BT has revealed that the deficit of its final-salary pension scheme has more than doubled in the past six months from £4bn to £9.3bn.
The deficit has increased sharply because its assumed cost of providing pensions in the future has risen dramatically under UK accounting rules.
BT's pension update came as it saw its half-year profits almost halve, due in part to the cost of redundancies.
It made a pre-tax profit of £547m in the six months to 30 September.
This is a 45% decline on the £991m profit it reported for the same period a year earlier.
In addition to redundancy costs, the change in how it accounts for its pension deficit also depressed profits.
The firm's half-year revenues were down 1% from a year ago to £10.357bn.
When the cost of redundancies, the pensions change and other one-off factors are pulled out, BT's pre-tax, post-exceptional items profit for the half-year rose 12% to £888m.
BT is now continuing efforts to reduce its pension deficit, paying £525m into the scheme in its current financial year, and the same amount in 2010-11 and 2011-12.
At the end of 2008, current BT staff also agreed to the company's plan to end the final-salary pension scheme to existing workers for pensions earned after 1 April 2009.
However, this has not stopped the cost of the scheme's past obligations ballooning.
'Making progress'
Looking ahead at its future financial performance, BT said its trading conditions were now improving.
It now expects its revenues for the year to 31 March 2010 to decline by between 3% and 4%, better than its previous guidance of a fall of between 4% and 5%.
It also predicts that it will achieve cost cuts of "at least" £1.5bn, better than its previous guidance of more than £1bn.
BT's chief executive Ian Livingston said the firm was making "progress, but there remains a lot more to do".
Analysts said they welcomed the firm's continuing cost cutting, under which the firm is shedding 15,000 jobs, as announced in May.
Most of the jobs are going in its Global Services IT division.
"We have been very strong believers in the ability of current management to strip out costs from the business and they're delivering well ahead of market expectations," said Daiwa analyst Michael Kovacocy.
Shares in BT rose 6.3 pence, or 4.4%, to 148.3p in Thursday morning trading.
Thursday, November 12, 2009
Iraq in third overseas oil deal
Iraq has struck a deal with a consortium led by US oil giant Exxon Mobil, and including Royal Dutch Shell, to develop the West Qurna 1 oil field.
This is the second major deal the country's oil ministry has agreed with overseas oil firms this week.
The latest deal, which needs cabinet approval, is designed to boost oil production at the Qurna oil field from 280,000 to 2.1 million barrels a day.
Earlier this week, Iraq struck a similar deal with Italian firm ENI.
Under the terms of the deal, ENI will lead a consortium to develop the Zubair oilfield in southern Iraq.
The deal, which also needs cabinet approval, calls for the group to extract 200,000 barrels of oil a day, rising to 1.1 million a day within seven years.
Raising production
Last month, Iraq signed off a deal with Britain's BP and China's CNPC.
The two oil companies will develop the giant southern oilfield in Rumaila.
The project aims to almost triple output at the 17-billion-barrel field - increasing it by two million barrels a day.
These agreements are the first major oil deals Iraq has signed with international oil companies since the US-led invasion of 2003.
Iraq has the world's third-largest oil reserves, but production has yet to reach full potential.
The country's total daily output of about 2.4 million barrels is lower than it could be, because of sanctions against former Iraqi governments, lack of investment and insurgent attacks, analysts say.
This is the second major deal the country's oil ministry has agreed with overseas oil firms this week.
The latest deal, which needs cabinet approval, is designed to boost oil production at the Qurna oil field from 280,000 to 2.1 million barrels a day.
Earlier this week, Iraq struck a similar deal with Italian firm ENI.
Under the terms of the deal, ENI will lead a consortium to develop the Zubair oilfield in southern Iraq.
The deal, which also needs cabinet approval, calls for the group to extract 200,000 barrels of oil a day, rising to 1.1 million a day within seven years.
Raising production
Last month, Iraq signed off a deal with Britain's BP and China's CNPC.
The two oil companies will develop the giant southern oilfield in Rumaila.
The project aims to almost triple output at the 17-billion-barrel field - increasing it by two million barrels a day.
These agreements are the first major oil deals Iraq has signed with international oil companies since the US-led invasion of 2003.
Iraq has the world's third-largest oil reserves, but production has yet to reach full potential.
The country's total daily output of about 2.4 million barrels is lower than it could be, because of sanctions against former Iraqi governments, lack of investment and insurgent attacks, analysts say.
