Finns And Danes

Wednesday took us back into the reporting nightmare as we have 3 companies with intricate results, from Finland, Israel, and Denmark. Plus plenty of other news as well. Archegos is bust according to the Financial Times.

Stock markets are still uncertain whether to rise or fall after the Tuesday débâcle, which I think I may have been the first to blame on commentary by Janet Yellen, our US Secy of the Treasury. She has now walked back the comments she should never have made.

shallow focus photograph of black and gray compass

Image Source: Unsplash

So it's off to the races:

*Israeli BiolineRX BLRX fell 16% today on news which doesn't appear in my brokerage account or in Israeli sites in English. It jumped Tuesday on results from its Genesis phase III trial of Motixafortide stem cells against rejection in autologous bone marrow transplants for multiple myeloma patients.

*Danish drug-maker Novo Nordisk shares are down 0.28% at the opening after a Q1 report heavier on hope than results. Sales at DKK 33.8 mn were essentially flat while gross margins were down by 2% because of costs for R&D (good) and administration (bad). Operating profits fell 8% to DKK 14.982 mn but pretax profits gained 6% at DKK15.938 mn and taxes did too. Net profit rose 8% to DKK5.45/sh from last Q1 level of 5.05/sh.

The results in DKK leave out the impact of currencies, which fell in major market like the US and Canada, but which rose in the UK. NVO upped its forecasts from Feb. when it reported on the prior year. It now expects full-year operating profit to rise 5-9% versus 4-8% estimated in Feb. Free cash flow will be DKK 37-44 bn, up from February's estimate of 36-41 bn. However, reported net profit is still expected to fall 6% because of currencies. International sales were up 9%, mostly thanks to diabetes drug Ozempic hitting the Chinese market. But US sales were up only 6%, more than half from new medicines NVO launched since 2015. Basic insulin sales are barely growing whereas GLP sales to the US rose 20%.

NVO's report included information on an initiative with Toronto to develop diabetes prevention in emerging markets, and its plan to become carbon-neutral by 2030. It carbon toll fell 48% in Q1 compared to 2019 levels. More importantly, NVO also has 2 phase III trials coming for oral semaglutide, against obesity, and to treat non-alcoholic stearohepatitis liver disease. The latter has begun already and the former will launch in the current quarter. More drugs below.

Financials

*Finnish Sampo Oyj, a financial conglomerate operating in Nordic countries reported “a strong start to the year in all business areas. Profit before taxes for Q1 rose to euros 632 mn from prior Q1 level of euros 162 mn. Eps came to 82 euro cents from 26 while mark-to-market eps rose 3 euros per share to 1.39 euros, vs prior-year loss of euros 1.71/sh. It will repay its senior debt coming due in Sept.

SAXPY reported the strongest underwriting results in property & casualty insurance in its history, up 37% to euros 317 mn, driven by a 4.5% drop in the combined ratio to 81.2% from 85.7% in Q1 2020. You want the combined ratio to fall. Sampo claims that this is a first step toward its goal of annual mid-single-digit operating profits and a combined ratio of under 86%. The problem is that Q1 2021 was not a normal quarter for Sampo because of the impact of the virus. Among the factors to remember is that claims for shipping, home insurance, and car insurance losses were vastly below normal. Large losses, Sampo said, came to only one claim, which is not normal, and were down 2% from prior year.

Group solvency II ratio at 189% met the target of 170-190% and financial leverage ratio of 28% met the target of under 30%. Return on equity was 26% positive vs -33.2% a year ago and NAV/sh was euros 23.38, up from prior year Q1 level of euros 19.82.

Yet business was oddly skewed at If P&C, its largest insurance arm. Sales were up in Sweden and Denmark but down in Norway and Finland. This all reflects covid-19 and may not last. It had underwriting profits of euros 213 mn, up 18% and a combined ratio of only 81.5%, best ever for If in which Sampo owns 49%. SAXPY raised its combined ratio forecast for If to 82-84%, meeting the target of under 85% set for the full year. It also expects profits before taxes at IF to nearly double to euros 257 mn from 129 mn in 2020.

