Meta may be banned from operating in China, but the company is finding plenty of growth coming from the world’s second-biggest economy.
In its third-quarter earnings report on Wednesday, Meta said sales rose 23% from a year earlier, illustrating the company’s ability to weather a tough digital ad market better than smaller rivals like Snap and X, formerly known as Twitter.
Susan Li, Meta’s finance chief, told analysts on the earnings call that Chinese companies played a major role this quarter, continuing a theme from recent periods.
Online commerce and gaming “benefited from spend among advertisers in China reaching customers in other markets,” Li said. That means Chinese companies are spending big money on Meta’s platforms like Facebook and Instagram to send targeted advertising to the company’s billions of users around the world.
Among Meta’s geographic regions, Li said the rest of the world category showed the strongest growth, at 36%. Europe was next at 35%, followed by Asia-Pacific at 19% and North America at 17%. The first category includes South America, and Li said China was a big reason for the rapid expansion.
“Brazil was a strong contributor to the region’s acceleration due in part to increased advertisers demand from China advertisers targeting users in Brazil,” Li said.
Facebook, along with Google and Twitter, are all blocked in China due to the country’s Great Firewall. Facebook and its sibling apps have been inaccessible there since 2009.
Still, Meta has witnessed a “longer-term trend of overall growth” from the China market, Li said, though there have been some “periods of volatility.” For instance, she said that the past two years were marred by higher shipping costs that resulted from the COVID-19 pandemic, which also brought strict lockdown rules in China.
But with China opening up more this year and the worldwide supply chain problems easing, Chinese companies are looking to expand their businesses around the globe and are using Meta as a major tool.
Ultimately, “spending from Chinese advertisers further accelerated for us in Q3,” Li said, adding that “lower shipping costs and easing regulations on the gaming industry have served as tailwinds here.”
Li stressed “the potential for volatility in the future” particularly because “there are so many macro factors at play that are quite hard to predict.”
In particular, Li cited the unpredictability in the Middle East due to the Israel-Hamas war, which led Meta to widen its revenue guidance range.
“We have observed softer ads at the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook,” Li said. “It’s hard for us to attribute demand softness directly to any specific geopolitical event.”
Meta shares dropped more than 3% in extended trading, wiping out earlier gains, after Li’s cautionary comments.
Mattel (MAT.O) on Wednesday warned of slowing demand for the toy industry heading into the crucial holiday season, taking the shine off its bumper third-quarter results driven by the "Barbie" movie's box-office success.
The company's shares fell about 8% in extended trade after the toymaker reiterated that its annual net sales forecast would be "comparable" to last year's figures of $5.44 billion.
"We are operating in a challenging macroeconomic environment with higher volatility that may impact consumer demand," said CFO Anthony DiSilvestro on a post-earnings call.
A majority of the expected $125 million benefit from the "Barbie" movie to full-year sales was reflected in Mattel's third-quarter results, which handily beat market expectations.
"While the movie will have likely cast some glow on Barbie sales in Q4, the company's decision to maintain (sales) guidance suggests that it expects some near-term headwinds ahead," said Zak Stambor, senior analyst at Insider Intelligence.
Even though Mattel shrugged off concerns around inventory destocking from retailers as it heads into the key holiday period, shopping is expected to be downbeat as crimped household budgets weigh on big-ticket purchases.
Still, the company expects consumer demand for its dolls and toy vehicles such as the Hot Wheels brand to outperform broader softness in the toy industry.
"We expect to see an accelerated growth rate in the fourth quarter with significant gross margin expansion," CEO Ynon Kreiz told Reuters.
Mattel also raised its annual adjusted earnings per share forecast to between $1.15 and $1.25, banking on the margin benefit from the "Barbie" movie.
Its adjusted per-share profit of $1.08 beat analysts' estimate of 86 cents, according to LSEG data.
Rival Hasbro (HAS.O) will report third-quarter results on Thursday.
Consumer Reports said on Wednesday it had found "concerning" levels of lead and cadmium in a third of various chocolate products it tested recently and called on Hershey (HSY.N) to reduce the amounts of heavy metals in its chocolate.
The non-profit consumer group said 16 of the 48 products from various makers that its scientists tested contained potentially harmful levels of lead, cadmium, or both.
Consumer Reports tested products in seven categories: dark chocolate bars, milk chocolate bars, cocoa powder, chocolate chips, and mixes for brownies, chocolate cake, and hot chocolate.
