Starbucks reports UK loss, pays no tax for 2012

Friday, June 28th, 2013 | Finance News

By Tom Bergin

LONDON (Reuters) - Starbucks, whose thin tax payments in Britain provoked a backlash against corporate tax avoidance when revealed by Reuters, paid no tax for the year to September 30, 2012.

The coffee giant's main UK subsidiary reported its 15th straight annual loss at its UK stores in accounts filed on Friday.

Reuters revealed in October that Starbucks reported consistent UK losses while telling investors the British unit was profitable and promoting managers of the unit within the group.

Friday's accounts showed a UK loss of 30 million pounds ($46 million), down from the 32 million pounds loss it reported for the previous year, helped by a 4 percent rise in turnover to 413 million pounds.

The company cited challenging economic conditions and a competitive UK coffee market, although the accounts show profits were also undermined by a royalty for the use of the Starbucks brand of 26 million pounds.

This is paid to an affiliate in the Netherlands, where Starbucks has negotiated what it said was a very low tax rate.

The UK unit also paid 2 million pounds in interest to affiliated companies, the accounts showed.

Following widespread criticism from politicians and the picketing of stores, Starbucks said it would pay or pre-pay around 10 million pounds a year in taxes in 2013 and 2014.

The company said it would not take tax deductions for certain intercompany payments such as the royalty fee, interest payments and the 25 percent mark up on coffee beans that is paid to a Swiss-based Starbucks coffee purchasing unit.

Starbucks recently paid 5 million pounds to the UK tax authority as the first installment of its 2013 tax bill, British media reported earlier this month.

Starbucks declined immediate comment.

($1 = 0.6593 British pounds)

(Reporting by Tom Bergin; Editing by Ruth Pitchford)

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No sign of BlackBerry turnaround in results, shares plunge

Friday, June 28th, 2013 | Finance News

By Euan Rocha and Alastair Sharp

TORONTO (Reuters) - BlackBerry's market capitalization plunged by more than 25 percent on Friday after the smartphone maker reported dismal quarterly results, prompting deeper investor skepticism of the company's long-promised turnaround.

BlackBerry, which has struggled to claw back market share from the likes of Apple Inc's iPhone, Samsung Electronics Co Ltd's Galaxy phones and other devices powered by Google Inc's Android operating system, reported a loss in the fiscal first quarter ended June 1, and said sales of its make-or-break new line of devices were softer than expected.

The company also said it will not make an operating profit in the current quarter.

BlackBerry shares were down 27.3 percent at $10.53 on the Nasdaq on Friday afternoon, touching levels last seen in November 2012, before the launch of the new BB10 range of smartphones.

"They're not the high-end provider anymore, they're not Apple, they're not the low-end provider, they're not Nokia, so they are in the middle and they do relatively low volumes," said Daniel Ernst, analyst at Hudson Square Research in New York.

"It's difficult to make great margins on that kind of volume - so I would say the outlook is quite negative them."

BlackBerry invented the concept of on-the-go email more than a decade ago with clunky little devices with a mini keyboard. The gadgets, which offered powerful security features, allowed the company to corner the lucrative market serving business and legal professionals as well as government workers.

But many in that market are now moving to other devices, leaving BlackBerry struggling to make its mark both at the top and the bottom of a competitive smartphone market.

BlackBerry said it shipped 6.8 million smartphones in the quarter, including about 2.7 million BB10 devices. This fell shy of market expectations of more than 3 million shipments for its new Z10 and Q10 smartphones. The first-quarter results and revenue figures also missed analyst estimates.

By comparison, Apple shipped 37.4 million iPhones in the March quarter, up from 35.1 million a year ago.

"I'm confident in the future of BlackBerry 10 but there's lots of work to do," Chief Executive Thorsten Heins conceded on a conference call. "This is a marathon. And with the financials that we have under our belt, we are ready to run that marathon."

On the bright side, BlackBerry's cash position rose to $3.1 billion as of June 1, up about $200 million from the final quarter of the last fiscal year. The company has no debt.

Waterloo, Ontario-based BlackBerry reported a net loss of $84 million, or 16 cents a share in the quarter. That compared with a year-ago loss of $518 million, or 99 cents a share.

Excluding one-time items, BlackBerry reported a loss from continuing operations of $67 million, or 13 cents a share, on revenue of $3.1 billion.

Analysts, on average, had expected a profit of 6 cents a share, on revenue of $3.36 billion, according to Thomson Reuters I/B/E/S Estimates.

But BlackBerry also reported steep decline in revenue from its high-margin service business, the monthly fees BlackBerry collects for providing data and security services to customers.

Those fees had been expected to fall. But the company said the decline was steeper than forecast, because of Venezuelan currency restrictions, which also hurt overall earnings by some 10 cents a share.

TOO LITTLE, TOO LATE

BlackBerry launched two new BB10 smartphones this year, the touch screen Z10 device and then the Q10, which includes the mini keyboard many BlackBerry users still covet, as well as a less expensive Q5 keyboard device targeted at emerging markets.

But the Z10 only hit store shelves in the crucial U.S. market in late March, while the Q10 device reached the United States only after the quarter had ended.

