Central Europe's car makers hit by COVID-19 pandemic

Oil giant Royal Dutch Shell on Thursday reported a sharp drop in net profit for the three months through to the end of June, following an unprecedented period of energy market turmoil and significantly weaker oil and gas prices.

The Anglo-Dutch company reported adjusted earnings of $638 million for the second quarter of 2020. That compared with a net profit of $3.5 billion over the same period a year earlier and $2.9 billion in the first three months of 2020.

Analysts had warned that “Big Oil” companies, referring to the world’s largest energy majors, were likely to report “

The ongoing economic impact of the coronavirus pandemic had prompted Shell to 

In a note to shareholders published June 30, which came shortly after a 

The gloomy outlook for commodity prices through to 2050 followed Shell’s decision to cut its dividend to shareholders for the 

The firm’s board explained at the time that maintaining the current level of shareholder distributions was “not prudent,” slashing the dividend by nearly two-thirds.

Shell now believes Brent crude futures will average $35 a barrel in 2020, down from a previous forecast of $60 for the international benchmark.

The company also lowered its Brent price forecast to $40 in 2021 and $50 in 2022, having previously said it expected prices to average $60 for each respective year.

Brent crude futures traded at $43.71a barrel on Thursday morning, around 0.1% lower, while 

Exxon Mobil and Chevron are both expected to unveil their second-quarter earnings on Friday, with the U.K.’s BP poised to report on August 4.

 French carmaker Renault (

FILE PHOTO: A Renault car is seen in a show room at a Renault carmaker dealer, amid the coronavirus disease (COVID-19) outbreak in Sint-Pieters-Leeuw, Belgium May 29, 2020. REUTERS/Yves Herman

Global automakers have been hit hard by the coronavirus pandemic, which has shuttered factories and kept many customers away from car dealerships.

But the Renault-Nissan alliance has been hit especially hard as it was already weakened by low margins and boardroom turmoil surrounding Carlos Ghosn, the architect of the alliance who was ousted in 2018.

Renault shares were down 3.3% when trading opened in Paris.

“Today’s results will be a disturbing wake-up call,” CEO Luca de Meo, the former Volkswagen (

“We are currently touching the bottom of a negative curve that started several years ago, and probably even earlier,” de Meo added.

“We are in a complex, difficult situation. We all are. But ... we were all ready, I would say, feverish. So for sure, it is even harder for us.”

Germany recorded its worst deterioration in the economy in the second quarter since 1970, according to statistics released Thursday.

German gross domestic product fell a seasonally adjusted 10.1% quarter-on-quarter, which was worse than the 9% drop forecast by economists.

The Federal Statistical Office said there was a “massive slump” for exports and imports of goods and services as well as for household final consumption expenditure and capital formation in machinery and equipment. 

The U.S. later on Thursday

The euro EURUSD, 

UK banking giant Lloyds swung to a £600m pre-tax loss for the first half of the year today as coronavirus cost it an extra £2.4bn.

The provision for loan losses was bigger than the £1.5bn analysts had anticipated. It took total provisions for the first half of the year to £3.8bn.

That saw 

Britain’s AstraZeneca (

Optimism over its COVID-19 vaccine has fuelled what was already a strong year for the company as it also stuck by its 2020 outlook. AstraZeneca has gained from changes wrought by Chief Executive Pascal Soriot’s focus on products and bets on newer medicines.

The company reiterated that it was on track with late-stage trials for its coronavirus vaccine, which could be rolled out by the year-end.

Shares of London’s most valuable listed company on Thursday rose 3% at 88.6 pounds after product sales of $6.05 billion in the three months ended June 30 surpassed analysts’ consensus of $6.01 billion. The figure excludes payments from tie-ups.

Newer drugs for diabetes, heart conditions, and cancer, including its top-selling lung cancer drug Tagrisso, performed well in the quarter and AstraZeneca remains on track for a third consecutive year of growth.

AstraZeneca has had a busy few months: it took on the development of the COVID-19 shot from Oxford University, got billions in government funding, signed several supply deals, and was even the subject of a mega-merger speculation - all while marching on with its core business.

Among drugs with better-than-expected revenues, sales of respiratory drug Symbicort rose 12% to $653 million, about $90 million above consensus, while revenue from cancer drug Lynparza jumped 62% to $554 million.

There are no approved vaccines for the illness caused by the novel coronavirus, but AstraZeneca’s shot is widely considered the leading candidate after results from early-stage human trials showed it was safe and produced an immune response.

Core earnings of 96 cents per share beat analysts’ expectation of 93 cents. Total revenue rose by 11%.

The COVID-19 pandemic poses new challenges for carmakers in central Europe. Below are figures on producers in the region and their contribution to the economies of Hungary, the Czech Republic, and Slovakia, the countries in the region that are most reliant on the auto industry.

FILE PHOTO: An employee is seen by an assembly line as PSA Peugeot Citroen plant prepares to re-open after shutting down in March due to the coronavirus disease (COVID-19) outbreak in Trnava, Slovakia April 17, 2020. REUTERS/Radovan Stoklasa/File Photo

HUNGARY

Population: 9.8 million.

The car sector’s contribution to GDP is about 4-6%, and it accounted for almost one-third of industrial output and 21% of exports in 2019.

The sector employs around 170,000 people.

