Financial life in a big town

January 6, 2012

German industrial orders down sharply in November

Filed under: Uncategorized, lenders — Tags: , , , — Silver @ 3:52 pm

Industrial orders in Germany dropped sharply in November as demand from abroad dropped _ nearly erasing a strong gain from the previous month.

Orders were down 4.8 percent compared to the previous month, the Economy Ministry reported Friday. In October, orders rose 5 percent _ a figure that was revised downward from the initial reading of 5.2 percent.

The decline was the largest monthly drop since January 2009 but UniCredit economist Andreas Rees said it was less a “harbinger of a nasty recession” than giving back some ground after October’s “tremendous rise.”

“There is no reason to get overly concerned about the state of the German economy, or even to become panicky,” Rees said. “As a matter of fact, exactly the opposite is true for German industrial companies as indicated by forward-looking sentiment indicators in the last few weeks overnight pay day loans.”

According to the report, foreign orders were down 7.8 percent on the month in November while orders from inside Germany _ Europe’s biggest economy _ declined 1.1 percent.

The sharpest month-on-month drop was in orders for investment goods such as factory machinery, which fell 6.5 percent.

On a less volatile quarter-on-quarter basis, the ministry says figures so far show orders in 2011’s final three months were “slightly under” the level of the third quarter.

Source

January 5, 2012

Americans bought more cars and trucks last year.

Filed under: Business, online — Tags: , , , — Silver @ 2:16 am

American bought more cars and trucks last year, spurred by easier credit, an improved economy and a desire to replace the aging vehicles that got them through the Great Recession.

Sales rose sharply for Detroit’s three carmakers and for Japan’s Nissan in 2011, aided by a surge in November and December. Analysts expect that momentum to continue into 2012.

Low interest rates, looser credit standards and pent-up demand are driving demand. The average age of a car on U.S. roads is the oldest ever, closing in on 11 years. Americans want to trade in those older vehicles now that a tentative recovery has begun and they’re feeling a little more secure about jobs and finances.

Buyers also were drawn out by an array of high-quality small cars with nice, roomy interiors and more features than in the past. That made it easier to downsize from bigger cars amid high gas prices. Pickups also sold well as business began to replace the trucks they need to haul equipment.

Those trends were good for the industry, which needs sales to keep growing after a scary drop in 2009. Healthy sales are also good for the economy, which benefits from jobs created by carmakers and spending by buyers.

After final figures are tallied late Wednesday, U.S. auto sales should rise to around 12.7 million for 2011. That’s a 10 percent jump from 2010 and 22 percent from 2009, when the U.S. auto industry and the financial system were in peril. Sales are almost certain to rise again in 2012, perhaps as high as 13.8 million, marking the third straight year of growth.

“Over the course of the fourth quarter of 2011, clear signs emerged that U.S. consumers are more confident and that other underpinnings of our economy are either stable or slowly improving,” said Don Johnson, GM’s U.S. sales chief.

Chrysler led the 2011 sales gains with a 26 percent increase, followed by Nissan at 15 percent, GM at 13 percent and Ford at 11 percent, the companies reported Wednesday.

For December, Chrysler sales surged 37 percent from a year earlier on strong demand for the Jeep Wrangler and the Chrysler 200 sedan. GM was up 5 percent for the month, aided by the Chevrolet Cruze compact and pickup sales. Ford sales rose 10 percent, led by the new Explorer SUV. Nissan sales rose nearly 8 percent for December.

Chrysler Group LLC’s strong showing for December capped a remarkable turnaround under its new Italian ownership. And it’s expected to jump ahead of Honda as the No. 4 U.S. automaker in 2011.

Chrysler and GM nearly ran out of cash in 2009 and needed government help and a trip through bankruptcy protection to survive.

Chrysler, now majority owned by Fiat SpA, sold 1.37 million vehicles last year, about 284,000 more than in 2010. It has introduced 16 new or revamped models in the past two years, vehicles that have fueled its recovery.

Sergio Marchionne, CEO of Chrysler and Fiat SpA, is predicting a net profit for 2011 of $600 million.

