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The Scotsman: Royal Dutch Shell on course to beat its own profits record

By Hamish Rutherford

ROYAL Dutch Shell is expected to report the biggest-ever profit by a British company – more than $26 billion (£13.1bn) – on Thursday, breaking its own record of 2006.

Consensus forecasts among analysts predict fourth-quarter earnings of $5.82bn, with higher operating costs and lower refining margins biting into profits, even though oil prices reached record levels during the period.

Assuming the consensus is correct, Shell would then have made a full-year profit of $26.65bn, 5 per cent ahead of 2006.

The profits come after a steep increase in capital spending to seek out new oil and gas reserves, with the company still troubled by a scandal over its reserves in 2004. Analysts expect the company to reveal production at the lower end of its guidance range of 3.3-3.5 million barrels of oil equivalent a day, and expect production guidance to be cut for 2008.

Deutsche Bank said in a note: “Looking ahead, 2008 looks likely to be another year of rising capital expenditure but declining production at Shell.”

The analysts predicted that a rise in profits in exploration and production divisions are likely to have been weighed down by downstream and retail divisions. Shell may also give an update on plans to cut its workforce by more than 3,000 through an outsourcing exercise.

AstraZeneca, the pharmaceutical giant, also unveils its 2007 results this week, with analysts expecting pressure on the group from patent challenges for its top selling drugs.

Three of its leading products are facing competitions from rivals looking to market generic copies. Analysts at Dresdner Kleinwort predict heartburn drug Nexium, AstraZeneca’s biggest seller, could have fallen 8 per cent in the final quarter.

Concerns over the patent challenges have knocked AstraZeneca’s share price by more than a third in past three months. Analysts will be looking for reassurance on the issue, with about 30 per cent of earnings forecasts for 2009 and 2010 at risk.

British Airways has recently been in the news after a dramatic crash landing, and the impact of Christmas fog that grounded dozens of flights will be revealed when the British flag carrier unveils nine-month results on Friday.

The consensus among analysts is pre-tax profits of £773 million for the three quarters, compared with £584m the year before. First-half profits rose by more than a third to £593m, despite a rise in fuel costs and the weak US dollar.

Mitchells & Butlers, owner of the All Bar One and Harvester chains, is expected to be shown struggling this week when it reports first quarter results on Thursday. Pub and restaurants have suffered since the smoking ban in England and Wales, and in November the group said sales were slowing.

FRIENDS TO PART WITH ASSETS

FRIENDS Provident will outline its plans for growth this week, expected to include a partial break-up.

The 176-year-old insurer was forced into a strategic review after a planned friendly merger with Resolution failed last year.

Analysts have said it needs to do a deal to find cash to fund growth. Friends is expected to announce a sale of Lombard, its wealth management business for wealthy individuals, and its majority stake in F&C Asset Management.

The full article contains 549 words and appears in The Scotsman newspaper. Last Updated: 27 January 2008 9:21 PM

http://business.scotsman.com/industry/Royal-Dutch-Shell-on-course.3715804.jp

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