PepsiCo 4th-quarter profit falls

(Reuters) - PepsiCo Inc (PEP.N: Quote, Profile, Research) reported lower quarterly profit on Thursday, hurt by a higher tax rate and a decline in sales volume of carbonated soft drinks.

The company, which makes Pepsi Cola, Frito Lay snacks and Quaker oatmeal, said net income for the fourth quarter ended on December 29 was $1.26 billion, or 77 cents per share, compared with $1.83 billion, or $1.09 per share, a year earlier.

Excluding restructuring charges and tax items, the company earned 80 cents per share.

Last month Pepsi Bottling Group Inc (PBG.N: Quote, Profile, Research), the world's largest bottler of Pepsi drinks, reported flat sales volume in the United States and weaker sales of refrigerated drinks, sold at convenience stores and gas stations.

 

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Children's Place ex-CEO says could bid for company

(Reuters) - Children's Place Retail Stores Inc (PLCE.O: Quote, Profile, Research) former Chief Executive Ezra Dabah said on Thursday he was confident he could make a bid to buy the company for $24 a share, sending its shares up 18 percent in pre-market trading.

The $24 price would represent a 35 percent premium to the closing price of Children's Place shares on Wednesday. Dabah said he had received interest from private equity firm Golden Gate Capital to be a participant in the deal.

Dabah, who said in a filing to the Securities and Exchange Commission that he owns 17.2 percent of the children's clothing retailer's shares, resigned as CEO last September after an internal probe found he did not comply with the company's securities-trading policies.

The SEC filing comes the same day that Children's Place said its sales at stores open at least a year rose a better-than-expected 6 percent in January.

Wall Street on average had been expecting a same-store sales gain of 2.5 percent, according to Reuters Estimates.

Same-store sales rose 9 percent at the Children's Place brand and 2 percent at the company's Disney Store chain.

Children's Place also said it has been notified by Nasdaq that its stock was subject to delisting because of its failure to hold its fiscal 2006 annual meeting by February 3.

Last September, the company said its board was evaluating strategic options -- including a potential reorganization or an outright sale.

 

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Euro Declines as Trichet Says U.S. Slowdown May Hurt Europe

(Bloomberg) -- The euro fell for a third day against the yen and dollar as European Central Bank President Jean-Claude Trichet said the slowdown in the U.S. may curtail economic growth in Europe, signaling lower interest rates this year.

The euro extended its drop against the yen this year to 5.3 percent and erased gains against the dollar after the ECB left interest rates unchanged today. Investors have raised bets the ECB will cut interest rates by mid-year even as policy makers say inflation is accelerating. The pound fell after the Bank of England lowered rates today.

``The market is being disappointed by the ECB's stubbornness and is selling the euro,'' said Toshi Honda, a currency strategist in London at Mizuho Corporate Bank Ltd., a unit of Japan's second-biggest bank by assets. ``The ECB will have to concede to the market eventually.'' The euro may fall to $1.40 by the middle of the year, he said.

The currency dropped to 154.49 yen as of 2:14 p.m. in London, from 155.88 yesterday in New York. It declined against the dollar to $1.4523 from $1.4632, losing 2.1 percent in the past three days.

Against the pound, it rose to 74.66 pence from 74.59 pence, after policy makers at Britain's central bank cut the benchmark interest rate by a quarter-point to 5.25 percent, citing slowing global growth and tighter credit. All but two of 61 economists surveyed by Bloomberg predicted the decision.

Carry Trades

The yen gained against all of the 16 most-active currencies as European stocks dropped and the risk of the region's companies defaulting on their bonds rose, increasing demand for safer assets and reducing appetite for so-called carry trades.

The yen traded at 106.39 against the dollar, from 106.54 yesterday. It gained the most versus the rand, rising 1.6 percent to 13.63. It climbed 0.4 percent to 95.01 against the Australian dollar.

The Dow Jones Euro Stoxx 50, a benchmark for the 15 nations that share the euro, declined 2.2 percent today, after slumping to the lowest since Jan. 24 yesterday. The Morgan Stanley MSCI World Index fell 0.9 percent.

In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. Higher currency volatility may discourage carry trades.

Implied volatility for one-month options on dollar-yen was 12.4 percent today and has declined from 12.8 percent a week ago. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options.

Citigroup Idea

Investors should sell the New Zealand dollar and buy the Swiss franc to hedge against currency losses on high-yielding assets and reduce their carry trades between the two countries, said Citigroup Inc., the largest U.S. bank by assets.