BlackBerry said it plans to unveil one more lower-priced phone running on its old BlackBerry 7 platform later this year, as it tries to keep market share in price-sensitive emerging markets that are flooded with cheap Android devices.

The company forecast an operating loss in the current quarter, as it boosts marketing spending on its new devices.

BlackBerry did not provide a detailed outlook for the rest of the year, saying the smartphone market remained highly competitive, making it difficult to estimate units, revenue and levels of profitability.

It also said it would not supply subscriber numbers going forward, as the changes in its revenue model make the numbers less relevant than in the past.

(Editing by Janet Guttsman, Frank McGurty and Matthew Lewis)

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How Gazprom’s $1 trillion dream has fallen apart

Friday, June 28th, 2013 | Finance News

By Vladimir Soldatkin

MOSCOW (Reuters) - Zoya Danilina, who owns some 700 shares in Gazprom , says investors don't have to look far to understand that Russia's most powerful company has lost its way.

Danilina remembers when her shares were worth over 300 roubles each. Now they fetch about 100 roubles.

"There have been much better days, when tables were served with black and red caviar," she said on the sidelines of Gazprom's annual general meeting in Moscow on Friday, looking at a plate of boiled buckwheat, a popular staple food in Russia.

In the caviar era, Gazprom head Alexei Miller, a close ally of President Vladimir Putin, was overseeing a company with the world's third-largest market value at $360 billion. In 2007, he promised to boost it to $1 billion.

Fast forward several years and Gazprom, still the world's largest gas producer and holder of 15 percent of global gas reserves, is worth $77 billion and could fall further as it faces a series of setbacks.

The biggest blow came from a shale gas revolution that has unlocked vast reserves in the United States.

U.S. prices have crashed, closing America as a prospective market for Gazprom, diverting cheaper liquefied natural gas (LNG) cargoes not needed in the United States to Europe, undermining Gazprom's position in its core market.

Europe, tied to Gazprom by a Soviet-built pipeline network, has balked at its contracts that tie gas prices to more expensive oil.

Last year, Miller was forced to offer billions of dollars in what Gazprom described as "rebates" to European buyers.

On Thursday, Germany's RWE said it won an arbitration case against Gazprom, which further loosened the price link to oil and raised the prospect of more price concessions.

Gazprom expects its 2013 earnings to fall by 10 percent, marking a second yearly decline.

The stock market now values Gazprom - the world's third-biggest company by earnings behind ExxonMobil and Apple - at only two times its 2012 earnings of $38 billion. That makes it the cheapest large-cap stock on an already cheap Russian market.

LNG, HOME PRICE SETBACKS

Investors could possibly forgive those setbacks if they were confident Gazprom could expand in the fast growing global LNG markets, while charging rising prices at home.

"Our goal is to control around 15 percent of the global market for liquefied natural gas," Miller, 51, told the annual general meeting on Friday.

But such hopes were dealt heavy blows over the past month.

Putin signaled last week the gradual end of Gazprom's monopoly on exports of LNG and opened the way for rivals Novatek and Rosneft to compete for huge new Asian markets.

"We offer to lower restrictions gradually on liquefied natural gas exports," Putin said in a speech at an economic forum in St Petersburg, both his and Miller's hometown.

Putin also said that monopolies would be able to raise prices only in line with inflation, reducing hopes for much higher returns on the domestic market.

Gazprom's domestic industrial customers pay $114 per 1,000 cubic meters - little more than half of the $201 it receives for exports after being adjusted for transportation and duties.

"Investors are structurally underweight Gazprom as they do not believe in significant change at the company," said Kingsmill Bond, chief strategist at Sberbank Investment Research in Moscow.

POLITICAL TOOL

Under Miller, hired by Putin in 2001, Gazprom often served as a Kremlin political tool, as described by EU officials.

"The Kremlin has decided that Gazprom is part of Russia's national security and geopolitics - not a commercial company," said Chris Weafer, founder of Macro Advisory, a Russia-focused consultancy.

"We are going back to Soviet days, when Gazprom was a government ministry. The market is valuing it like a ministry."

Using Gazprom as a weapon has proved to be a double-edged sword, poisoning relations with Ukraine, the transit route for most of Gazprom's Europe-bound gas, after several pricing disputes, which cut gas flows to Europe during several winters.

Gazprom is now investing billions of dollars in new export routes to circumvent is ex-Soviet neighbor - Nord Stream to Germany and the still-to-be built South Stream to Italy.

Investors fear those projects may never pay out.

Finally, Gazprom has failed to sign a supply deal with China, the world's largest energy market, despite first signing a memorandum of understanding as long ago as 2006.

Should the deal be signed before the end of the year, it may still not be enough to revive the appetite of investors, who have long criticized Gazprom's for overspending.

"The mega-projects will guarantee rapid growth in costs, while future revenues are absolutely uncertain," said Mikhail Korchemkin of consultancy East European Gas Analysis.

(Additional reporting by Denis Pinchuk and Douglas Busvine; Editing by Dmitry Zhdannikov and Jane Baird)

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