second half of 2021, includes a new paint plant, production of batteries and other electronic components. The possibility of another expansion to the region is left open, depending on economic conditions going forward.

BP and Royal Dutch Shell Beat EarningsEstimates

The two oil giants companies presented better than expected first quarter earnings results. Royal Dutch Shell generated more than $8 Billion in cash, being the sector leader in cash generation during the last 4 years and was able to reduce net debt in more than $4 Billion to $71.3 Billion, on route to reduce its debt to around $65 Billion, in order to increase shareholder distributions. BP generated $6.1 Billion in operating cash flow and reached its net debt target a year early. Share’s buybacks are supposed to
start in the second quarter with a $500 Million program.

SYNLAB goes public

SYNLAB, the biggest clinical laboratory and medical diagnosis services company in Europe, had their initial public offering on the 30th. The IPO went public through
Frankfurt Stock Exchange, with the ticker symbol “SYAB”, having Goldman Sachs and J.P.Morgan as joint Global Coordinators and Bookrunners. The company set the share price in the €18-23 range, with a consequent market cap of at least €3,9 billion. Synlab has also stated that €400 million raised from the IPO will be used to pay down debt.

Kansas City Southern bidding war

Kansas City Southern is in the midst of a bidding war between Canadian National and Canadian Pacific. The railroad giant, with railways in the USA, Mexico and Panama, was prepared to accept Canadian Pacific’s $28 billion offer, but is now reviewing a larger offer made by Canadian National. Canadian National’s offer was larger, being set at $33 billion. In the likely case that the Kansas company accepts either of these offers, we will see the first railway crossing Canada, the United States and Mexico.