Products found to contain excessive metal content included a dark chocolate bar and hot chocolate mix from Walmart (WMT.N), cocoa powder from Hershey's and Droste, semi-sweet chocolate chips from Target (TGT.N), and hot chocolate mixes from Trader Joe's, Nestle (NESN.S) and Starbucks (SBUX.O).
Only milk chocolate bars, which have fewer cocoa solids, were found not to contain excessive metal content.
Consumer Reports has said long-term exposure to the metals can result in nervous system problems, immune system suppression, and kidney damage, with greater danger to pregnant women and young children.
The U.S. Food and Drug Administration told the nonprofit that experts consider chocolate a "minor source of exposure" to lead and cadmium internationally, but that manufacturers and processors remain responsible for ensuring their food's safety.
Hershey's chocolates are pictured for sale on a store shelf in the Manhattan borough of New York City, New York, U.S. July 19, 2017. REUTERS/Carlo Allegri/File Photo Acquire Licensing Rights
Wednesday's study followed Consumer Reports' findings last December that 23 of 28 tested dark chocolate bars contained excessive lead or cadmium, including Hershey products sold under its own brand and the Lily's and Scharffen Berger brands.
Consumer Reports food policy director Brian Ronholm said Hershey, as a "leading and popular brand," should commit to making its chocolate safer. The nonprofit did not on Wednesday ask other manufacturers for the same commitment.
In March, Hershey Chief Financial Officer Steve Voskuil said his company was looking to reduce levels of lead and cadmium, saying the metals are elements in soil that can occur naturally in a chocolate product.
"We would love to eradicate it completely," Voskuil said.
Consumer Reports said more than 75,000 consumers signed an earlier petition for Hershey to reduce heavy metals in its chocolate, and that it is now again petitioning the company.
Hershey referred a request for comment to the National Confectioners Association.
"Chocolate and cocoa are safe to eat and can be enjoyed as treats as they have been for centuries," said Christopher Gindlesperger, a spokesman for the trade group.
Shell (SHEL.L) will cut at least 15% of the workforce at its low-carbon solutions division and scale back its hydrogen business as part of CEO Wael Sawan's drive to boost profits, it said on Wednesday.
The staff cuts and organizational changes come after Sawan, who took the helm in January, vowed to revamp Shell's strategy to focus on higher-margin projects, steady oil output and grow natural gas production.
Shell will cut 200 jobs in 2024 and has placed another 130 positions under review as part of a drive to reduce the headcount in the unit, which numbers around 1,300 employees, the company confirmed in response to a query from Reuters.
Some of these roles will be integrated into other parts of Shell, which employs more than 90,000 people, the company added.
"We are transforming our Low Carbon Solutions (LCS) business to strengthen its delivery on our core low-carbon business areas such as transport and industry," the company said.
Shell shares were down 0.2% by 1435 GMT.
The LCS operations include hydrogen and other businesses looking at decarbonizing the transport and industry sectors but do not include the renewable power business.
Shell managers last week held several town hall meetings with the LCS division where the job cuts and organizational changes were announced, company sources said.
The division also includes Shell's carbon capture and storage and nature-based solutions businesses, which will not be impacted by the current round of cuts, the sources said.
The main focus of the changes has been the hydrogen business.
Shell plans to sharply scale back its hydrogen light mobility operations, which develop technologies for light passenger vehicles, and will focus on heavy mobility and industry, the company said.
It will also merge two of four general manager roles in the hydrogen business, Shell said.
A view shows a logo of Shell petrol station in South East London, Britain, February 2, 2023. REUTERS/May James//File Photo Acquire Licensing Rights
The retreat from the light mobility sector follows the departure of the business's manager Oliver Bishop several months ago. Bishop today leads rival BP's (BP.L) global hydrogen mobility business.
Shell was one of the early backers of hydrogen-fuelled cars, but it has in recent years closed a number of hydrogen fuelling stations around the world, including in Britain, as consumers opted instead for electric vehicles.
The company last year started building a 200-megawatt electrolyzer plant in the Netherlands, Europe's largest, to produce zero-carbon, or green, hydrogen.
It also applied for a grant to develop a low-carbon hydrogen hub in Louisiana, but the project was not among seven announced earlier this month that will share $7 billion in U.S. federal grants to jump-start the emerging industry.