“Over the past 12 months, we successfully changed the conversation from Chrysler’s survival to products and service that consumers expect and want from a great American automaker,” Marchionne said in an e-mail to employees.

Nissan sold just over one million cars and trucks last year, its best calendar year ever. The company said it sold 944,000 Nissans and more than 98,000 of its Infiniti luxury cars and SUVs. Previously, 2007 had been the company’s best year.

Source

January 3, 2012

Greece: No second bailout, no euro

Filed under: Australia, Mortgage — Tags: , , , — Silver @ 10:28 am

Greece’s government warned Tuesday that the debt-crippled country will have to ditch the euro if it fails to finalize a second, euro130 billion ($169 billion) international bailout.

Spokesman Pantelis Kapsis said negotiations in the next three or four months with international debt monitors will “determine everything,” including whether Greece escapes a disastrous bankruptcy.

Greece is being kept afloat by a first, euro110 billion ($142 billion) international bailout agreed in May 2010, after investors shocked by the country’s huge budget deficit and debt mountain demanded sky-high interest rates to continue buying Greek bonds.

An additional bailout was agreed in October, when it became clear that the first batch of funds would not suffice, but that deal has yet to be finalized.

Sorting out the details of the bailout, which also foresees a euro100 billion writedown of Greece’s privately held debt, is the main task of the coalition government headed by former central banker Lucas Papademos, whose short mandate is expected to expire in early April.

“This famous loan agreement must be signed, otherwise we are outside the markets, out of the euro and things will become much worse,” Kapsis told private Skai TV.

In return for its first batch of rescue loans from its European partners and the International Monetary Fund, Greece imposed deeply resented austerity measures to contain its budget deficit _ set to hit at least 9 percent of GDP last year despite repeated spending cuts and tax hikes.

Kapsis said further cutbacks, possibly including new taxes, might be required to address a revenue shortfall,

“We will see what the shortfall is and it is very likely that measures will be required,” he said. “I also don’t believe it is easy to impose new taxes, but what does cutting spending mean? To close down the public sector?”

“There is no easy solution,” Kapsis said.

The details are expected to be determined during talks later this month with debt inspectors from the EU, the European Central bank and the IMF, who will determine whether the country receives its next loan installment.

“We can’t take (approval of the next installment) for granted,” Kapsis warned.

Source

January 1, 2012

Cameron Pledges Action on Finance-Industry Pay - Bloomberg

Filed under: economics, online — Tags: , , , — Silver @ 8:28 pm

U.K. Prime Minister David Cameron pledged more action to deal with

December 30, 2011

Stocks rebound: Dow up 136 points, S&P back in black

Filed under: legal, stocks — Tags: , , , — Silver @ 6:48 pm

U.S. stocks rose Thursday in a thinly-traded session as investors focused on signs of strength in the economy before calling it a year.

The Dow Jones industrial average () rose 136 points, or 1.1%, to end at 12,287. The S&P 500 () added 13 points, or 1.1%, to 1,263. The Nasdaq () gained 24 points, or 0.9%, to 2,614.

Thursday’s rebound put the S&P 500 back on track for a modest 0.4% gain in 2011, after the broad market index fell sharply Wednesday. The Dow is currently up 6.1% for the year, while the Nasdaq is set for a 1.5% loss.

Stocks were supported by reports on housing, manufacturing and employment that raised hopes about the U.S. economy.

"Today’s last round of major U.S. reports before the weekend New Year’s celebration provided a decidedly positive spin to the outlook," wrote Michael Englund, chief economist at Action Economics, in a note to clients.

Traders said low volume, typical of the holiday week, has led to more pronounced swings, and some of the moves are coming from year-end portfolio rebalancing rather than convictions over the trajectory of the market or particular stocks.

Are you a markets whiz?

"We expect light trading through today and tomorrow, and any noise can create wild swings," said Doug Cote, chief market strategist at ING Investment Management.

Looking ahead, many investors expect stocks to move higher in the first few months of 2012.

