Finance Blog number 1

Drug maker AstraZeneca PLC said it will cut another 7,300 jobs as it warned Thursday of a tough year ahead, due to government spending cuts on healthcare and stiff competition, even as it reported a 24 percent increase in 2011 profits.

The Anglo-Swedish company said its full-year profit was $10 billion, up from $8.1 billion a year earlier. The profit advance was helped heavily by a $1.5 billion gain from the sale of its dental subsidiary, Astra Tech.

The company said revenue this year will be hit by government interventions on prices, generic competition and the loss of exclusivity for Seroquel IR, a drug for the treatment of depression, and hypertension drug Atacand in global markets.

Job cuts and restructuring are expected to save $1.6 billion a year by 2014, the company said. AstraZeneca said it would shortly begin consultations with affected employees.

AstraZeneca shares were down 4.2 percent at 2,960 pence just before noon in London.

Generic competition cut revenue by $2 billion in 2011 while price interventions cost another $1 billion, AstraZeneca said.

Despite its concerns over the year ahead, AstraZeneca raised its full-year dividend by 10 percent to $2.80 a share10 percent, and announced a $4.5 billion share buyback program.

The company reported double-digit sales gains for cholesterol drug Crestor, Symbicort for asthma and Seroquel XR freecreditscore.

U.S. revenues were up 5 percent despite the negative impact of health care reform, while revenue in the rest of the world was down 3 percent, including a 15 percent slide in Europe.

AstraZeneca said it was reshaping its research and development activity to focus on neuroscience, employing 40 to 50 scientists in a new Innovative Medicines unit based in Boston in the United States and Cambridge in England.

The company will close its facility in Montreal and lay off some staff in Soedertaelje in Sweden.

“We’ve made an active choice to stay in neuroscience though we will work very differently to share cost, risk and reward with partners,” said Martin Mackay, the company’s president of research and development.

Linda McCulloch, a national officer for Britain’s Unite union, said the cuts were a blow to the research and development base.

“If the company can afford a 10 percent hike in its dividends, then it can afford to retain these roles,” McCulloch said.

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Ford reported its best annual earnings since 1998 on Friday, making 2011 the second most profitable year in the company’s 109-year history.

But much of the profit was attributed to a non-cash gain, as it put a large tax credit from past losses on its balance sheet that will shield it from taxes in the future. Excluding that credit, the automaker posted full-year and quarterly earnings that fell short of last year’s profit as well as analysts’ forecasts.

Shares of Ford (, Fortune 500) tumbled as much as 7.4% in early trading on the earnings miss before recouping about half the lost ground after assurances on an investors’ call about earnings guidance moving forward. Shares were down 3.1% in midday trading.

The company’s 2011 net income of $20.2 billion, up from $6.6 billion in 2010, was the best since 1998, when it received a large one-time gain from the sale of The Associates financial unit. About $12.4 billion of the latest profit came from the accounting gain.

Excluding special items, Ford reported operating income of $6.1 billion, or $1.51 a share, down from the $7.6 billion, or $1.91 a share, it earned on that basis in 2010.

Fourth-quarter operating earnings of $787 million, or 20 cents a share, were down from $1.2 billion, or 30 cents, a year earlier. Analysts surveyed by Thomson Reuters had forecast earnings of 25 cents a share.

Pretax earnings for the quarter and full year improved in Ford’s home North American market due to increases in both the pricing and the volume of vehicles sold. The company’s profit margin in the region also improved.

The strong North American results mean that the 41,600 members of the United Auto Workers union will be getting larger profit-sharing payments for 2011.

Full-year payments to the factory workers will average $6,200, up from $5,000 in 2010. But the workers already received more than half of that money in December due to the new labor deal reached in the fall.

The company announced earlier this month that its white-collar workers would get both bonus payments and merit raises for 2011, the first time in four years they’ve received both.

Cool cars from Detroit auto show

Profit fell in Ford’s South American unit and the quarterly loss increased in Europe. The Asia-Pacific region tipped from a fourth-quarter profit a year earlier to a loss this time due to the flooding, but the company had already warned of that loss.

Revenue for the year reached $136.3 billion, up from $120.9 billion in 2010, as it sold 5.7 million cars and trucks worldwide, up 7% from its 2010 total.

Ford Chief Financial Officer Lewis Booth said that the accounting gain was significant for the company because it was a sign that the company is back to making regular profits. It had stopped booking the tax credits back in 2006, despite ongoing losses at that time, because of doubts that Ford would once again be able to make the kind of profits that would allow it to use those credits.

CEO Alan Mulally said he considered the results to be strong, and that Ford missed its profits targets in the quarter due to external factors outside of North America, such as the economic slowdown in Europe and flooding in Thailand that shut factories and affected its supply chain.

He said the company expects Ford’s overall pre-tax operating profit in 2012 to be roughly the same as last year, as better auto profits will be offset by lower earnings from its finance arm.

And he said the company is still well on track to hit the mid-decade target it set last year of significantly better profits and global sales of about 8 million vehicles, an increase of about 40% from 2011 levels.

Van Conway, president of Michigan turnaround consultant Conway MacKenzie, said Ford’s results for the year were good, not great, and management really can’t be blamed for problems such as the downturn in Europe.

"The old line used to be when the economy got a cold, Detroit got pneumonia," he said. "They’re clearly position to weather a storm far better than they did before."

Adam Jonas, analyst with Morgan Stanley, said some of the earnings miss was due to higher engineering and other costs associated with development of new vehicles. He said the outlook remains good for the company.

