Business and Finance

Procter & Gamble Co posted a quarterly profit well ahead of analysts’ forecasts and said it has modestly higher expectations for growth in the industry even as consumers continue to remain cautious.

P&G’s pantry of products have been pressured for months, as shoppers try cheaper brands than Pampers and Tide, and eschew indulgences such as Hugo Boss cologne and SK-II face cream.

The world’s largest household products maker earned $3.31 billion, or $1.06 per share, in the fiscal first quarter that ended on September 30, compared with a profit of $3.35 billion, or $1.03 per share, a year earlier best payday advance.

Analysts, on average, expected P&G to earn 99 cents per share, according to Thomson Reuters I/B/E/S.

Net sales fell 6 percent to $19.8 billion, with declines in every category ranging from beauty to snacks and pet care.

Organic sales, which exclude the impact of currency fluctuations, acquisitions and divestitures, rose 2 percent. P&G had predicted such sales would be flat to down 3 percent.

(Reporting by Jessica Wohl, editing by Maureen Bavdek)

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Qwest Communications International Inc posted a higher-than-expected quarterly profit and boosted its full-year outlook as it planned more cut costs, sending its shares up 3.4 percent.

While the telephone operator’s quarterly revenue fell 9.6 percent, slightly steeper than analysts had expected, investors cheered Qwest’s ability to rein in costs.

“They’re shrinking their way to greatness here,” said Stifel Nicolaus analyst Chris King. “It continues to be a cost-cutting story.”

Like bigger phone companies AT&T Inc and Verizon Communications Inc, Qwest has been losing home phone customers to cable rivals and to wireless, as some consumers forsake landlines to depend entirely on cellphones.

Qwest reported a third-quarter net profit of $136 million, or 8 cents per share, compared with $145 million, or 8 cents per share, a year earlier.

Excluding unusual items, earnings per share would have been 9 cents compared with the average analyst estimate of 7 cents, according to Thomson Reuters I/B/E/S.

In the quarter, Qwest’s cost of sales fell to $932 million from $1.23 billion a year ago.

Revenue fell to $3.05 billion, compared to the average Street estimate of $3.07 billion, according to Thomson Reuters I/B/E/S. The company said “wireless substitution, increased unemployment, low business formation and soft housing trends” in its 14-state operating region cut into revenue faxless payday advance.

However, Qwest forecast full-year adjusted earnings before interest, tax, depreciation and amortization to be at the upper end of its previous target of $4.25 billion to $4.4 billion.

Qwest also cut its capital spending target for the year to $1.6 billion or lower, from its previous budget of $1.7 billion or lower, and raised its estimate for full-year adjusted free cash flow to a range of $1.6 billion to $1.7 billion, from the previous target of $1.5 billion to $1.6 billion.

“Qwest’s numbers were generally in line and slightly better on the outlook,” said Piper Jaffray analyst Christopher Larsen. “The name of the game for Qwest this quarter and for the rest of the year is strong cost cutting.”

Total access lines fell about 11 percent in the quarter, with the biggest decline coming in its consumer business, Qwest said.

“We are optimistic about our prospects as the economy begins to improve in the quarters ahead,” Qwest Chief Executive Edward Mueller said in the earnings statement.

Qwest shares rose 3.4 percent, or 12 cents, in premarket trade to $3.57.

(Reporting by Sinead Carew; Editing by Lisa Von Ahn and Derek Caney)

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Merrill Lynch veteran Robert McCann, the new head of UBS’s loss-making U.S. wealth management unit, said he had no plans to sell the business that was battered by a high-profile tax row.

McCann, who led the wealth management business at Merrill Lynch until early this year, took up his $850,000-a-year post at the Swiss bank on Tuesday and vowed to rebuild trust at its American unit.

He had been courted by UBS Chief Executive Oswald Gruebel since July and sued his former employer to enable him to join a rival.

The U.S. wealth division of UBS was hit by 5.8 billion Swiss francs ($5.8 billion) of client withdrawals in the second quarter of this year, as the bank fought a bruising tax case with U.S. authorities, and analysts say it is still suffering.

That has prompted some to speculate that UBS might eventually want to sell the business - a proposition that McCann rejected.

“I had to go to court against two of my former employers to be able…to work with UBS,” McCann said. “I would have not done that if the whole goal was to sell the company.”

McCann, said he would unveil his new strategy for the unit in the first quarter of 2010 but already expected to make selective cost cuts. His aim was to have a more nimble and more cost-efficient structure, he said.

