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Auto recovery fuels optimism for Europe’s earnings season

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Auto recovery fuels optimism for Europe's earnings season 1

LONDON (Reuters) – Expectations for European companies’ profits in the last quarter of 2020 are improving as the reporting season gets underway, driven by optimism car markers will recover faster than expected from the COVID-19 crisis, according to Refinitiv I/B/E/S data.

Companies listed on the pan-European STOXX 600 benchmark index are expected to see a 24.3% fall in fourth-quarter earnings, an improvement compared to last week’s prediction of a 26.2% retreat.

Refinitiv added that out of the 14 companies which had already reported earnings when it compiled the data, 78.6% had exceeded analyst estimates.

Germany’s Volkswagen’s notably reported on Friday a rebound in premium car sales in China and stronger deliveries which pushed its operating profit to 10 billion euros, well above the 4.8 billion euros awaited by analysts.

“We expect Q4 earnings season to deliver many beats across the sector”, UBS analysts commented separately in a note, warning however that some of the improvement had already been priced in the stock market.

More broadly, Germany’s auto industry association said on Tuesday it was optimistic for a recovery in the second half of 2021 despite the closure of stores and showrooms and a global shortage of semiconductors that has shut assembly lines.

Estimates for the first quarter also slightly increased compared to last week. Profits are seen rising 44% versus 43.5% in last week’s data.

(Julien Ponthus in Lodnon and Danilo Masoni in Milan, editing by Louise Heavens)

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China’s factory activity growth likely moderated during February holiday lull – Reuters poll

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China's factory activity growth likely moderated during February holiday lull - Reuters poll 2

BEIJING (Reuters) – China’s factory activity likely grew at a slightly slower rate in February as factories closed for the Lunar New Year holiday, a Reuters poll showed, although growth is expected to remain firm, buoyed by an early resumption of production.

The official manufacturing Purchasing Manager’s Index (PMI) is expected to dip marginally to 51.1 in February from 51.3 in January, according to the median forecast of 20 economists polled by Reuters. A reading above 50 indicates an expansion in activity on a monthly basis.

Chinese factories typically scale back operations or close for lengthy periods around the Lunar New Year holiday, which fell in the middle of February this year.

However, the resurgence of COVID-19 cases in the winter had prompted local governments and companies to dissuade workers from travelling back to their hometowns, giving a boost to the earlier-than-usual resumption of production at many factories, analysts say.

“Although government COVID-19 prevention measures may constrain some manufacturing activities in the near-term, the fact that a majority of migrant workers stayed in their workplace cities for the holiday should facilitate an earlier resumption of business activity following the holiday this year,” said analysts at Nomura in a note to client on Thursday.

Wang Zhishen, a migrant worker from Gansu, told Reuters that his factory, a manufacturer of logistics boxes in the manufacturing hub of Dongguan, only closed for three days during the holiday, thanks to overwhelming businesses. Lured by the 1,500-yuan cash subsidy his factory offered, he chose to work through the holiday.

The Chinese economy has largely shaken off the gloom from the COVID-19 health crisis, with consumers opening up their wallets after months of hesitation. Growth is now set to rebound sharply this quarter, also helped by the low base effect of a year ago.

The country has successfully curbed the domestic transmission of the COVID-19 virus in northern China, with the national health authority reporting zero new local cases for the 11th straight day. Cities that were on lockdown have since vowed to push for a work resumption at full speed.

The official PMI, which largely focuses on big and state-owned firms, and its sister survey on the services sector, will both be released on Sunday.

The private Caixin manufacturing PMI will be published on Monday. Analysts expect the headline reading will dip slightly to 51.4 from 51.5 in January.

(Reporting by Stella Qiu and Ryan Woo; Editing by Sam Holmes)

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Shell in Germany seeks to speed up drive to go green

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Shell in Germany seeks to speed up drive to go green 3

FRANKFURT (Reuters) – Royal Dutch Shell in Germany aims to produce aviation fuel and naphtha made from crops and to increase to commercial scale an electrolysis plant that makes fossil-free hydrogen, as it seek to move away from crude oil.

The energy major told an online conference on Friday it had applied for subsidies to carry out the work from the European Union and from German funds earmarked for decarbonisation. It did not give detail on the expected cost.

The global Shell group has set itself a goal of net zero emissions by 2050.

At Wesseling, part of the Rheinland refinery complex, it plans to use green electricity to produce synthetic, carbon-free, power-to-liquids (ptl) to replace its conventional jet fuel and naphtha output, building a ptl plant from 2023 and starting production in 2025.

The ptl plant can also use wood as biomass input.

Hydrogen is also considered a green fuel when electricity from renewable energy is used in its production.

