Royal Dutch Shell cut its dividend for the first time since the Second World War on Thursday, in a drastic step to preserve cash as it prepares for a protracted slump in demand for oil because of the coronavirus pandemic.
The Anglo-Dutch energy company also suspended share buybacks and said it would reduce oil and gas output by about a quarter after its net profit almost halved in the first three months of 2020 to $2.9 billion US.
The new measures combined with cuts in capital spending and planned cost reductions announced last month could save Shell almost $30 billion this year to help it weather the crisis and prepare for the transition to low-carbon energy.
“We are living through a crisis of uncertainty,” CEO Ben van Beurden said. “If we had not cut the dividend … we would have been left without options to reposition the company for the recovery and the future.”
Shares in Shell had slumped 8.2 per cent in London, underperforming rival BP,which said on Tuesday it was maintaining its first-quarter dividend.
Dividend slashed to 16 cents
For years, Shell has taken pride in having never cut its dividend since the 1940s, resisting such a move even during the deep downturns in the oil market of the 1980s.
Some investors had called on major oil firms to break the industry taboo around dividends because of the fallout from the health crisis, rather than taking on more debt to maintain payouts.
Shell said it would reduce its quarterly dividend to 16 cents per share from 47 cents, which would save the company about $10 billion this year if it stays at that level. Shell last changed its dividend at the start of 2014, raising it from 45 cents.
Shell is the first of the five so-called Oil Majors to cut its dividend because of the coronavirus crisis. Besides BP, Exxon Mobil has also said it will maintain its first-quarter dividend while Total and Chevron have yet to report first-quarter results.
“Shell’s dividend cut has thrown down the gauntlet to the supermajors. BP, Chevron, ExxonMobil and Total are due to pay out $41 billion of dividends in 2020,” said Tom Ellacott, an analyst at Wood Mackenzie.
‘Ripping off the Band-Aid’
Van Beurden said the dividend cut was part of a long-term resetting of the company that would also play a core part in Shell’s shift away from fossil fuels.
Oil and gas companies have come under increasing pressure from investors worried about climate change and Shell this month laid out the sector’s most extensive strategy yet to reduce greenhouse gas emissions to net zero by 2050.
“Ripping off the Band-Aid always hurts, but if Royal Dutch Shell’s move today allows more room for alternative energy investments, and facilitates a lower cost of equity, it could be just what the company needs to ensure its long-term health,” said Tal Lomnitzer, a senior investment manager at Janus Henderson Investors.
Wood Mackenzie said the cut meant Shell would be able to generate cash with oil at $36 a barrel, down from $51 previously. Brent crude has fallen 65 per cent so far this year and was trading at about $25 a barrel on Thursday.
Shell has cut its dividend for the first time since the Second World War. (Reuters)
Shell paid about $15 billion in dividends last year, making it the world’s biggest payer of dividends after Saudi Arabia’s national oil company, Saudi Aramco. Dividends paid by Shell and BP last year make up almost one quarter of all the dividend income paid out by companies on London’s benchmark stock index, the FTSE 100.
Global recession
Following years of deep cost cuts after its acquisition of BG Group for $53 billion in 2016, Shell had previously planned to boost payouts through dividends and share buybacks to $125 billion between 2021 and 2025.
Global energy demand could slump by six per cent in 2020 due to coronavirus lockdowns and travel restrictions in what would be the largest contraction in absolute terms on record, the International Energy Agency (IEA) said on Thursday.
Shell last month said it would reduce capital expenditure this year to $20 billion US at most from a planned level of about $25 billion US and cut an additional $3 billion to $4 billion off operating costs over the next 12 months.
Van Beurden said he expected the impact of the drop in oil demand to be more severe in the second quarter, while chief financial officer Jessica Uhl said the company was bracing for a deeper and longer recession that would extend into 2023.
Shell’s first-quarter net income attributable to shareholders based on a current cost of supplies and excluding identified items fell 46 per cent from a year earlier to $2.9 billion, above the consensus in an analyst survey provided by Shell.
The company said it cut activity at its refining business by up to 40 per cent and expected to cut oil and gas production in the second quarter to between 1.75 million and 2.25 million barrels of oil equivalent per day (boed) from 2.7 million boed in the first quarter. Shell said it did not expect the cuts to be permanent and it would still invest in oil and gas projects.
Shell, the world’s largest fuel retailer with 45,000 filling stations, said its fuel sales could fall up to 54 per cent in the second quarter.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