The 51-year-old executive said he would take a performance-related bonus that his base salary would be

$850,000.

During a court hearing in his case against Bank of America, which bought Merrill Lynch, McCann said he had to give up a bonus that could have topped $5 million.

Speaking from a hotel room in mid-town Manhattan just before he took up the new job, McCann told reporters he was “excited” at the prospect of joining the Swiss wealth management giant and that he got on very well with Gruebel from the start.

“We immediately established a chemistry between the two of us,” he told reporters.

The new U.S. wealth chief will report to Gruebel and be a member of UBS’ executive board. McCann said his predecessor, Marten Hoekstra, is leaving UBS.

Analysts welcomed McCann’s appointment, which had been widely expected.

“We believe McCann has the managerial capacity needed to revise and restructure the U.S. wealth management Americas business to become more profitable,” said Vontobel analyst Teresa Nielsen, adding it would still be possible to spin off the unit. 

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South Korea’s economy expanded at the fastest pace in seven years, stoking speculation the central bank will raise borrowing costs for the first time since the collapse of Lehman Brothers Holdings Inc.

Gross domestic product increased 2.9 percent in the third quarter from three months earlier, when it grew 2.6 percent, the central bank said in Seoul today. That was the fastest pace since the first quarter of 2002 and compared with a median estimate of 1.9 percent growth in a Bloomberg News survey. From a year earlier, GDP rose 0.6 percent.

South Korea has led a regional rebound with China and Singapore as companies including Hyundai Motor Co. and Samsung Electronics Co. reported surging profits, boosted by exports. South Korea may become the second Group of 20 nation after Australia to raise its benchmark interest rate since the height of the global financial crisis, BNP Paribas SA said this month.

“The bigger-than-expected GDP number definitely adds more weight for an interest-rate increase,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul, who had previously forecast the central bank to raise rates early in 2010. “The number today made a clear basis for the Bank of Korea to justify a rate increase.”

Record Profit

Hyundai, South Korea’s largest automaker, posted record third-quarter net income of 979.2 billion won ($827 million). Hynix Semiconductor Inc., the world’s second-largest computer- memory chipmaker, on Oct. 23 reported its first quarterly profit in two years on higher prices.

The nation’s Kospi stock index climbed 1.4 percent at 11 a.m. in Seoul, taking the year’s gains to 48 percent. The won was little changed against the U.S. dollar at 1,181.55, having risen 20 percent in the past 12 months.

Policy makers around the world are debating how quickly to withdraw monetary and fiscal stimulus measures to secure economic recoveries while avoiding an acceleration in inflation.

Bank of Japan policy makers this week are forecast to consider an announcement ending their purchases of corporate bonds in December, and economists including those at Credit Suisse Group AG predict China’s central bank will begin restraining credit growth in that country by year-end.

The Federal Reserve has already announced a phase-out of some of its emergency programs, while retaining a commitment to keep interest rates near zero for an “extended period.”

Health of Economy

South Korea’s government says an unwinding of expansionary policies would be “premature,” while central bank Governor Lee Seong Tae said last week keeping rates at a record-low for too long isn’t healthy for the economy.

Low interest rates have spurred consumer borrowing, with bank lending to households expanding for a seventh straight month in August before falling in September.

“I don’t think keeping rates too low for too long is good,” Lee told lawmakers at a parliamentary audit on Oct. 23. He said earlier this month a rate increase will be “more than” the usual 25-basis-point move.

South Korea’s exports gained 5.1 percent in the third quarter from the previous three months, when they rose 14.7 percent, today’s report showed. Corporate investment in factories and equipment climbed 8.9 percent, compared with a 10.1 percent in the second quarter.

Private Consumption

Private consumption advanced 1.4 percent from the second quarter. Government spending fell 0.8 percent and construction investment dropped 2.1 percent.

South Korea’s rebound comes as Singapore raised its 2009 economic forecast after gross domestic product expanded for a second consecutive quarter in the three months through September. China’s economy expanded at 8.9 percent in the third quarter, the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession.

Sales at South Korea’s major department stores rose in September for a seventh straight month and exports fell at the slowest pace in 11 months in September. Manufacturers’ confidence climbed to the highest level in two years, earlier reports showed.

Kia Motors Corp., South Korea’s second-biggest automaker, posted record profit in the three months to Sept. 30 as global stimulus measures boosted demand for cars. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, said earlier this month operating profit more than doubled to as high as 4.3 trillion won in the same period.

