US Business

Pfizer reported a jump in second-quarter profits Thursday behind a near doubling of revenues driven by sales of its Covid-19 vaccine and therapeutic drug Paxlovid.

The drugmaker raised some of its overall financial benchmarks, but maintained 2022 sales targets for its two Covid-19 products: $32 billion from the vaccine co-developed with German company BioNTech; and $22 billion from Paxlovid.

The total is equal to just over half of forecasted 2022 total revenues.

In the quarter ending June 30, profits were $9.9 billion, up 78 percent from the year-ago period following a 47 percent jump in revenues to $27.7 billion.

US officials last month approved emergency authorization to Pfizer and Moderna for Covid-19 vaccines in under-five-year-olds, the final age group awaiting immunization in most countries.

Pfizer is currently working on a Covid-19 Omicron vaccine booster candidate for the fall, assuming regulatory approval is granted, company officials said.

Pfizer and German BioNTech have also submitted data for an Omicron vaccine to the European Medicines Agency.

“Pfizer is well positioned to satisfy its current contractual obligations and potential demand within its production capacity through the end of the year,” said Chief Executive Albert Bourla in a statement.

Sales for both its Covid-19 products rose during the quarter. 

Revenues for the vaccine came in at $8.8 billion, up 13 percent from the year-ago period, while sales of Paxlovid were $8.1 billion — a big jump over the prior quarter following a five-fold growth in US utilization.

Shares fell 0.2 percent to $51.43 in pre-market trading.

Most of South Africa is battling endless power cuts, but a remote whites-only farming town in the country’s sun-drenched centre is close to producing enough electricity to be self-sufficient.

Built after the end of apartheid along the Orange River on 8,000 hectares (more than 19,000 acres) of land acquired by white Afrikaner nationalists, Orania manages its affairs autonomously from the central government.

At the end of a gravel track outside the 31-year-old town, a diamond mesh gate opens onto hundreds of photovoltaic panels mounted in rows.

In a country struggling to provide basic services, the small settlement of 2,500 people is the only town nationwide close to reaching energy supply autonomy and freeing itself from the failing national power grid.

“The solar farm is quite a huge game changer for us. It brings energy sustainability to the town,” said Gawie Snyman, 43, who manages the municipality.

“Our big dream is to become an energy exporter”.

Africa’s most developed economy has in recent years been plagued by epileptic power supply, which many blame on the ageing coal-fired plants operated by the state-owned energy giant Eskom.

After weeks of some of the worst blackouts in recent years, President Cyril Ramaphosa on Monday announced energy reforms, urging South Africans to “join in a massive rollout of rooftop solar” and sell excess to the grid.

Orania, a town some 620 kilometres (380 miles) southwest of Johannesburg, was already well on its way to becoming totally energy independent in just several years’ time.

– Solar independence –

Established in 1991 after the abolition of the racial laws, Orania is protected under South Africa’s constitution, which ensures the right to self-determination.

The town was developed on land acquired by a group of Afrikaner families, led by the son-in-law of Hendrik Verwoerd, the architect of apartheid.

It was set up to preserve the “culture” of the Afrikaners — descendants of the Dutch and French-Huguenot Protestant settlers who came to South Africa in the 17th century.

Prospective residents of Orania submit an application, get vetted and the default requirement is one has to be Afrikaner.  

Town spokesman Joost Strydom, 28, said the town in the Karoo region now aimed to make the best of year-round sunshine in order to enjoy “total electricity independence”.

With funding from the municipality and private investors, Orania started building its 10.5-million-rand ($620,000) solar farm in June last year. 

Just 12 months later, the town was generating 841 KW of electricity per hour — almost enough to power half the town and surrounding farms growing corn, wheat and nuts, local authorities say.

“It was the basic idea of self-sufficiency that drove us towards doing this,” said Francois Joubert, the engineer who designed what has become known as the “Orasol” plant.

Standing next to a row of solar panels, the 69-year-old in a grey flat cap said Eskom had “failed dismally” to provide the town with the necessary power.

“You can’t rely on anybody to supply you with basic ingredients to live here in the Karoo,” he said. 

“We had to do that ourselves, we had to work it out… And it’s working for us.”

– Thirsty pecans –

A few kilometres from the solar plant, Joubert’s wife Annatjie watched as a mechanical tree shaker released pecan nuts onto a red net during early morning harvesting on her farm.

The 66-year-old former IT specialist said a stable power supply was crucial for her orchard to flourish.

When Eskom rations electricity to prevent the grid from collapsing, her trees go thirsty as she can’t pump water from the river, she explained.

Yet “it’s vital to complete your irrigation cycles especially with pecans nuts because they use a lot of water,” she said.

The new solar plant would allow her to do just that, she added.

As the world grapples with a food crisis sparked by Russia’s invasion of Ukraine, “we need to produce as much as possible of our own food, and therefore we need water… we need electricity,” her husband said.

The town was proud to be playing its part through producing clean energy, said the engineer.

“We are very glad that we can assist the green idea,” he said.