The U.S. economy has shown signs of improvement recently, with economists forecasting a 3.3% increase in gross domestic product in the final three months of 2011. In addition, corporate profits are expected to rise in the fourth quarter, continuing an 11-month streak.

But the outlook for next year remains clouded by the debt crisis in Europe, which continues to weigh on demand for risk assets such as stocks.

On Thursday, an auction of Italian 10-year bonds, which have seen yields continue to flirt with the 7% danger zone, provided muted results. While yields were reported below prior levels, demand was short.

The euro fell to a 17-month low and analysts warn the currency could fall even further in 2012.

"Europe is a powder keg and could explode at any time, and likely will when we are the most complacent," said Keith Springer, president of Springer Financial Advisors in Sacramento cash advance america.

Economy: Jobless claims rose 15,000 to 381,000 in the latest week, according to the U.S. Labor Department. Analysts surveyed by Briefing.com had expected 368,000 claims.

But the figure remained below 400,000, giving investors hope that the labor market will strengthen in the new year.

The National Association of Realtors index of pending home sales, which measures signed sales contracts but not closed sales, rose 4% to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October.

Economist had expected the a 0.6% increase in pending home sales.

The report boosted shares of homebuilders, including Pulte (, Fortune 500), Masco (, Fortune 500), Lennar () and DR Horton (, Fortune 500).

An index of manufacturing activity in the Chicago area eased slightly in December but held near a 7-month high, according to the Institute for Supply Management.

Companies: Amazon (, Fortune 500) eased after analysts at Goldman Sachs (, Fortune 500) suggested that the online retailer’s sales growth for the holiday period may fall short of expectations.

Shares of Yahoo (, Fortune 500) gained 2.7% after reports that China’s Alibaba Group has hired a lobbying firm to prepare a bid for Yahoo.

BP () edged higher despite reports that employees could face criminal charges in relation to last year’s Gulf of Mexico oil spill.

World markets: European stocks closed higher. Britain’s FTSE 100 () added 0.8%, the DAX () in Germany rose 0.9% and France’s CAC 40 () rose 1.1%.

Asian markets ended mixed. The Shanghai Composite () edged up 0.2%, the Hang Seng () in Hong Kong fell 0.7% and Japan’s Nikkei () lost 0.3%.

Betting on the dollar in 2012

Currencies and commodities: The dollar gained strength against the euro and the British pound but fell versus the Japanese yen.

Oil for February delivery rose 31 cents to $99.05 a barrel.

Gold futures for February delivery fell $23.20 to $1,540.90 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, with the yield easing to 1.89% from late Wednesday.  

Source

December 29, 2011

Swiss Skiing Gets Cheaper as Resorts Cut Prices - Bloomberg

Filed under: legal, term — Tags: , , , — Silver @ 4:52 am

Four years after Bruno Prior paid less than a dollar for an unprofitable ski resort in the Swiss Alps, the strength of the country

December 27, 2011

Consumer confidence index surges in December

Filed under: Banks, money — Tags: , , , — Silver @ 4:16 pm

Americans are gaining faith that the economy is on the upswing. The monthly Consumer Confidence Index surged to the highest level since April and is approaching a post-recession peak.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose almost 10 points to 64.5, up from a revised 55.2 in November. Analysts had expected 59. The level is close to the post-recession peak of 72, which the index reached in February.

The surge in December builds on another big increase in November, when the index rose almost 15 points from the month before.

One component of the index that measures how shoppers feel now about the economy, rose to 46.7, up from 38.3 in November. The other barometer, which measures how shoppers feel about the next six months, rose to 76.4, up from 66.4.

Improving confidence is in line with retail reports of a decent holiday shopping season.

Economists watch the confidence numbers closely because consumer spending _ including items like health care _ accounts for about 70 percent of U.S. economic activity. Still, the December confidence reading is below the 90 level that indicates an economy on solid footing.

Analysts are cautious about whether the gains are the start of something more sustainable.

“While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

Even with the increase in confidence, shoppers are still nervous about their jobs and the overall economy according to the preliminary results of the survey, which ran Dec pay day loans. 1-14.