The central bank and the government have upgraded their economic forecasts for this year. Finance Minister Yoon Jeung Hyun said early this month the economy is likely to contract less than 1 percent in 2009 and Governor Lee says he shares that view.

To prevent the economy from sliding into a recession, the central bank cut the benchmark interest rate by 3.25 percentage points between October and February to a record-low 2 percent and the government boosted spending.

The Bank of Korea will meet on Nov. 12 to review borrowing costs. South Korea hasn’t had a rate rise since August 2008.

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Russell Read, the former chief investment officer of Calpers, the largest pension fund in the United States, knows his trees.

Read owned a 500-acre Maine forest landscaped with the same mix of maples and oaks the colonists would have seen when they first arrived on the shores of America.

Bob Carlson, who was a board member at the California Public Employees’ Retirement System for nearly half its history, recalls asking about commodities like timber during Read’s interview for the position at Calpers.

“His eyes lit up,” said Carlson. “That’s what I wanted.”

Read got the job in June 2006 at the age of 42 and quickly set out to turn Calpers into a modern, aggressive investor.

At the time, esoteric new markets were racking up huge, almost unimaginable gains. He and the board were in agreement — Calpers should be part of it.

“I think the push for commodities and infrastructure and forestry and some of those other things was kind of a movement afoot,” said Tony Oliveira, Supervisor of California’s Kings County and one of the Calpers board members who helped choose the new investment chief.

A former senior executive at Deutsche Bank, who had once taught risk management, Read seemed to be the right person for the times.

Despite Read’s background and the ever riskier bets he was making, Calpers still struggled with risk management. Carlson, who describes Read’s risk management plans as “brilliant,” said that Read left the fund before he could put them in place.

Red flags about the growing riskiness of Calpers’ portfolio also went unheeded. A consultant warned Read in December 2007 about the size of the fund’s commitment to private equity, but the push went on.

For a while, Calpers looked smart under Read, hitting a peak value of $260 billion in October 2007 as it borrowed money to boost returns and moved into sophisticated collateralized debt obligations, land for residential real estate, as well as commodities.

But as the financial crisis unfolded last year, Calpers lost $100 billion, more than a third of its value, tumbling to $160 billion a year and a half after the high. The other thing it lost was its gold plated reputation, founded on steady returns, pioneering new investments and policing public companies as an activist shareholder. Smaller rivals who were more conservative lost much less.

Calpers has not retreated, though — just the opposite, in fact. As the entire pension industry questions what level of risk it should be taking in the aftermath of last year’s financial meltdown, Calpers in June increased its target for venture capital and private equity — what the fund’s advisor itself called the highest risk, highest reward bet — to 14 percent of overall investments, up from 10 percent.

Chief Investment Officer Joseph Dear, who declined to comment for this story, in a published internal interview called the changes “relatively minor”. “We looked at the long term return assumption and basically said we don’t see a significant reason to change,” he said.

“Calpers has the reputation of being the gold standard of pension investing, largely by the virtue of its size. But the reality is very different,” said Edward Siedle of Benchmark Financial Services, a pension fund investigator and investment consultant. 

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Many of the world’s wealthiest investors remain traumatized by the losses they sustained during the financial crisis and are clutching on to safe, low-yielding assets rather than taking any risks.

Wealth managers say that even after a 75 percent rise in world stocks since March, a lot of clients’ money has yet to move. Investors have, in the words of one strategist, become “structurally risk averse.”

That is prompting investment managers to seek creative ways to unleash funds held in safe cash positions, and may be the key to sustaining this year’s rally in stocks and riskier assets.

Managers are enticing clients with guarantees of investment capital or by offering other rewards to make losses less likely.

It is a phenomenon similar to that seen in 2002-03 when investors were reeling from the bursting of the internet stocks bubble. So some may even have been twice burned.

How much is tied up is difficult to ascertain. Fund tracker EPFR Global reckons that some 94 percent of the net flows to U.S. money market funds it tracked in 2008 has already exited.

But going further back, it says U.S. money funds that report weekly took in a net $191 billion in 2007 as a whole. That suggests that the cash unwinding of the past two years is at most only two thirds through.

“There is a lot of juice,” said Michael Dicks, head of research and investment strategy at Barclays Wealth no fax no teletrack payday loan. “Even if they went half way from where they are now to where they were pre-crisis, that would produce a significant amount of momentum.”

PROTECT ME

Today’s problem for investment managers — who, of course, get their fees from clients making money and moving around assets — is that the stock market crash was so harsh that many investors are almost terminally gun-shy.

World equities did, after all, fall some 60 percent from peak to trough.