The US economy contracted for a second straight quarter between April and June, government data showed Thursday, fueling recession fears just months before key midterm elections in a blow for President Joe Biden.

Gross domestic product declined at an annual rate of 0.9 percent in the second quarter, following a bigger drop in the first three months of the year, according to the Commerce Department.

Two quarters of negative growth is commonly viewed as a strong signal that a recession is underway, and a downturn in the world’s largest economy would have global consequences, as well as domestic political costs.

Though Biden says he is confident the US economy is not suffering a downturn, his critics are sure to seize on the report as proof of the veteran Democrat’s mismanagement of the economy.

After a 1.6 percent decline in the first three months of the year, the report noted drops in government spending at all levels and private investment on goods, including autos, and on residential buildings fell in the second quarter, despite an increase in exports.

The US economy also continues to battle sky-high inflation, as a result of supply chain snarls due to Covid lockdowns, as well as Russia’s war in Ukraine which has sent prices of food and fuel soaring.

Meanwhile, a key inflation measure, the personal consumption expenditures price index, rose 7.1 percent in the latest three months, the same pace as in the first quarter, the data showed.

With the labor market showing some signs of cooling and supersized interest rate hikes by the Federal Reserve slowing the economy — the latest coming on Wednesday — many economists say the recession discussion is more a matter of when, not if.

And that poses a major political headache for the president, who has seen his approval ratings plummet in recent months as American families struggle to make ends meet due to surging inflation.

– Way out? –

In recent days, Biden has led his administration in a chorus of denial.

“We’re not going to be in a recession, in my view,” he insisted Monday, stressing the strength of the labor market.

It would be highly unusual for an economy still adding jobs at a rapid pace, and with near record-low unemployment, to fall into recession.

Fed Chair Jerome Powell agreed, and said that even with ongoing interest rate hikes to slow the economy, it is possible to cool price pressures without causing a downturn or a big jump in joblessness, although he acknowledged the path to thread that needle is narrowing.

The central bank announced another big interest rate hike of 75 basis points on Wednesday, the fourth increase this year, and stressed it would not hesitate to go for “another unusually large increase” if needed.

Powell said the overriding aim was to get sky-high inflation moving back down toward two percent, but the Fed wants to strike a balance.

“We’re trying to do just the right amount. We’re not trying to have a recession and we don’t think we have to,” he told reporters.

JetBlue Airways plans to acquire low-price carrier Spirit Airlines for $3.8 billion, the companies announced Thursday, in what would establish the fifth largest US airline.

The proposed takeover, which requires regulatory approval, comes a day after Spirit terminated a combination with the Frontier Group following JetBlue’s competing bid challenging the transaction.

By combining, the companies will be able to challenge giant US carriers American, Delta, United and Southwest. They expect $600-$700 million in annual savings by joining forces, said a joint press release from Spirit and JetBlue. 

The companies plan to argue the deal will help consumers.

“We believe we can uniquely be a solution to the lack of competition in the  US airline industry and the continued dominance of the Big Four,” said JetBlue Chief Executive Robin Hayes.

“By enabling JetBlue to grow faster, we can go head-to-head with the legacies in more places to lower fares and improve service for everyone. Even combined with Spirit, JetBlue will still be significantly smaller than the Big Four.”

But some aviation watchers think the transaction could draw criticism in Washington, where antitrust regulators sued to block an alliance of American Airlines and JetBlue.

The all-cash transaction adjusts the price if the deal is delayed because of regulatory challenges. The price will be $33.50 per share if the transaction is completed by December 2023.

But the price would increase to $34.15 per share if the transaction is consummated in July 2024.

JetBlue also agreed to a pay Spirit a fee of $70 million and Spirit shareholders $400 million “in the unlikely event the proposed agreement is not consummated for antitrust reasons,” according to the press release.

In the wake of JetBlue’s challenge to the Spirit-Frontier deal, Spirit leaders, including Chief Executive Ted Christie, had depicted the JetBlue transaction as a risky bet in light of antitrust concerns, as they continued to advocate for the Frontier tie-up.

But on Thursday, Christie told CNBC that at the time he was “actively soliciting” for the Frontier deal, but that there is “a lot of reason to be excited about where we landed.”

“We’ve been listening to the folks at JetBlue and they have a lot of good thoughts on their plans,” Christie told the network.

Although Spirit leaders continued to back the Frontier transaction, they ran into trouble with Spirit shareholders who wanted the richer JetBlue premium. Spirit was repeatedly forced to postpone an investor vote on the Frontier agreement before finally pulling the plug on the transaction on Thursday.

Shares of Spirit rose 4.0 percent to $25.27 in pre-market trading, while JetBlue gained 2.0 percent to $8.57.

German auto giant Volkswagen said Thursday that it was able to overcome global economic headwinds and supply chain issues to put in a “robust” performance in the first six months of 2022.

A week after Volkswagen announced that it would part ways with its chief executive Herbert Diess, the carmaker said it was “confident” for the second half of the year.