Those claiming jobs are “plentiful” increased to 6.7 percent from 5.6 percent, while those claiming jobs are “hard to get” decreased to 41.8 percent from 43.0 percent. Those anticipating more jobs in the months ahead increased to 13.3 percent from 12.4 percent while those anticipating fewer jobs declined to 20.2 percent from 23.8 percent.

That’s because while the job market is steadily improving, unemployment _ at 8.6 percent _ is still high. And housing remains wobbly. The Standard & Poor’s/Case-Shiller index of home prices, also released Tuesday, dropped in October in 19 of the 20 cities it tracks. It was a second straight declining month, further evidence of a bumpy housing recovery.

Heading into the holiday season, store executives were nervous about consumers’ willingness to spend. Merchants offered big discounts on holiday merchandise and lured shoppers with expanded hours.

After a record spending spree over Thanksgiving weekend, the season’s semi-official start, shoppers retreated for a few weeks. Then stores saw a surge of shopping the week before Christmas as consumers took advantage of better discounts.

The National Retail Federation now expects a 3.8 percent increase in holiday sales, up from its original forecast of 2.8 percent made in September when the economy’s recovery looked more uncertain. More data will be released this week that will offer more clues about stores’ last-minutes sales surge before Christmas.

Source

December 26, 2011

King Says Crisis Threatens Europe

Filed under: online, stocks — Tags: , , , — Silver @ 2:42 am

+%3Cp%3EMervyn+King%2C+vice+chairman+of+the+European+Systemic+Risk+Board%2C+said+Europe%92s+sovereign+debt+crisis+is+threatening+to+hurt+the+real+economy+and+the+outlook+for+financial+stability+has+worsened.+%3C%2Fp%3E+%3Cp%3EGrowth+prospects+%93have+deteriorated%94+since+September%2C+King%2C+who+is+also+governor+of+the+Bank+of+England%2C+said+at+a+briefing+hosted+by+the+European+Central+Bank+in+Frankfurt+yesterday.+%93Investors+lack+confidence+to+continue+to+provide+normal+levels+of+funding.+Dependence+on+central+banks+has+risen.%94+%3C%2Fp%3E+%3Cp%3EThe+ECB+loaned+banks+a+record+489+billion+euros+%28%24636+billion%29+for+three+years+on+Dec.+21+to+avert+a+credit+crunch+from+the+sovereign+debt+crisis.+The+central+bank+said+earlier+this+week+that+the+turmoil+has+taken+on+systemic+proportions+not+seen+since+the+2008+collapse+of+Lehman+Brothers+Holdings+Inc.+%3C%2Fp%3E+%3Cp%3EKing+said+the+outlook+for+financial+stability+has+%93worsened%94+since+the+last+ESRB+meeting+in+September%2C+and+while+intervention+by+the+ECB+is+expected+to+%93assuage+funding+problems+in+the+near+term%2C+in+the+longer+term+private+funding+markets+must+be+revitalized.%94+%3C%2Fp%3E+%3Cp%3EBank+shares+have+suffered+this+year+as+borrowing+costs+surged+in+the+euro+region.+The+Stoxx+600+Banks+Index+has+fallen+28+percent+since+the+end+of+June%2C+compared+with+a+12+percent+decline+by+the+Stoxx+Europe+600.+%3C%2Fp%3E+Capital+Plea++%3Cp%3EKing+also+appealed+to+banks+not+to+%93reduce+lending+to+the+real+economy%94+as+they+increase+their+capital+levels+to+meet+new+standards+set+by+regulators.+%3C%2Fp%3E+%3Cp%3E%93We+are+very+conscious+there+is+extreme+risk+aversion+in+private+financial+markets%2C%94+he+said+%3Ca+href%3D%22http%3A%2F%2Fus-fast-cash-now.com%22%3Ecash+advance%3C%2Fa%3E%3C%21–+.+–%3E.+%93We+want+a+more+robust+banking+system+so+that+whatever+risks+crystallize%2C+whatever+their+source%2C+the+banking+system+is+in+a+better+position+than+2008.%94+%3C%2Fp%3E+%3Cp%3EThere+was+%93no+discussion%94+at+the+ESRB+meeting+of+any+country+leaving+the+euro+area%2C+King+said.+Still%2C+%93all+financial+institutions+are+advised+to+prepare+for+a+wide+range+of+contingencies%2C%94+he+said.+%3C%2Fp%3E+%3Cp%3EAndrea+Enria%2C+the+second+ESRB+vice+chair+who+is+also+the+chairman+of+the+European+Banking+Authority%2C+said+he+is+%93disappointed%94+by+European+leaders+dithering+over+putting+rescue+measures+in+place%2C+effectively+delaying+Europe%92s+bank+recapitalization.+%3C%2Fp%3E+%3Cp%3E%93We+have+always+been+quite+adamant+in+all+occasions%2C+also+in+the+debate+running+up+to+the+decision%2C+that+this+should+have+been+a+comprehensive+package%2C%94+Enria+said.+This+includes+%93recapitalization%2C+some+measures+–+funding+guarantees+–+addressing+the+funding+problems+and+strengthening+of+the+European+Financial+Stability+Facility+and+of+the+tools+to+deal+with+the+sovereign+crisis.%94+%3C%2Fp%3E+%3Cp%3EThe+ESRB%2C+which+aims+to+warn+of+brewing+risks+in+the+financial+system%2C+was+set+up+in+January+as+part+of+a+new+European+architecture+designed+to+ward+off+another+financial+crisis+such+as+that+which+followed+the+Lehman+collapse.+Its+65-+member+board+is+headed+by+ECB+President+Mario+Draghi.+%3C%2Fp%3E++%3Cp%3E%3Ca+href%3D%27http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2011-12-23%2Fking-says-crisis-threatens-europe-s-economy-as-stability-outlook-worsens.html%27+rel%3D%27nofollow%27%3ESource%3C%2Fa%3E%3C%2Fp%3E+