"Our global hydrogen portfolio remains a key part of our efforts to address the commercial and technical challenges in scaling our Low Carbon Solutions business," Shell said.
"We will be disciplined in only making investments with the highest chance of creating value and lowering emissions."
NET ZERO
Sawan said last week that Shell is changing its "pathway" towards meeting its ambition to become a net zero carbon emitting company by 2050.
"For avoidance of doubt, what hasn't changed is the destination that we have set for ourselves," Sawan told to Energy Intelligence Forum in London.
Sawan came under pressure internally last month after two employees issued a rare open letter urging him not to scale back investments in renewable energy, sparking an internal debate.
Shares of Shell and its European peers BP and TotalEnergies (TTEF.PA) have come under pressure in recent years as investors fret over future returns as they lower oil and gas production.
U.S. rivals Exxon Mobil (XOM.N) and Chevron (CVX.N) have doubled down on fossil fuel production, announcing large acquisitions of oil companies in recent weeks.
The interest rate on the most popular U.S. home loan last week jumped to the highest since September 2000, marking its seventh straight weekly increase and driving mortgage applications to a 28-year low, a survey showed on Wednesday.
The 7.9% average contract rate for a 30-year fixed-rate mortgage during the week ended Oct. 20 was up 20 basis points from the prior week, the Mortgage Bankers Association said.
A "For Rent, For Sale" sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo Acquire Licensing Rights
"Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995," MBA vice president and deputy chief economist Joel Kan said. "These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity."
The cost of borrowing to buy a house has risen even as the Federal Reserve has put its inflation-fighting rate-hike campaign on pause, after lifting its benchmark policy rate from near zero in March 2022 to 5.25-5.50% in July of this year.
The 30-year fixed rate mortgage is up 81 basis points since then, tracking a similar rise in the yield on the 10-year Treasury note, the main benchmark for longer-term U.S. borrowing rates.
The United Auto Workers (UAW) union reached a tentative labor deal on Wednesday with Ford Motor (F.N), the first of Detroit's Big Three car manufacturers to negotiate a settlement to strikes joined by 45,000 workers since mid-September.
The proposed accord, which UAW's leadership must still approve, provides a 25% wage hike over the 4-1/2-year contract, starting with an initial increase of 11%.
The Ford deal, which could help create a template for settlements of parallel UAW strikes against General Motors (GM.N) and Chrysler parent Stellantis (STLAM.MI), would amount to total pay hikes of more than 33% when compounding and cost-of-living mechanisms are factored in, the UAW said.
"We told Ford to pony up and they did," Fain said in a video post on Facebook, adding that the strike at Ford "has delivered".
In addition to the general wage hike, Fain said the lowest-paid temporary workers would see raises of more than 150% over the contract term and employees would reach top pay after three years. The union also won the right to strike over future plant closures, he said.
The UAW also succeeded in eliminating lower-pay tiers for workers in certain parts operations at Ford - an issue Fain highlighted from the start of the bargaining process, wearing T-shirts with the slogan "End Tiers."
The Ford contract would reverse concessions the union agreed to in a series of contracts since 2007 when GM and the former Chrysler were skidding toward bankruptcy, and Ford was mortgaging assets to stay afloat.
"We know it breaks records," Fain said in a video address Wednesday night. "We know it will change lives. But what happens next is up to you all."
The Detroit automakers have argued that the UAW's demands will significantly raise costs and hobble their electric vehicle ambitions, putting them at a disadvantage when compared to EV leader Tesla (TSLA.O) and foreign brands such as Toyota Motor (7203.T), which are non-unionized.
The UAW was preparing to strike at a key Ford facility in Dearborn this week if it had not reached an agreement after striking at additional GM and Stellantis facilities this week.
But in an unexpected move that adds pressure on GM and Stellantis, the UAW told Ford workers now on strike to return to their jobs during the ratification process. That means production of Ford Super Duty pickups, Ford Bronco and Explorer SUVs and Ranger trucks could restart this week.
Ford, confirmed the news. "We are pleased to have reached a tentative agreement on a new labor contract with the UAW covering our U.S. operations," Ford CEO and President Jim Farley said in a statement. Ford shares rose 2% in after-hours trade.
In statements, GM and Stellantis said Wednesday they are working to secure agreements as soon as possible.