“Despite unprecedented global challenges, Volkswagen has demonstrated remarkable financial robustness,” said chief financial officer Arno Antlitz. 

“Despite all the caution in the face of the volatile market environment and geopolitical risks, we are confident that we can further accelerate the transformation of the group,” Antlitz said.

VW said its net profit rose by 26 percent to 10.6 billion euros ($10.8 billion) in the first six months, even if its bottom-line in the second quarter alone was hit by an accounting effect linked to hedging against fluctuations in raw material prices.

Underlying, or operating, profit rose by 16 percent to 13.2 billion euros in the period from January to June.

“This was driven by strong performances from the premium and sport brand group,” VW said. 

First-half revenues were nearly stable at 132.3 billion euros, but unit sales were down by 14 percent at four million vehicles, not least because of the worldwide shortage of semiconductors plaguing the industry.

– Easing supply constraints –

Looking ahead, Volkswagen said it “confirms its outlook for 2022… as supply constraints ease.” 

The carmaker expected “the product mix to normalise in the second-half as the semi-conductor situation improves in combination with a strong order book,” it said.

“A noticeable recovery of the monthly sales towards the end of second quarter additionally bodes well for second-half sales,” it said.

Nevertheless, it was “still not possible to conclusively assess the specific effects of the war in Ukraine or effects of the Covid-19 pandemic on the Volkswagen group’s business, on the global economy and growth in the industry in fiscal year 2022,” VW cautioned.

In Europe, in particular, there were uncertainties regarding energy supply. 

Last week, Volkswagen unexpectedly announced the departure of CEO Diess after four years at the helm. 

He will be replaced in September by Oliver Blume, the current head of the premium Porsche sports car brand.

There would be “continuity” in the group’s strategic shift towards electric vehicles despite the change of leadership, said Antlitz, who will remain on the board under Blume, in a call with journalists.

Blume will likely be tasked with guiding Porsche through a long-planned stock market entry.

A final decision on the listing should be taken in “late summer”, Antlitz told analysts on a conference call.

European stock markets ran out of steam Thursday as investors digested another hefty Federal Reserve interest rate hike and awaited vital US economic growth data and key results from big-hitters Amazon and Apple.

Frankfurt, London and Paris stocks rose at the open amid a flood of company earnings, but gains petered out as the morning progressed.

Europe’s energy sector was in particular focus with Britain’s Shell and France’s TotalEnergies posting bumper second-quarter profits on elevated oil and gas prices.

Asian indices mostly climbed following a surge on Wall Street, fuelled by hopes that the US central bank could slow its pace of inflation-fighting interest rate hikes.

All eyes are now on the release of second-quarter growth data and the latest earnings in the United States.

The dollar meanwhile struggled to bounce back from a sell-off — sitting at a three-week low against the yen — that came in response to comments by Fed chief Jerome Powell suggesting its next super-sized increase could be its last.

However, analysts cautioned that the initial joy, which sent New York’s three main indexes soaring, could be short-lived as the global economy continued to face several headwinds and inflation would likely not come down quickly.

As expected, the Fed lifted borrowing costs 75 basis points to a range of 2.25 to 2.5 percent, close to the neutral level it considers neither stimulating nor slowing economic growth.

Forecasts have rates going as high as 3.8 percent in 2023, as the bank tries to control runaway inflation.

There is a growing concern that the sharp rise in rates is bearing down on the world’s top economy and could send it into recession.

In his post-meeting comments, however, Powell said he did not consider that was the case, because “there are too many areas of the economy that are performing too well”. He did note that growth was slowing.

On Wall Street, the Dow and S&P rallied and the Nasdaq soared more than four percent — its best one-day rise since late 2020 — as tech firms caught a wave of optimism.

Asia followed suit, though with more muted gains, although Hong Kong dipped as the city’s de facto central bank followed the Fed in lifting rates owing to its currency peg.

Oil prices rallied as data showed a big drop in US stockpiles, while Powell’s comments on the economy eased recession concerns and the weaker dollar made the commodity cheaper for buyers holding stronger currencies.

– Key figures at around 1100 GMT –

London – FTSE 100: DOWN 0.1 percent at 7,339.10 points

Frankfurt – DAX: UP 0.1 percent at 13,173.01

Paris – CAC 40: FLAT at 6,258.89

EURO STOXX 50: UP 0.2 percent at 3,613.33

Tokyo – Nikkei 225: UP 0.4 percent at 27,815.48 (close)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 20,622.68 (close)

Shanghai – Composite: UP 0.2 percent at 3,282.58 (close)

New York – Dow: UP 1.4 percent at 32,197.59 (close)

Euro/dollar: UP at $1.0203 from $1.0200 Wednesday

Pound/dollar: UP at $1.2168 from $1.2158 

Euro/pound: DOWN at 83.84 pence from 83.89 pence

Dollar/yen: DOWN at 135.35 yen from 136.57 yen

Brent North Sea crude: UP 1.4 percent at $108.14 per barrel

West Texas Intermediate: UP 1.9 percent at $99.11 per barrel