Imperial Brands grows profits, Vodafone still in a mess and Glencore seals Teck coal deal

“The FTSE 100 dipped on Tuesday as investors awaited the latest inflation reading from the US,” says AJ Bell investment director Russ Mould.

“US markets were broadly flat overnight, with Asian indices subsequently making modest progress, as everyone is on tenterhooks ahead of the consumer prices data. The market feels on the cusp of performing a victory parade to celebrate the battle against inflation being won but it is not there yet, with central banks pushing back against the idea rates have definitely peaked.

“Mixed UK employment data showed real pay growing at its fastest rate in two years – which may cause some consternation on Threadneedle Street but is potentially good news for consumer-facing businesses if it means people have a bit more disposable income in their pockets in the crucial Christmas trading period.

“Babcock became the latest defence-orientated business to report strong orders amid global instability and conflict – the business achieving an important milestone with the restoration of dividend payments.”

Imperial Brands

“Amid strengthening political and regulatory headwinds, one might think the tobacco and vaping industry is struggling. Imperial Brands’ results would suggest otherwise, as profits and dividends are growing.

“While the industry might have over-estimated the speed by which smokers transition to vaping and other next-generation products, when you add up sales across the board companies like Imperial Brands are still making big money.

“Parts of the market remain doubtful, nonetheless. When you have headlines about governments in different countries clamping down on smoking and trying to stop young people from vaping, it’s no wonder that sentiment remains poor towards shares in the sector. 

“Consumers are increasingly paying more attention to health and wellness and owning shares in this sector may not sit well with their moral conscience. But there will be others who see the opportunity to buy growing companies on cheap valuations. At the moment the balance seems to be in favour of the former.”

Vodafone

“Vodafone’s results are a checklist of everything bad about a company. It has swung to a loss-making position, revenue is down, the dividend is not growing, there is negative free cash flow and net debt has ballooned.

“We’ve got the usual rhetoric from the chief executive that the turnaround story is making progress but at the end of the day it’s yet another set of results that remind us how Vodafone has lost its way big time.

“Work is underway to restructure the group but don’t hold your breath for rapid change.”

Glencore

“It has taken some time to get over the line but Glencore has finally sealed a deal for a majority stake in Canadian rival Teck Resources’ coal business. This is a striking move on the part of the diversified miner and commodities trader. 

“At a time when most mining businesses are turning away from coal due to its polluting nature Glencore is seemingly doubling down on the fossil fuel.

“However, there is more to this move than meets the eye as Glencore plans to spin-off the assets acquired from Teck, which are steelmaking coal rather than thermal coal, and its own coal portfolio into a separate business. The aim is to list this entity separately on the stock market in a couple of years’ time when the two businesses have been successfully integrated.

“The company has a reputation for ruthlessness and, while this deal will do little for its public reputation, it clearly feels the move makes business sense. 

“If it is successful in executing its spin-off plans then the remaining Glencore businesses would be free of the stink of coal and would likely attract a higher valuation as well as having scope to pursue the acquisition of new metals assets to help position it for the energy transition.”

These articles are for information purposes only and are not a personal recommendation or advice.