Energy prices weaken
Macro & Overnight
Oil prices reversed sharply. A -4% decline reflects demand concerns in a slowing global economy, specifically with China Covid uncertainty.
On Wall Street, Apple fell 4% on reports of weaker iPhone demand from Asia, and Tesla fell 12% after missing forecasts for 4Q deliveries.
Some better news from Germany. Yesterday’s dip in reported inflation and the arrival of the first LNG cargo at the new floating Wilhelmshaven facility. This project has been delivered in 7 months versus the more typical 5-6 years of planning scrutiny for such energy infrastructure. Demonstrating how quickly supply chains can be fixed when necessary.
With milder weather, European wholesale gas prices continue to weaken and are now at levels last seen before the invasion of Ukraine. While still at elevated levels compared to history, lower gas prices represent an emerging good news story for UK inflation, economic growth and public finances.
UK Company News
It remains relatively quiet on the company news front.
Computer board supplier Concurrent Technologies expects to report revenues circa 10% ahead of market expectations and profit before tax, at least in line with market expectations. Cash has depleted to £4m due to investment in R&D and components. Dividend suspended, but order intake at over £31m, up 25%, including for new systems products. The company continues to run double shifts into Q1 2023. A small player in the huge designed-in defence industry component market. Concurrent remains agile and innovative in mitigating the impact of semiconductor shortages.
Materials technology company HEIQ sees worsening macroeconomic conditions into Q4 that have resulted in a significant deterioration in consumer demand, with sales in China especially suffering. The company has missed expected milestone payments. Revenues for FY 2022 will be approximately 20% below market expectations at between US$ 54m to US$ 55m. Gross margin will be below market expectations at 47% – 48%. Consequently, the company now expects a loss before tax of between US$ 2.5m and US$ 3.5m. It also expects trading for FY 2023 to be below market guidance, with anticipated sales and gross margins only maintained in FY 2022. Given the macroeconomic headwinds, the company has implemented cost savings and will review its cost base to return to profit before tax in FY 2023.
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