“Clients are still nervous — less so than they were a year ago but (they) are only getting back into markets very selectively,” said Phil Cutts, director at RBC Wealth management.

To combat this and the ultra-low rates paid on cash accounts, investors are being offered products that provide some form of protection or at least a sweetener to get them to dip back into risk.

Cutts’ RBC, for example, is touting a capital-guaranteed BRICs currency fund. Principal is returned in full if the Brazil, Russia, India and China basket — divided equally between real, ruble, rupee and yuan — underperforms the dollar.

But if it rises, investors get the principal plus the return on the basket. RBC then adds an additional 20 percent of the return. 

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Coca-Cola Co reported a third-quarter profit that topped Wall Street estimates by a penny, helped by higher sales volume and cost cuts.

The world’s largest soft drink maker said on Tuesday that net income rose slightly to $1.90 billion, or 81 cents per share, from $1.89 billion, or 81 cents per share, a year earlier.

Excluding a charge, Coca-Cola earned 82 cents per share. Analysts on average were expecting 81 cents, excluding items, according to Thomson Reuters I/B/E/S.

Net operating revenue fell 4 percent to $8.04 billion.

Sales by volume rose 2 percent.

Coke’s broad geographic footprint, especially in developing markets such as India and China, is helping it weather a slowdown in the United States.

The company’s shares were down 0.4 percent at $54.60 in trading before the market opened.

(Reporting by Martinne Geller; Editing by Lisa Von Ahn)

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The dominance enjoyed by Amazon.com Inc’s Kindle faces its first major test this holiday season, but industry experts say only a real technological leap will pose a threat.

Barnes & Noble Inc is expected to unveil its own branded electronic book reader on Tuesday with a hybrid model that incorporates a reading screen similar to the Kindle’s white and gray display, with a second touch-screen display that makes browsing easier.

The bookseller’s main advantage could be in its physical stores where users will be able to test out the device. A disadvantage may be its as-yet unknown price, which some say will be higher than the Kindle’s recently lowered $259.

Barnes & Noble has not confirmed its e-reader plans.

But the market — arguably built by Amazon — is getting crowded, with e-readers in the pipeline from a spin-off of Royal Philips Electronics called iRex Technologies, Taiwan’s Asustek, Plastic Logic and a Hearst-backed venture called FirstPaper. They would share the space with Interead’s “Cool-er,” the Cybook OPUS from Bookeen and others.

“It takes one person to prove this is a very viable business model and as soon as that is proven you have a lot of people … who jump in,” said Mukul Krishna, global director for digital media at consultancy Frost & Sullivan, adding that the best time to enter the market is ahead of the holidays.

“Amazon has done exactly that with the Kindle. They’ve caught everyone’s imagination,” Krishna said.

E-reader hype has hit a peak in the past month, as Amazon rolled out the Kindle internationally and the world’s biggest Web players and publishers began to mobilize.

Google Inc unveiled plans for an online e-book store, while News Corp’s Rupert Murdoch visited Japan and South Korea to size up e-reader technology. But Amazon is expected to retain its first-mover advantage.

“Amazon really controls the digital shelves right now,” said Mark Coker, founder of e-book publisher Smashwords. He cited the Kindle’s locked-in customers, who must buy e-books exclusively from Amazon that can then only be read on their Kindles or on Apple Inc’s iPhone or iPod Touch.

“I think everyone realizes Amazon got it completely right. They are way ahead of the curve,” he said.

Some 3 million e-readers are expected to be sold in the United States this year, with sales doubling in 2010, according to Forrester Research.

Amazon does not provide data on Kindle sales, but investors will be eager to learn of its progress when the online retailer releases results on Thursday.

DIGITALLY SHARING

Analysts say the larger — but not unsurmountable — threat to Amazon could come from demand for an open system in which e-books bought from various sources can be shared on multiple devices. 

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Citigroup Inc posted a quarterly per-share loss as it suffered $8 billion of credit losses, raising questions about when the bank can return to sustained profitability.

The loss per share was narrower than analysts expected but still underlined how far the bank has to go to catch up with stronger rivals like JPMorgan Chase & Co. Citigroup has received $45 billion of capital from the U.S. government and is now one-third owned by taxpayers, while JPMorgan has paid back the government bailout it received last year.

Citigroup’s shares were down 6 percent to $4.70 in afternoon trade.

“On first blush, this is not particularly optimistic,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. “They did beat on earnings and revenue, but the $8 billion credit losses … is a reminder that we are in a weak economic environment.”