Shell said last September it will set up offshore wind farms to provide power and on Friday it said it could also start building a 100 MW electrolysis plant, to be called Refhyne II, from 2022, scaling up from a 10 megawatt plant.

“The product portfolio of the location clearly must change,” said Fabian Ziegler, head of Shell Deutschland.

To further the shift to clean transport in Germany, Shell also plans to equip petrol filling stations with electric car charging points.

Shell is already the owner of German solar battery maker sonnen. On Thursday, it said it has agreed to buy Cologne-based virtual power plant (VPP) operator Next Kraftwerke, Germany’s biggest VPP.

Next aggregates wind and biogas power production and markets it in balancing markets, which can help offset the unpredictable flows associated with renewable output.

(Reporting by Vera Eckert, editing by Barbara Lewis)

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Why digital must be at the top of a retailer’s strategy

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Why digital must be at the top of a retailer's strategy 4

By Chris Burnside, Account Manager, Specialty Retail, UK & Nordics Global Sales & Verticals, Worldline

COVID-19 is constantly shifting consumer shopping habits from on-site to online, meaning that eCommerce is becoming the main driver of physical retailers’ strategies. Changes in demographics, innovations in payments, and evolving customer needs, as well as the current social isolation that the nation is dealing with are all shaping the retail sector of today.

Online shopping, price-comparison search engines, online coupons and cashback deals have created a new breed of consumers. These shoppers are smart, tech-savvy, hungry for deals and conduct their own research before making purchases. However, these connected customers tend to be bigger shoppers and might potentially become lifelong advocates (including via social media) to bring in more following for a specific brand.

Therefore, retailers must be well prepared to survive in these lucrative, yet challenging times as online purchases surge and consumers demand a way of paying for goods online.

Changing customer expectations

Today’s customers are becoming increasingly more omnichannel in the way they shop and expect to be dazzled by interactivity and connected services, while retaining the simplicity and seamlessness of payments. These shoppers also expect on-site shopping to allow them to mix online and in-store purchases, pick-up of purchased goods, and transparent refund and return policies.

Some retailers might ask what the benefits are of bringing in such demanding customers. However, these types of shoppers can increase a retailer’s profits substantially as they have been proven to deliver a higher value purchase track record compared to regular or smaller ticket item shoppers.

If any physical retailers are in doubt, they should simply consider the benefits that go along with becoming connected and offering their goods online. Firstly, online shopping offers a greater variety of ways to target individuals’ needs, from targeted ads and special occasions coupons to personalised gifts for shoppers that drives sales and generates new and returning customers.

The surging power of online

Chris Burnside

Chris Burnside

The other massive benefit is the ability to offer more online. Online is increasingly what more and more customers today are looking for. As more purchases are made online, brands must be mindful that physical retail space is getting increasingly more expensive, especially in top locations. Therefore, with an eCommerce model, businesses can choose a central warehouse located outside the city.

Another vital perk of going digital is the potential to establish direct engagement with your audience via social media. According to research by Facebook, more than 80% of people use Instagram to research their potential purchases and discover new trends and products.

When entering the world of eCommerce there are several challenges that retailers must plan for. These include, online fraud, a lack of local payment methods, no direct support for clients in case of issues or questions, lower authorisation rates and potential IT issues. However, a reliable partner can help mitigate these risks and help retailers to effectively design the registration flow and the checkout experience to retain paying customers and limit fraudsters’ activities.

Such providers have in-store solutions that provide a unified and safe payment flow that immerses and connects the buyer and the seller in this financial journey. It constitutes a set of comprehensive hardware and software-based solutions to open up retailers to more customers and boost their sales and conversion levels. Bridging the gap between online and physical stores by introducing digital kiosks, touch screens and VR experiences to POS transform the shops of today into the shops of the future.

The value of strong acquiring capabilities

Alongside omnichannel, it cannot be underestimated the importance of also offering effective, fast, and reliable acquiring services that are tailored to retailers needs based on regions and their risk appetite. It means the capacity to implement smart routing and switching to effectively optimise authorisation levels.

When offering their products globally, retailers must also consider the importance of having a well-thought out set of local payment methods. This is because one of the major differences between physical retail and online shopping is that once in the shop, customers are likely to pay for the products they really want whether by card or cash. Online sales, especially on local markets can be more complex. This is because they will typically choose a specific local payment method that they are accustomed to, such as BLIK in Poland, Sofort in Germany or iDEAL in the Netherlands. By not offering these, it can be a deal-breaker causing people to drop sales and search for stores that have these options at checkout.

The right acquiring capabilities, by having a global presence and massive knowledge base, can offer pre-implementation support to retail owners and guide them through the implementation process itself. Therefore, with a massive infrastructure and immense experience in the payments industry behind them, the right providers have the capacity to serve customers around the world and provide a seamless payment experience of the future, right here and right now.

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