GDP FORECAST FOR 2020: the government projects a 5% decline (vs OECD projection for a decline of 8%)

** AUDI - production is running in three shifts at its car plant, but certain parts of the engine plant were not back at full capacity as of mid-July. It made 164,372 cars last year and 1.969 million engines but declined to give a forecast for this year’s output due to the unpredictable situation. It plans one-week maintenance shutdown at the car plant in August. In most parts of engine production, a two-week halt or reduced operation is planned.

** DAIMLER - operates in two shifts now, but is due to go back to three shifts from the first week of August. It declined to comment on orders or expected output and made about 190,000 cars last year. It plans a summer shutdown from Aug. 17-23.

** SUZUKI - restarted production at the end of April in a single shift, and went back to two shifts on July 13. This year, it is making only hybrid cars for European Union markets. Last year it made close to 180,000 cars, and it expects output this year to be 20% below plans. It has scheduled a summer maintenance shutdown from Aug. 10-21.

** OPEL - its engine factory restarted on May 13, and is now running at full capacity in three shifts.

** BMW - the company said in mid-May that construction of its plant in eastern Hungary would be delayed “by a few months.” BMW announced in 2018 that it would invest 1 billion euros ($1.18 billion) to build a plant in Hungary.

CZECH REPUBLIC

Population: 10.7 million.

The auto sector’s share in GDP is around 10%, and it accounts for more than 20% of exports.

Czech car makers produced 1.43 million vehicles in 2019.

The auto industry employs around 180,000 people directly and about half a million in total.

GDP FORECAST: the government projects a 5.7% decline (vs OECD forecast for a 9.6% decline)

** SKODA AUTO - part of the Volkswagen Group and the country’s biggest exporter, it delivered 1.24 million cars in 2019, with most produced in its Czech plants. It has returned to full production although it has said output will depend on demand.

** TPCA - a joint venture between Toyota Motor Co and Peugeot, it is running at full strength since June although shutdowns caused lost production of 40,000 vehicles.

** HYUNDAI MOTOR MANUFACTURING CZECH - part of Hyundai Motor Co., it produced 309,500 vehicles in 2019. It said in June it aimed to return to three-shift operations in the second half of the year as it saw some improvements.

SLOVAKIA

Population: 5.5 million.

The auto sector’s share in GDP is around 13%, and it accounts for about half of industrial production.

Slovakia is the world’s biggest per-capita car producer, with 1.1 million vehicles made in 2019.

The sector employs about 275,000 directly and indirectly.

GDP FORECAST: the government projects a 9.8% decline (vs OECD forecast of a 9.3% decline)

** VOLKSWAGEN SLOVAKIA - the country’s biggest producer manufactured 377,750 vehicles in 2019. It said current production was in line with plans but declined to give a forecast for 2020 output. The Slovak government has aimed to gain further Volkswagen investments at the plant after the German carmaker backed away from a new site in Turkey.

** KIA MOTORS SLOVAKIA - running a two-shift operation and aiming to reintroduce the third shift in September, after the planned summer shutdown. It produced a record of 344,000 cars in 2019. Output fell 27% year-on-year in the first half of 2020. The company is planning to boost the share of eco-friendly cars in its output.

** GROUPE PSA SLOVAKIA - a 55-day shutdown led to lost production of 72,000 vehicles. It produced a record of 371,152 cars in 2019. CEO Martin Dzama was quoted by Slovak media as saying the plant faced a tough future if it didn’t win the production of a new model within the group.

** JAGUAR LAND ROVER - the country’s newest plant was launched in 2018. It restarted production in May and said in June it was gradually increasing output.

Australians will withdraw 56% more from their retirement savings than the government originally expected because of the novel coronavirus crisis, according to treasury analysis, as they use the tax-free money to repay home loans and boost cash in hand.

FILE PHOTO: People maintain social distance as they queue to be tested for the coronavirus disease (COVID-19) at a pop-up testing centre, as the state of New South Wales grapples with an outbreak of new cases, in Sydney, Australia, July 30, 2020. REUTERS/Loren Elliott

Already one million Australians have applied to pull up to A$20,000 each from their retirement savings, industry data showed, while thousands of eligible workers have depleted their savings completely.

The long-term consequences could be devastating for many people, an industry group said.

About A$42 billion ($30 billion) is expected to be withdrawn under the government scheme giving early access to retirement savings to support a coronavirus-hit economy, according to treasury analysis. That is 56% more than the government’s first estimate of A$27 billion.

“Allowing Australians to access their own money during this difficult period has proved extremely popular,” Treasurer Josh Frydenberg said in an emailed statement.

Treasury analysis of banking data showed the vast majority of early release payments are being used in mortgage offset accounts that reduce interest payments, and over half remains unspent.

“We know that almost 60% of those accessing their super early have used it or plan to use it to meet essential day-to-day expenses, including paying down debts, with another 36% adding the money to their savings,” Frydenberg added, referring to superannuation, or workers’ mandatory retirement savings.

Industry sources and academics, however, have warned of the likely opportunity cost of withdrawing the money early, missing out on future compounding returns that will hit future retirement balances.

“This scheme is delivering many members support to get through some tough times,” said Bernie Dean, chief executive of the industry group Industry Super Australia.

“(But) to have over half a million people using it to drain their savings completely is devastating - and most of them still pretty early in their working life.”

The policy-driven raid on retirement savings has also impacted the domestic stock market as pension funds sell assets to pay those customers.