The bank did post net income of $101 million, but it reported a $529 million loss from continuing operations before taxes. The ultimate bottom line for shareholders was negative, including one-time losses from converting preferred shares into common stock, and tax benefits.

Results were further muddied by accounting losses that resulted from the bank’s bonds performing better.

“It can give you brain damage trying to figure this out,” said Walter Todd, portfolio manager at Greenwood Capital Management in Greenwood, South Carolina. “With all the other opportunities out there in the financial space, I don’t know why you’d spend the time to try to understand what the heck’s going on here, unless you can take a lot of risk.”

Citigroup set aside less money to cover bad loans than it did in last year’s third quarter, but that may make sense because the bank’s assets also declined from the year-ago period, and net credit losses declined from the second quarter. The bank said it has enough money set aside to cover losses in consumers loans for the next 13.3 months, the highest level in at least two years.

Analysts have struggled to nail down when Citigroup will start posting profits from its main businesses. Some have forecast a return to “core profitability” as soon as early next year.

The bank’s inability to post earnings from its main businesses has made some analysts impatient. But others argue that by the time the bank is clearly profitable, its shares will no longer be cheap. The shares trade at about three-quarters of their book value, while competitors trade above their book value.

A key source of uncertainty for Citigroup is the performance of its U.S. credit card and mortgage loans, which have suffered and may be stabilizing.

“Clearly, U.S. consumer credit remains the number one issue affecting our near-term results,” Chief Executive Vikram Pandit said on a conference call with analysts.

Citigroup has posted more than $100 billion of writedowns and consumer credit losses since the credit crisis began. It posted more than $37 billion of net losses between the fourth quarter of 2007 and the fourth quarter of 2008.

In the third quarter, it posted a net loss to shareholders of $3.2 billion, or 27 cents a share, compared with a loss of $2.9 billion, or 61 cents a share, a year earlier.

Analysts’ average forecast was a loss to shareholders of 38 cents a share. 

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Abbott Laboratories Inc said its third-quarter profit rose 37 percent on strong demand for its Humira arthritis drug and nutritional products, as well as gains from a settlement with Medtronic Inc.

The profit reported on Wednesday topped Wall Street forecasts, and revenue was in line with targets, a relief for investors on the heels of a disappointing sales report from rival diversified healthcare company Johnson & Johnson

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Shares of Abbott rose 3 percent as the company also nudged up its full-year profit forecast.

“It was a very solid quarter, and the most important thing is that Humira relieved concerns among investors that it might stall, from its previous rapid growth,” said Morningstar analyst Damien Conover.

Conover said Humira’s continued growth probably gave Abbott confidence to raise its 2009 profit forecast and that other aspects of the earnings report were much as expected.

Abbott said it had earned $1.48 billion, or 95 cents per share, up from $1.09 billion, or 69 cents per share, a year earlier. The results included a gain of $287 million from a previously announced settlement with Medtronic over heart stent technology.

Excluding special items, the third-largest U.S. healthcare company by market value earned 92 cents per share. On that basis, analysts on average expected 90 cents, according to Thomson Reuters I/B/E/S.

Sales rose 3.5 percent to $7.76 billion, in line with Wall Street expectations. Revenue would have risen 8.4 percent if not for the stronger dollar, which lowers the value of overseas sales.

Global prescription drug sales fell 1.6 percent to $4.1 billion, hurt by new generic forms of Abbott’s Depakote anti-seizure medicine. But that represents an improvement over the 4.3 percent decline seen in the second quarter.

Humira sales rose 24 percent to $1.49 billion, about $30 million ahead of Wall Street expectations, according to the average estimate of five analysts polled by Thomson Reuters I/B/E/S.

Sales of Abbott’s drug-coated stents, including Xience, rose 10 percent to about $330 million in the quarter. Company officials predicted Xience, already the market leader, will capture greater share in coming months due to new data showing advantages over rival stents used to prop open heart arteries that have been cleared of plaque.

Abbott’s nutritional business continued to show strength, with sales rising 9.8 percent to $1.39 billion despite the stronger dollar. The company, which is steadily expanding this segment, announced in July it would pay $130 million for the nutrition businesses of Wockhardt Ltd, whose brands are sold in India.

The Wockhardt transaction is among five significant deals for Abbott this year, as the company aims to lessen its dependence on Humira for future earnings growth.

“The nutritionals business continues to do very well,” said Conover. He speculated that Abbott was trying to “entrench” those products in fast-growing emerging markets and would later move aggressively to introduce lucrative prescription drugs there. 

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