The New Zealand dollar will be among the hardest hit currencies if global economic growth slows, according to a report from a Citigroup research team led by Todd Elmer, a currency strategist in New York.

The ECB left its main refinancing rate at a six-year high of 4 percent, in line with the forecasts of all 56 economists surveyed by Bloomberg.

Trichet, speaking in a press conference in Frankfurt, said countering inflation remains the key for the central bank. Inflation in the 15 nations sharing the euro reached a 14- year high in January of 3.1 percent, overshooting the bank's 2 percent limit for a fifth month.

 

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Trichet Sees `Unusually High Uncertainty' on Growth

(Bloomberg) -- European Central Bank President Jean- Claude Trichet signaled that risks to euro-region economic growth are increasing, prompting investors to raise bets on interest-rate cuts.

``As the reappraisal of risk in financial markets continues, there remains unusually high uncertainty about its overall impact on the real economy,'' Trichet said at a press conference in Frankfurt today after the ECB kept its key rate at 4 percent. ``We will continue to monitor very closely all developments over the coming weeks.''

The ECB has kept borrowing costs at a six-year high, declining to follow counterparts in the U.S. and Great Britain by cutting borrowing costs as it seeks to contain inflation in the 15 euro nations. Investors predict that a slowing economy will prompt the ECB to reduce its key interest rate.

``There is a greater acknowledgment that risks to growth are on the downside,'' said David Owen, chief European economist at Dresdner Kleinwort in London. ``The ECB's not going to cut in next couple of months, but it is starting to prepare the markets for rate reductions.''

The euro weakened 0.8 percent to $1.4521 at 3:21 p.m. in Frankfurt and the yield on 10-year German bunds fell 5 basis points to 3.85 percent.

Growth Forecasts

The ECB on Dec. 6 projected the euro-region economy to expand about 2 percent this year after 2.6 percent in 2007. Trichet said today that latest data confirmed the bank's assessment that ``risks surrounding the economic outlook lie on the downside.''

The International Monetary Fund on Jan. 29 cut its 2008 euro-region growth estimate by half a point to 1.6 percent, saying that ``no one is going to be exempt from some slowdown.'' The Washington-based fund also trimmed its growth estimates for the U.S. and Japan, the world's two largest economies.

Stock markets have dropped this year on concern the U.S. economy is sliding into a recession, curbing earnings growth. Germany's benchmark DAX Index has lost 16 percent this year and the Dow Jones Stoxx 600 Index 12 percent.

The Bank of England today cut interest rates for the second time in three months, lowering the benchmark by a quarter point to 5.25 percent. The Fed last month lowered its rate by 1.25 percentage points in two reductions to 3 percent.

 

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Biogen Fourth-Quarter Net Rises 85 Percent on Tysabri

 (Bloomberg) -- Biogen Idec Inc., the world's largest maker of multiple sclerosis drugs, said fourth-quarter profit rose 85 percent on sales of its fastest-growing product, the MS medicine Tysabri.

Net income rose to $201.2 million, or 67 cents a share, from $108.6 million, or 32 cents, a year earlier, the Cambridge, Massachusetts-based company said today in a statement. Profit excluding certain costs beat analysts' estimates by 9 cents a share.

Revenue rose 26 percent from a year earlier to $893 million as worldwide sales of Tysabri quadrupled. Biogen said it expects 100,000 patients will be taking Tysabri by the end of 2010, which could mean $2.8 billion in annual sales at current prices, according to analysts. The MS drug was cleared in the U.S. last month for an expanded use, Crohn's disease, an inflammation of the intestines.

``It was a very good quarter, they deserve credit,'' said Michael King, an analyst with Rodman & Renshaw in New York, in a telephone interview today.

Biogen fell $2.77 cents, or 4.4 percent, to $60.52 yesterday in Nasdaq Stock Market composite trading. The stock has gained 23.7 percent in the 12 months before today.

Tysabri generated $129 million in worldwide sales in the quarter, up from $30 million a year earlier. Worldwide sales are split with Biogen's partner, Irish drugmaker Elan Corp. Biogen recorded $90 million of the Tysabri sales in the fourth quarter, the company said. About 21,000 patients worldwide were taking the drug at the end of December.

Reintroduced

Biogen and Elan pulled the drug from the market in February 2005 after two patients developed rare, fatal brain infections. A month later, the companies disclosed a third case of the disorder, progressive multifocal leukoencephalopathy. The drug was reintroduced in July 2006 after the U.S. Food and Drug Administration decided the benefits for slowing MS relapses outweighed the risk.