Air India losses more than $1bn
Troubled national carrier Air India has reported a net loss of 55.5bn rupees ($1.2bn; £719m) for the full-year to the end of March.
The loss was due largely to a 12% drop in revenue, from 152.5bn rupees to 134.8bn rupees, as a result of falling passenger numbers.
Last month, the Indian government agreed to inject 53bn rupees into the carrier to help keep it in business.
Global airlines are struggling with falling traffic during the downturn.
The International Air Transport Association (Iata) has forecast losses of $11bn across the whole industry for 2009.
Air India has been told by the Indian government to cut costs dramatically as a condition of receiving the state aid.
This could prove difficult, as hundreds of pilots threatened to strike in September to protest against the airline's plans to cut pay incentives.
The strikes were called off after the government intervened.
The loss was due largely to a 12% drop in revenue, from 152.5bn rupees to 134.8bn rupees, as a result of falling passenger numbers.
Last month, the Indian government agreed to inject 53bn rupees into the carrier to help keep it in business.
Global airlines are struggling with falling traffic during the downturn.
The International Air Transport Association (Iata) has forecast losses of $11bn across the whole industry for 2009.
Air India has been told by the Indian government to cut costs dramatically as a condition of receiving the state aid.
This could prove difficult, as hundreds of pilots threatened to strike in September to protest against the airline's plans to cut pay incentives.
The strikes were called off after the government intervened.
Latin America boosts Telefonica
Spanish telecoms firm Telefonica, owner of the O2 mobile network, has reported a rise in nine-month profits.
A strong performance in Latin America helped to lift net income by 0.3% to 5.6bn euros ($8.4bn; £5.1bn).
In Spain, which accounts for a third of its revenues, Telefonica says customer numbers are up despite the recession.
Telefonica Europe chief executive Matthew Key told the BBC that both the consumer and commercial market are showing signs of recovery there.
In the UK, the firm has lost its rights to exclusively sell the iPhone. Mr Key said they would still sell the phone, but also concentrate on other new products such as the Palm Pre.
He added that Telefonica was keen to expand the O2 brand in Germany where he said the brand is only third or fourth in the market.
In Latin America, Telefonica has 170 million customers and it expects the market to continue growing strongly.
A strong performance in Latin America helped to lift net income by 0.3% to 5.6bn euros ($8.4bn; £5.1bn).
In Spain, which accounts for a third of its revenues, Telefonica says customer numbers are up despite the recession.
Telefonica Europe chief executive Matthew Key told the BBC that both the consumer and commercial market are showing signs of recovery there.
In the UK, the firm has lost its rights to exclusively sell the iPhone. Mr Key said they would still sell the phone, but also concentrate on other new products such as the Palm Pre.
He added that Telefonica was keen to expand the O2 brand in Germany where he said the brand is only third or fourth in the market.
In Latin America, Telefonica has 170 million customers and it expects the market to continue growing strongly.
Surprise rise in Australian jobs
Australia's economy created more jobs than expected in October, with 24,500 more people finding employment.
It is the second monthly gain in a row and has led analysts to speculate that interest rates will be increased in December to 3.75% from 3.5%.
In October, Australia became the first G20 country to raise rates since the global recession began, and it raised rates again earlier this month.
The news sent the Australian dollar to a 15-month high.
One Australian dollar was worth 93.33 US cents.
The unemployment rate saw a slight increase to 5.8%, but overall it has remained fairly steady since March.
"These are very strong numbers," said Felicity Emmett, senior economist at RBS.
"Employment is up over 60,000 in just two months and the jobless rate might peak below 6%... that's amazing," she said.
It is the second monthly gain in a row and has led analysts to speculate that interest rates will be increased in December to 3.75% from 3.5%.
In October, Australia became the first G20 country to raise rates since the global recession began, and it raised rates again earlier this month.
The news sent the Australian dollar to a 15-month high.
One Australian dollar was worth 93.33 US cents.
The unemployment rate saw a slight increase to 5.8%, but overall it has remained fairly steady since March.
"These are very strong numbers," said Felicity Emmett, senior economist at RBS.
"Employment is up over 60,000 in just two months and the jobless rate might peak below 6%... that's amazing," she said.
Oil rise 'could derail recovery'
The International Energy Agency (IEA) has warned that the recent rise in the price of oil "risks derailing the recovery" if it continues.
The IEA says that oil demand itself will also rebound much more slowly if price rises continue in 2010.