"2012 may be shaping up to be a very good year for Ford," he wrote in a note Friday.

Ford is the first of the Big Three U.S. automakers to report results. General Motors (, Fortune 500) and Chrysler Group will report next month. But all are expected to post profits, the first time all will be in the black at the same time since 2004. All gained U.S. market share for the first time since 1988. 

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Leaders of the world

The U.S. bond market is neutralizing budget deficits as an election-year campaign weapon.

Interest payments will cost the government 3.1 percent of gross domestic product this year, according to Office of Management and Budget and International Monetary Fund data compiled by Bloomberg. That

U.K. retail sales rose in December as stores cut prices to lure consumers during the year-end holiday shopping season.

Sales including fuel rose 0.6 percent from November, when they fell a revised 0.5 percent, the Office for National Statistics said today in London. The December increase matched the median forecast of 21 economists in a Bloomberg News survey. From a year earlier, sales were up 2.6 percent.

The gain may not be maintained as U.K. unemployment rises, inflation outpaces wage increases and consumer confidence falls. With global growth cooling and the euro-area crisis damping export demand, concerns are growing that Britain is heading for another recession. A report today indicated Chinese manufacturing shrank for a third month in January.

Strikes and demonstrations against Greek austerity measures hit the capital Athens on Tuesday, as international debt inspectors returned to decide whether the country’s reforms are strong enough for it to secure a vital bailout.

The officials from the European Union, European Central Bank and International Monetary Fund, which are lending money to Greece to keep it from bankruptcy, are expected to press the government for faster cost-cutting reforms.

Greece’s continued access to bailout loans depends not only on delivery on its austerity promises but also on negotiations with private creditors on a bond swap deal aiming to cut its debt by euro100 billion ($127 billion). It needs to get an agreement soon if it is to secure more rescue loans, with a bond repayment of euro14.5 billion due in late March.

Some 10,000 protesters took part in rallies in central Athens over potential pay cuts in the recession-battered private sector. Anti-austerity strikes in the capital disrupted public transport and other services. Journalist unions also launched a 48-hour strike.

Police said a plain-clothed officer from the anti-terrorism division was beaten and seriously injured by a group of some 30 protesters who took his handgun. The rally was otherwise peaceful.

Under government pressure, unions and employers are due to launch talks Wednesday to explore ways of slashing labor costs. Lower-level members of the debt of the debt inspection team started the talks in Athens on Tuesday, with the mission chiefs due Friday.

Meanwhile, Greece saw its borrowing rates ease marginally in a bill auction on Tuesday. Unable to issue long-term debt due to untenably high borrowing interest rates of 33 percent, the country maintains a market presence through regular treasury bill auctions.

The public debt agency said it raised euro1.625 billion ($2.06 billion) in a sale of 13-week treasury bills, an interest rate of 4.64 percent, compared with 4.68 percent in the last such auction in December.

Demand for the bills was 2.90 times the amount on offer, roughly the same as last month.

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European Central Bank Governing Council member Ewald Nowotny said Standard & Poor

Republican Senators Orrin Hatch of Utah and Bob Corker of Tennessee criticized the Federal Reserve for overstepping its role by making policy recommendations on how the U.S. government should try new ways to spur the housing market.

Hatch, the top-ranking Republican on the Senate Finance Committee, said the housing study sent by Chairman Ben S. Bernanke to Congress last week, along with recent Fed speeches,

U.S. stock futures are falling Thursday as the European debt crisis again becomes the key driver of market sentiment.

Stock markets in London, Germany and France have all declined. The euro has dropped to a 15-month low against the dollar.

The concern in the markets has centered on the state of Europe’s banks following UniCredit’s announcement Wednesday that it was selling new shares at a large 69 percent discount to Tuesday’s closing price.

Banks are an integral part of the debt crisis because they hold government bonds. A default or steep fall in the value of government bonds could inflict heavy losses on banks and choke off credit to the European economy. That’s why regulatory authorities want Europe’s banks to raise their buffers by euro115 billion (149 billion) over the next few months. The worry in the markets is that banks will have to offer sharp discounts to raise the funds.

U.S. economic reports have the potential to shift sentiment. Key releases later Thursday include the Institute for Supply Management’s monthly survey of the services sector as well as indicators on the pace of hiring in the private sector.

The latter may affect market expectations for Friday’s closely-watched nonfarm payrolls data for December. The figures often set the market’s tone for a week or two after their release. The expectation is that the U No teletrak payday loan.S. economy generated around 150,000 jobs during December.

Positive economic news propelled U.S. stocks to a big rally on Tuesday. Those gains held Wednesday as automakers reported strong sales in December.

Less than two hours before trading opens in New York, futures on the Dow Jones industrial average are down 55 points to 12,301. Futures for the broader S&P 500 index have fallen 7 points to 1,266.

European stocks fell, though most indexes remained higher for the year so far. Germany’s DAX was down 0.7 percent at 6,066 while the CAC-40 fell 1 percent to 3,163. The FTSE 100 index of leading British shares was 0.7 percent lower at 5,629.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.8 percent to close at 8,488.71. South Korea’s Kospi index lost 0.1 percent at 1,863.74, while Hong Kong’s Hang Seng Index rose 0.5 percent to 18,813.41. Benchmarks in Singapore and Taiwan were also higher.

Mainland China’s benchmark Shanghai Composite Index lost 1 percent to 2,148.45, its lowest level in almost three years. The Shenzhen Composite Index lost 3.5 percent to 813.99. More than 100 companies plunged to the daily limit of 10 percent.

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LONDON