December 19, 2011

Egypt’s military, activists vie for public support

Filed under: legal, marketing — Tags: , , , — Silver @ 2:16 am

Egypt’s ruling military and the revolutionaries who demand they immediately step down battled for a third day in the streets on Sunday _ and competed fiercely for the support of a broader public that has grown tired of turmoil since the fall of Hosni Mubarak 10 months ago.

The generals appear to be winning the fight for the public, despite a heavy-handed crackdown on protesters around Cairo’s Tahrir Square using a roughness that rivals even that of Mubarak’s widely hated police force.

The protesters have tried to drum up Egyptians’ anger at the military by spreading videos and photos of military police savagely beating young men and women to the ground with sticks and truncheons _ and the resonant scene of a woman in a conservative headscarf being stripped half naked by soldiers who stomp on her chest.

But so far their efforts to win public sympathy don’t seem to be gaining traction in the face of the military’s campaign to depict the crowds of hundreds in the streets as hooligans and vandals, not the idealistic activists who succeeded in bringing down Mubarak. At least 10 protesters have been killed and 441 others wounded in the three days of violence, according to the Health Ministry.

“The military has failed in everything except for its stunning success in making people hate the revolution, its history and its revolutionaries,” prominent columnist Ibrahim Eissa wrote in an editorial in the independent pro-revolution newspaper, Al-Tahrir.

Led by a general who served for 20 years as Mubarak’s defense minister, the military has been methodically seeking to discredit the revolutionaries, accusing them of illegally receiving foreign funds and being part of a plot hatched abroad to destabilize Egypt. The generals have in the meantime sought to portray themselves as key players in the 18-day revolt that toppled Mubarak’s 29-year rule and hence have earned the right to rule.

In a statement posted on its Facebook page, the ruling military council on Sunday called the clashes part of a “conspiracy” against Egypt. It said its forces had the right to defend the “property of the great people of Egypt.”

Seeking to depict the protesters as hooligans _ and apparently to counter the widely published images of protesters being beaten or dragged on the ground _ it also posted on the page footage of young men throwing rocks at a basement window of the parliament building and of at least one man trying to set the place ablaze.

