German economy ‘in better shape’ than thought in Q4

Germany’s massive car industry has struggled to adapt to new tougher emissions tests and was the main culprit for the economic slowdown. (AFP)
Updated 22 February 2019

German economy ‘in better shape’ than thought in Q4

  • Destatis confirmed preliminary readings of 0.0 percent expansion between October and December, adjusted for price, seasonal and calendar effects
  • Europe’s powerhouse only just escaped a technical recession — two successive quarters of negative growth — in the second half of 2018

FRANKFURT AM MAIN: The German economy is “in better shape” than feared, analysts said Friday, after detailed data for the fourth quarter of 2018 showed a dashboard with few red lights despite flat growth.
Figures from federal statistics authority Destatis confirmed preliminary readings of 0.0 percent expansion between October and December, adjusted for price, seasonal and calendar effects.
“German economic growth has stalled,” the statisticians said in a statement, with the flatline in the final three months of last year following contraction of 0.2 percent between July and September.
That meant Europe’s powerhouse only just escaped a technical recession — two successive quarters of negative growth — in the second half of 2018.
Nevertheless, “the German economy is in a better shape than its current reputation,” economist Carsten Brzeski of ING Diba bank commented on the release.
Private consumption, government spending and investments all picked up, while both imports and exports grew at around the same pace, leaving the country’s trade surplus almost flat.
“None of the traditional growth components” were negative, Brzeski noted, arguing the data showed the massive car industry’s struggles to adapt to new tougher emissions tests were the main culprit for the slowdown.
Stocks of newly-built cars had piled up in the second and third quarter, he pointed out, before being finally delivered in the fourth after passing the so-called WLTP process introduced in September.
“Inventories were a massive drag” on growth in the final three months, Unicredit analysts agreed, calculating the effect slowed the economy by “a whopping 0.6” percentage points.
“The temporary problems in the car industry mask solid fundamentals,” Brzeski said.
“In a couple of months, the German economy should be able again to show its true colors.”


Gulf Marine CEO quits after review sparks profit warning

Updated 32 min 35 sec ago

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.