Shell to unveil annual results

Royal Dutch Shell is expected to report a decline in production levels

Published: 12:07am, 28th January 2012
Updated: 11:31pm, 29th January 2012

Royal Dutch Shell and AstraZeneca will set the tone for the City's results season next week in a busy few days for heavyweight corporate updates.

Drugs giant AstraZeneca will cap a tough year with its annual results on Thursday after suffering setbacks in its efforts to produce new blockbuster treatments. The UK's second-biggest medicine maker is forecast to report flat revenues for the year to December 31 of 33.5 billion US dollars (£21.3 billion) and a 15% rise in pre-tax profits to 12.65 billion US dollars (£8.1 billion).

The company previously warned its profits would be at the low end of market expectations after an ovarian cancer drug called olaparib was held back for further development when tests revealed it was unlikely to prove effective. Elsewhere, the results of tests on drugs for patients with major depressive disorders were disappointing although research is still ongoing.

AstraZeneca took impairment charges of around 381.5 million US dollars (£246 million) in the final quarter of 2011 as a number of its potential new drugs fell through. Shares are 6% lower than their 2011 peak in May, amid fears that Astra has relatively few new drugs to replace its existing stable such as Nexium for heartburn and schizophrenia drug Seroquel, but have climbed back 20% from their year-low in August.

Oil giant Royal Dutch Shell saw earnings come under pressure in the final quarter of 2011 as unseasonably warm weather in Europe hit demand for gas. The Anglo-Dutch supermajor is expected to report profits of 5.1 billion US dollars (£3.3 billion), a 27% slide on the previous quarter but a 24% increase on the previous year.

The company is also expected to report a decline in production levels as it feels the impact of lower demand and a wide range of disposals, including assets in North America and Australia. Oil prices remained relatively flat over the quarter, with Brent crude in London selling at 110.2 US dollars a barrel, following a steep gain earlier in the year, driven by the turmoil in the Middle East and North Africa.

Meanwhile, the company's downstream operations, which include petrol forecourts, are forecast by some analysts to break-even as consumer finances come under mounting pressure.

Separately, strong growth in China, India, Indonesia and other emerging markets is set to shelter PG Tips-to-Magnum maker Unilever from the economic storm in western Europe. The household goods giant is expected to report on Thursday that volumes growth slowed to 1.2% in the final quarter of 2011, down from 1.9% in the previous three months.

The real weakness is in some of its southern Europe markets, while it has recently been growing market share in the UK even though sales of its ice cream brands, which include Ben & Jerry's and Wall's, were hit by poor weather in July. Its UK performance was boosted by the success of its extended range of Domestos Germ-Kill products.

The group is expected to post a rise in overall sales and bottom-line profits, which will further sour relations with staff who recently carried out the first ever strike, over plans to axe the company's final salary pension schemes. Martin Deboo, an analyst at Investec Securities, expects the group to report a 3% rise in full-year pre-tax profits to 6 billion euros (£5 billion), on sales up 5% to 46.5 billion euros (£38.8 billion).