The generals’ campaign plays on Egyptians’ frustration with continued instability and economic woes since Mubarak’s fall. Many are now more focused on the multistage parliamentary elections that began last month and continue through March. Islamist parties have so far overwhelmingly dominated the vote, with liberals and secular parties far behind.

That trend continued with the announcement Sunday of results from the second of three rounds of voting, held last week. Out of around 160 seats up for grabs in the second round, the Muslim Brotherhood won 29 and another more conservative Islamic party, Al-Nour, won 23. Two liberal groups _ the Wafd Party and the Egyptian Bloc _ won nine and seven seats, respectively. The rest will be determined in a run-off vote to be held later this week.

The Islamists have been staying clear of the recent violence, fearing that they could jeopardize their electoral gains by taking part in the protests. Their stance has prompted many activists to accuse them of political opportunism.

The military has meanwhile been using the state media and sympathetic private TV stations to market an image of itself as the protector of the nation, filling its statements with patriotic rhetoric and grave warnings if turmoil persists.

The revolutionaries who led the protests against Mubarak accuse the military of mismanaging the transition since then, of seeking to hold on to power and of using the same autocratic ways as the ousted leader. They demand that the military hand over power to civilians immediately _ and some have begun demanding that presidential elections scheduled for the middle of next year be moved up to January to pick a civilian head of state to take the generals’ place.

“The military is looking down at us and handling everything from a security perspective,” said Shady el-Ghazali Harb, a prominent activist and an icon of the anti-Mubarak uprising. “It is trying to make the point that its way of handling things is what will be applied and nothing else.”

The latest deadly clashes began Friday, when one of several hundred peaceful protesters staging a sit-in outside the Cabinet offices near parliament was detained and beaten by troops. The protesters began their sit-in three weeks ago to demand that the military immediately step down.

In Sunday’s clashes, protesters and troops battled on two main streets off Tahrir Square, trading volleys of stones and firebombs around barriers that the military set up to block the two central avenues. The army also used water canons.

One of the streets is site of a research center set up during the three-year occupation of Egypt by France in the late 18th century. The building was almost completely gutted by a fire which broke out during the height of the clashes on Saturday, when troops on its roof and on other nearby rooftops hurled rocks down on protesters below.

Protesters, who blame the fire on the troops, have been trying to salvage valuable books and documents from the center, whose two-story building is now in danger of collapsing after its roof caved in.

Activists have flooded social network sites and sympathetic media with photos and video from the troops’ brutal assaults the past two days.

The photo of the woman protester half-stripped by soldiers ran on the front page of the Al-Tahrir newspaper, emblazoned with a headline in red, “Liars,” referring to repeated denials by the military council and military-appointed Prime Minister Kamal el-Ganzouri that no force or live ammunition were used against the protesters.

The presenter of a political talk show on a private TV station sarcastically praised the soldiers for their bravery in wrestling the woman down.

“She is more of a man than 300,000 men put together, including me,” said Youssef al-Hussein on ONTV.

Other widely circulating footage show an army officer firing a pistol at protesters _ though it is not clear whether he was using live ammunition _ and soldiers dragging women by the hair and ferociously beating, kicking and stomping on protesters cowering on the ground.

Still, many Egyptians complain the revolutionaries have gone too far and that, almost a year after ousting Mubarak, they should now go home and let the military run the country or wait for the next parliament to decide the country’s future.

Such sentiments are not surprising given that the military has been the most powerful institution in Egypt since army officers seized power in a 1952 coup that toppled the monarchy.

Nearly 60 years later, the military continues to have the last word on policies, a position of power that has left many activists not entirely certain that the generals who succeeded Mubarak would voluntarily return to their barracks.

“The military council uses every opportunity to show itself as the land’s strongest institution,” said Mohammed Abbas, an activist who defected from the Muslim Brotherhood to side with youth groups more active in protests. “We are making it easier for the generals by our divisions and isolation.”

Source

December 17, 2011

Covidien to spin off Hazelwood-based drug business

Filed under: Business, lenders — Tags: , , , — Silver @ 12:12 pm

Covidien plc will spin off its Hazelwood-based drug business, turning it into an independent company that may restore the historic corporate name of Mallinckrodt.