The oil price has risen more than 70% this year and is trading at about $77 a barrel, after falling on Thursday.
The IEA also warned that signs of renewed economic growth around the world remained "tentative".
The price of oil fell $2.43 to $76.85 a barrel on Thursday after a bigger than expected rise in weekly US oil supplies.
'Risk'
In its monthly report, the agency said China was driving demand and revised upwards its forecasts. In 2010, it predicts a 1.6% increase in demand to 86.2 million barrels a day.
The IEA said that in the US, "the 'real' economy, as opposed to the financial one is struggling to recover" and added that if the government withdrew its stimulus spending measures, the economy could "choke again... and cast further gloom on an already depressed job market".
Graph of oil prices to date in 2009
It added that economies in developed countries were still fragile, and that demand for oil in those nations was dropping away when prices hit $80 a barrel.
"If prices keep rebounding, there's a risk to the global economy as a whole, even to some of those economies in the Far East and even the Middle East," said David Fyfe, the head of the IEA's oil industry division.
However, the IEA also said global oil demand would grow in the fourth quarter of this year, the first year-on-year increase in fuel use since the second quarter of 2008.
And it raised global oil demand forecasts for 2009 by 210,000 barrels to 84.8 million barrels a day.
Meanwhile, the IEA said that oil producing cartel OPEC pumped more oil in October than in September.
The IEA says that oil demand itself will also rebound much more slowly if price rises continue in 2010.
The oil price has risen more than 70% this year and is trading at about $77 a barrel, after falling on Thursday.
The IEA also warned that signs of renewed economic growth around the world remained "tentative".
The price of oil fell $2.43 to $76.85 a barrel on Thursday after a bigger than expected rise in weekly US oil supplies.
'Risk'
In its monthly report, the agency said China was driving demand and revised upwards its forecasts. In 2010, it predicts a 1.6% increase in demand to 86.2 million barrels a day.
The IEA said that in the US, "the 'real' economy, as opposed to the financial one is struggling to recover" and added that if the government withdrew its stimulus spending measures, the economy could "choke again... and cast further gloom on an already depressed job market".
Graph of oil prices to date in 2009
It added that economies in developed countries were still fragile, and that demand for oil in those nations was dropping away when prices hit $80 a barrel.
"If prices keep rebounding, there's a risk to the global economy as a whole, even to some of those economies in the Far East and even the Middle East," said David Fyfe, the head of the IEA's oil industry division.
However, the IEA also said global oil demand would grow in the fourth quarter of this year, the first year-on-year increase in fuel use since the second quarter of 2008.
And it raised global oil demand forecasts for 2009 by 210,000 barrels to 84.8 million barrels a day.
Meanwhile, the IEA said that oil producing cartel OPEC pumped more oil in October than in September.
Porsche confirms big annual loss
German sports carmaker Porsche has confirmed it made a big full-year loss, largely due to its unsuccessful attempt to take over Volkswagen.
Porsche abandoned its long-running attempt to buy VW, Europe's largest carmaker, this summer, despite building a 51% stake in the company.
Instead, Porsche is set to become the 10th VW brand under a deal due to be completed by the end of 2011.
Porsche released a profit warning in July saying it had made a big loss.
The company reported a pre-tax loss of 4.4bn euros ($6.5bn; £3.9bn) for the year to the end of July, against an 8.6bn euros profit the previous year.
It did not release a net profit figure.
Taking out the impact of the VW takeover attempt, Porsche said it remained the "most profitable automobile manufacturer in the world".
Porsche had to build up major debts to get a 51% stake in VW, only to fall short of the required 75% when it could not raise more funds due to the impact of both the global credit crunch and the slump in global car sales.
Porsche abandoned its long-running attempt to buy VW, Europe's largest carmaker, this summer, despite building a 51% stake in the company.
Instead, Porsche is set to become the 10th VW brand under a deal due to be completed by the end of 2011.
Porsche released a profit warning in July saying it had made a big loss.
The company reported a pre-tax loss of 4.4bn euros ($6.5bn; £3.9bn) for the year to the end of July, against an 8.6bn euros profit the previous year.
It did not release a net profit figure.
Taking out the impact of the VW takeover attempt, Porsche said it remained the "most profitable automobile manufacturer in the world".
Porsche had to build up major debts to get a 51% stake in VW, only to fall short of the required 75% when it could not raise more funds due to the impact of both the global credit crunch and the slump in global car sales.
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