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Week-in-Review: Multinationals With Multiple Problems

iconFeb 26, 2016 15:30
This week was a rough one for companies such as BHP Billiton and BAE Systems.

by Jeff Yoders on FEBRUARY 26, 2016

This week was a rough one for companies such as BHP Billiton and BAE Systems, vast multinationals that call the entire world home and offer products as varied as mined raw materials to supersonic fighter jets.

Things started off auspiciously when BHP slashed its interim dividend by 75% on Tuesday, abandoning a long-held policy of steady or higher payouts as it braces for a longer-than-expected commodities downturn. That wasn’t the end of the rough ride for BHP, though. The Anglo-Australian miner was then sued in the US by investors who accused it of fraudulently overstating its ability to manage safety risks prior to November’s fatal dam burst at the Brazilian mine it co-owned and operated with Rio Tinto Group.

Mo’ Nations, Mo’ Problems

So, not only is BHP on the hook for the destruction caused thanks to the dam collapse in Brazil but, if the lawsuit is successful, it could also owe back any money lost by investors.

But, BHP was not along in facing angry investors and lower returns this week. My colleague, Stuart Burns wrote about the challenge that defense and aerospace multinational BAE Systems is facing as oil prices keep falling and Middle Eastern clients cancel orders for Euro Fighters.

As oil keeps declining, nations such as Saudi Arabia — fighting one war and it might have another conflict on the way — are passing on those expensive Euro Fighters and they’re making only the most necessary defense expenditures. For BAE, that meant issuing a $1.5 billion bond sale at the end of last year to facilitate cash flow in the event of much smaller up-front deposits for those fighter jets.

So, as BAE and BHP dealt with their problems in a fairly bad week for multinationals, was anyone making progress in this bearish metals market?

The General Bucks the Trend

Actually, GE made a first-of-its-kind deal with Chinese metal coatings manufacturer Tianjin Xinyu Color Plate Co, Ltd.

As the only international company bidding among strong local competitors, GE, this week, won a contract to provide power distribution and low-voltage drives as an electrical and automation solution for Tianjin Xinyu Color Plate’s two greenfield continuous galvanizing lines, which produce galvanized steel sheets for white goods and construction industries.

GE’s insulated gate, bipolar transistor-based LV7000 converters and high-performance controllers will allow Tianjin Xinyu Color Plate to manufacture high-quality galvanized steel.

So, while it was a downer week for most multinationals, GE has reason to celebrate as it extended its reach into a new market.


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