"This lays the groundwork for the next two contracts and they should fall in line fairly quickly because all three were within a narrow gap of each other," Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
The UAW ratcheted up pressure on the automakers by striking at each company's most profitable plant - GM's Arlington, Texas assembly plant, Ford's Kentucky heavy-duty pickup factory, and Stellantis' Ram pickup plant in Sterling Heights, Michigan.
The total economic loss from the auto workers' strike has reached $9.3 billion, the Anderson Economic Group said earlier this week.
"I think this will be a positive for the stocks," said portfolio manager Tim Piechowski at ACR Alpine Capital Research, which has $250 million in investment in GM. Detroit Three shares currently reflect a scenario worse than the terms of the tentative agreement, he said.
BARGAINING TABLE
The UAW's campaign for a record contract converged with union efforts in Hollywood and at delivery giant UPS to win big pay increases. It also became the focus of attention by U.S. President Joe Biden and Republican rivals who see Michigan and other auto states as pivotal to their 2024 campaign strategies.
Biden joined Fain on a picket line last month, and praised the tentative agreement in a statement Wednesday night as a "testament to the power of employers and employees coming together to work out their differences at the bargaining table."
Absent from Fain and Browning's summary of the contract terms Wednesday was mention of future pay and unionization at new joint-venture electric vehicle battery factories the Detroit Three are building with Asian partners.
Because they are owned by separate corporate entities, the automakers did not have to include those factories in this round of bargaining. Fain had pushed for assurances that battery plant wages would be comparable to wages at assembly plants and expressed concern that UAW jobs at Detroit Three combustion powertrain plants would be lost over time to non-union battery operations.
Nonetheless, Harley Shaiken, a labor professor at the University of California, Berkeley, saw the deal as one with far-reaching implications. "This is a set of negotiations, historically, where gains made in Detroit would be viewed and adapted by many other industries across the economy," he said.
Former GM shareholder Jeffrey Scharf of Act Two Investors said the bottom line for union chief Fain depended on his ability to expand the union.
"If they can use this as a lever to organize Tesla and companies like that, he's brilliant. If they fail to organize the other companies and the differential causes jobs to go out of Detroit and to the other companies, then he's a failure," Scharf said.
Barclays Plc (BARC.L) is laying off dozens of staff in its U.S. consumer banking division as part of a global drive to cut costs, according to a source familiar with the situation.
The redundancies account for about 3% of employees in the bank's U.S. consumer division, said the source, who declined to be identified discussing personnel matters. The staff were informed earlier this week, the person said.
"We review our business on a regular basis to ensure we are operating as effectively and efficiently as possible," a spokesperson for Barclays said in a statement. "These decisions are never easy and employees whose roles have been impacted will receive a full range of transition services."
Barclays on Tuesday said it would embark on a fresh round of restructuring in the coming months, as it looks to reduce costs and drive efficiencies across the bank in a bid to lift profits.
The bank's shares nonetheless slid 6% on Tuesday as long-suffering investors in the British bank digested its downbeat outlook for its home market.
Chief Executive C.S. Venkatakrishnan said the lender will update investors on the areas impacted when Barclays reports full year results in February.
The bank is already drawing up plans to cut hundreds of jobs in its domestic retail bank and cut staff in its investment bank, Reuters reported last month.
Barclays' consumer, cards, and payments business, which houses the U.S. division impacted by the latest job cuts, has been a source of strength for the bank in recent quarters as growth in credit card balances from its $3.8 billion acquisition of retailer Gap Inc's (GPS.N) portfolio lifted revenues.
The outlook for the business looks murkier now, however, with the bank warning on Tuesday that higher unemployment expectations in the U.S. could lead to customers missing payments.
Southwest Airlines(LUV.N) said on Wednesday it has reached a tentative agreement with the Transport Workers Union Local 556, representing nearly 19,000 flight attendants, making it the first major U.S. airline to strike such a deal.
The union would communicate details about the agreement and the voting timeline directly to its members, the company said.
Transport Workers Union Local 556, which represents Southwest's flight attendants, has said its members have not received a pay raise in the last four years.
Southwest flight attendants have been demanding higher pay and a better work-life balance in their new contracts.
In the past two years, unions across the aerospace, construction, airline, and rail industries have put up fights for higher wages and more benefits in a tight labor market.
In August, the airline reached a tentative labor agreement with the union that represents about 17,120 transport workers who handle ramp, operations, provisioning, and cargo.
United and American Airlines are yet to reach an agreement with their flight attendants over new contracts.