Covidien, based in Dublin, makes medical devices and medical supplies in addition to drugs. The proposed spinoff also will have its legal headquarters in Ireland, largely for tax reasons, company executives said in a conference call.

But the spinoff’s U.S. operation will be based in Hazelwood, and its new CEO will work from here. Spokesman Steve Littlejohn said the company has not made a final decision on its name, “but chances are good that it will be Mallinckrodt.”

Covidien’s pharmaceutical business has $2 billion in sales, with two-thirds of that coming in the U.S. market. It turned an operating profit of $318 million this fiscal year.

The drug business is a large provider of acetaminophen, the ingredient in Tylenol, and the largest U.S. supplier of opioids; both are pain medicines. Other lines include contrast products used with medical imagery and nuclear medicine products.

The pharmaceutical operation currently employs about 2,500 people in metro St. Louis. A company spokesman said the move should have no immediate impact on jobs here. Some jobs might be added as the firm sets up its own administrative operation.

Analysts had speculated that Covidien might get rid of the drug operation. Although profitable, it is less lucrative than the rest of Covidien and demands a higher investment in research and development. The drug operation earns a 16 cent operating profit for every dollar of sales, compared with 28 cents for the rest of the company.

The drug operation has a “lumpy” revenue history, notes analyst Aaron Vaughn of Edward Jones in Des Peres. The division is largely a generic drugmaker, and that sector suffered through a price war in past years, he noted.

“We thought they would be getting the business right-sized so that they could spin it off and let it grow on its own,” he said.

Covidien Chief Executive Jose Almeida said the pharmaceutical drug division’s performance had improved in recent years.

“We’re confident the business can now stand on its own,” he said in a conference call Thursday morning.

He said the company had been thinking about shedding the business for several years, citing “major differences” between drugs and Covidien’s other medical products. The operations have different business models, sales channels, customers and capital requirements, and demand different talents, he said.

Separating the operations would allow both to focus on their own strategies, Almeida said payday loans no teletrack. Shareholders also might get more value over the long term, he said.

The drug business “definitely needs some investment,” said analyst Jeff Jonas of Gabelli & Co. in an interview with Bloomberg News. “They need to find new products, invest in the pipeline. That’s a multiyear process.”

Research and development consumes 7 percent of revenue in the drug division, compared with 4 percent in the rest of Covidien.

The spinoff would be in the form of a stock distribution, tax-free to U.S. shareholders, the company said. That tax-free aspect made the option of a spinoff superior to the alternative of selling the unit, company officials said.

The spinoff could take 18 months to complete and would need approval of regulators.

Bloomberg News, citing unidentified sources, reported last summer that Covidien had tried to sell the unit, but talks broke down.

Almeida said he has picked a CEO for the new company, although he didn’t name the person. The person is a ’strong leader” with “broad pharmaceutical experience,” Almeida said, and will join the spinoff from another company.

The drug operation is now headed by Matt Harbaugh, the drug division’s chief financial officer serving as interim president. Based in Hazelwood, he has led the unit since the previous president left last year.

Besides its Hazelwood headquarters, the drug unit has a research operation in Webster Groves, a nuclear medicine facility in Maryland Heights and a plant just north of downtown St. Louis.

That plant sits on what was the Mallinckrodt family farm. G. Mallinckrodt & Co. was founded there in 1867 and grew up as a chemical and drug firm. It refined uranium for the Manhattan Project, which created the atomic bomb during World War II.

Avon Products acquired Mallinckrodt in 1982. Avon sold the company to International Minerals and Chemical Corp. in 1986, which later changed its own name to Mallinckrodt.

In 2000, Tyco bought the company. After Tyco went bankrupt amid scandals, its health care operations were spun off as Covidien in 2007.

Without the drug business, Covidien would have $9.6 billion in sales. Covidien’s remaining business makes trays, hypodermic needles, retractors, pumps for patient feeding and pain management, and other medical devices.

Covidien stock rose $1.39 to $43.55 on Thursday.

Source

« Older PostsNewer Posts »

Powered by WordPress