In December, Biogen lost more than $5 billion in market value when it abandoned a plan to sell the company, saying it didn't receive any offers. Billionaire investor Carl Icahn criticized the process last week as ``flawed,'' and nominated three people to the company's 12-member board.

Biogen reiterated its forecast annual revenue growth of 15 to 20 percent in 2008, driven by increasing prescriptions of Tysabri. Profit excluding certain costs will be $3.20 to $3.35 a share, said Chief Executive Officer James Mullen, at an investor conference in San Francisco Jan. 7.

 

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U.S. Stock Futures Rise on Productivity Report, Disney Earnings

(Bloomberg) -- U.S. stock futures rose, pointing to a rebound from the market's biggest drop in 11 months, after worker productivity grew more than forecast and earnings at Walt Disney Co. and JDS Uniphase Corp. topped analysts' estimates.

Walt Disney, the second-largest U.S. media company, gained on higher revenue from cable networks and theme parks. JDS Uniphase rallied after the maker of telecommunications testing equipment said it isn't being affected by the slowdown in the U.S. economy. Newmont Mining Corp. led metal producers higher as BHP Billiton Ltd. raised its bid for Rio Tinto Group.

``Disney and Uniphase have shown that companies are still capable of good results, despite recent carnage in the markets,'' said Jonathan Monk, a fund manager at Aerion Fund Management in London, who helps oversee about $23 billion.

Standard & Poor's 500 Index futures expiring in March climbed 4.2 to 1,347.4 at 8:48 a.m. in New York. Dow Jones Industrial Average futures gained 32 to 12,352. Nasdaq-100 Index futures increased 6 to 1,791. European and Asian stocks fell.

Fourth-quarter earnings have declined 23 percent on average at the 316 companies in the S&P 500 that reported results so far, according to data compiled by Bloomberg. Excluding financial companies, profit growth averaged 18 percent.

Productivity, a measure of employee efficiency, rose at an annual rate of 1.8 percent in the fourth quarter, the Labor Department said. Economists in a Bloomberg News survey projected a 0.5 percent gain. A gauge of labor costs climbed less than forecast.

Disney, JDS Uniphase

Walt Disney jumped $1.78 to $31.85. Net income in the first quarter was 63 cents a share, beating the 52 cent average estimate of 19 analysts compiled by Bloomberg. Sales rose 9.1 percent to $10.45 billion, surpassing the $10.1 billion average estimate.

JDS Uniphase increased $2.14 to $12.30. Profit for the first quarter, excluding costs such as stock-based compensation, was 22 cents a share, exceeding the 11 cent average estimate of analysts in a Bloomberg survey.

Newmont, Barrick Gold Corp., Freeport-McMoRan Copper & Gold Inc. and Goldcorp Inc. gained after Australia's BHP Billiton, the world's largest miner, raised its hostile bid for the U.K.'s Rio Tinto Group to $147 billion. Aluminum Corp. of China, China's biggest aluminum company, and Alcoa Inc. last week bought a stake in Rio to block the takeover attempt, which was announced in November.

Newmont climbed 90 cents to $50.38. Barrick rose 65 cents to $48.38. Goldcorp added 83 cents to $35.43. Freeport-McMoRan advanced $1.09, or 1.3 percent, to $87.

 

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Recovery for SIVs unlikely given Basel II rules-panel

(Reuters) - The troubled market for so-called structured investment vehicles (SIVs) is effectively dead and likely to stay that way given new international rules for matching banks' reserves to their risks, panelists at a bond industry conference said on Tuesday.

The new Basel II international accord, to be applied to U.S. banks with total assets of $250 billion or more, is likely to make investing through off-balance sheet SIVs less attractive for banks, which are the main sponsors of such vehicles, speakers at the American Securitization Forum conference in Las Vegas said.

SIVs are specialized funds that raise cash by issuing short-term debt and invest the proceeds in longer-dated and higher-yielding assets, including U.S. mortgages. The funds pocket the difference between what they make on their investments and the interest they pay out to investors.

The vehicles have been unable to fund themselves normally for many months amid the U.S. credit crisis and the market value of their investment portfolios has plummeted, prompting ratings downgrades and mass restructuring efforts.

But the market for SIVs may have eventually contracted anyway given the onset of Basel II, which has been seen as offering a way for banks to lower their capital reserves by linking reserve requirements to the credit quality of investments.

 

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