Its second biggest sub, Topdanmark, reported before tax profits in Q1 of 137 mn, down from 150 mn last year although it also saw a combined ratio drop to 84.7% from 88.7%. Hastings of the UK also had strong underwriting margins in the first quarter of 2021, and lower claims because of covid-19 and operational reforms going on. Its Q1 operating ratio hit 75.1% and thanks to stronger sterling, pre-tax profits hit euros 46 mn. It faced pressure on car policy prices and therefore kept live customer numbers stable at 3 mn policies. I am not giving details of other bits of Sampo except to note that its UK arm Hastings (car insurance) did not gain from the pandemic even though sterling was stronger than the DKK.

The problem is that the benevolent market of Q1 will not necessarily prevail as Nordic countries, Britain, and the Baltics return to normal. Q1 was very profitable mostly and Sampo Oyj will follow its policy of paying out to shareholders 70% of profits surplus to capital it no longer needs. We will get part of the euros 944 mn surplus on May 28, 1.7 euros/sh up from prior Q1 level of 1.5.

Key figures

1-3/2021

1-3/2020

Change, %

EURO mn

     

Profit before taxes

632

162

290

If

257

129

99

Topdanmark

137

-13

-

Hastings

46

-

-

Associates

126

86

47

Mandatum

76

-16

-

Holding (excl. Associates)

-11

-24

-54

Profit for the period

526

139

278

     

Change from Dec. results

Earnings per share, Euros

0.82

0.26

0.56

EPS (based on OCI) Euros

1.39

-1.71

3.10

NAV per share, Euros

23.28

19.82

3.46

Average number of staff (FTE)

13,204

10,303

2,901

Group solvency ratio, % *)

189

176

13

RoE, %

26.0

-33.2

59.2

*Investor A/B of Sweden plans to split its shares 4:1 as of May 30. Because IVSBF's ADR is widely held, trading will stop on May 18. The new ISIN code will be 0015811963 for the b shares we own and there will be 1.822 mn shares outstanding after the split. It will also transfer shares to its employees under option plans.

*A less intimidating result came from Canadian General Fund, CGRIF, which calculated that its May 4 NAV in loonies had fallen 0.4% to C$54.28 but that its share price had fallen further to 36.55, down 0.66%. This may be warning against too much optimism in Finland. Top holdings as usual are in IT, industrials, materials, and financial stocks, and not in healthcare. In order: Canadian Pacific (merger candidate); 1st Quantum MineralsFranco-Nevada gold; West Fraser Timber; NVIDIA; Amazon, Lightspeed POSTFI; and Mastercard. The share price today gained 1.6%. The fund has to buy large caps; (I sometimes go deliberately buy smaller cap rivals to its holdings like Kirkland Lake Gold KL, which was tipped today by “the Late Investor” (Paul Manfilly, who seems to be still alive) because its cost per oz of gold mined is $800/oz. It reports before the opening tomorrow.)

*CBOE Group, now a Value Line pick, will close down its Chicago farm commodity pits which have operated since about 1850. The share gained 1.5% on the news and it was given a $120 TP by Argus.

Materials

*The Administration plans to provide uranium subsidies to keep nuclear power plants open. This resulted in boost of Cameco, CCJ, up 4.4%, and Energy Fuels, UUUU, up 5.05%.

*Cement maker CRH of Ireland hit a new high at $50, up 3.71%. No news I can find but it is about to become a double. It rose sharply in UK trading today and sterling is up to boot.

*Cemex is up 2.37% and is already up 215% from our basis. CX is Mexican.

Tech & Tel

*Vodafone gained 2.1% today and hit a new 52-week high of $19.58. VOD.

*BCE of Canada rose 0.45% to hit a 52-wk high of $48.88.

*Ericsson is up 2%, ERIC of Sweden; Nokia NOK gained 2.61% at the opening and now is up 2.45%.

Drugs

*Novacure was tipped for a double by Jim Cramer and the share is up 2.55% to $202.33. I told you about NVCR first but nobody listens to me on TV and the web.

*AbCellera rose 7.12% and is back at $30, not very good as we paid nearly $60 at ABCL's Jan. ipo. It is working with Eli Lilly on a covid-19 antibody.

*TEVA is up 1.9% more to $10.28 after it added ESG (Environment, Social, and Governance) metrics to its 2020 annual report. It also was tipped as a biosimilars play for trastuzumab. We are now up from my basis.

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Comments

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William K. 3 years ago Member's comment

I certainly listen to V.L.! Quite an interesting article, and yes, things have been a bit scrambled. But that happens when emotions drive the truck. When sanity returns and logic prevails stability may begin to reappear.