Friday, November 28, 2008

Heinz's Ketchup on Financial Comments

Heinz (HNZ) reported fairly good results for Q2. Apparently ketchup will do well in the current economic difficulties. But listen to the way senior officers explain themselves. They are pulling their punches. We all know that economic times are difficult. So why do they need to say the following:

“Our first-half results demonstrate that the Company’s growth strategy is working. Heinz will accelerate its focus on boosting productivity and margins in light of the current economic climate. We will also shift investments in marketing and R&D toward value-oriented innovation, which is more important than ever to consumers. As we look beyond FY2009, we remain confident in our business fundamentals, but in light of the volatile economic conditions, we will closely watch currency and commodity movements before we advise investors of our financial outlook for FY2010,” said Heinz Chairman, President, and CEO, William R. Johnson.

Just sit there and think about it for a moment. If the strategy is working, which they claim it is, why are you preparing the investor for changes. Also it is intuitively obvious that currency and commodity prices deeply influence results at companies such as Heinz. So for the CEO to say they are watching them is laughable. They better be watching them before something runs them over.

Thursday, November 27, 2008

Bank of Montreal Wimps Out!

Bank of Montreal (BMO) released Q4 and year end financial results. They clearly had a difficult year and are probably glad it’s over. Now that everyone is dealing with financial insanity it’s nice to be part of the peer group. They did admit that they missed four out of five financial objectives and then proceeded to wimp out and claim they will not be publicly announcing financial objectives. They made it clear that they have rigorous internal objectives and hold their own people accountable. That’s really nice. But how does the shareholder hold the board and senior management accountable.

Wednesday, November 26, 2008

BCE Shambles

BCE (BCE) experienced a body blow today. The much anticipated deal is to close on Dec 11, 2008. Given the Citigroup was propped up everyone expected it to go forward. Now KPMG who was to provide a solvency opinion as a pre-condition, is saying they do not believe the firm will be solvent. Ontario Teachers pension plan acknowledges that this is a pre-condition.

Who is the culprit. KPMG is looking suspicious. While the economic scenario is changing the shades of doom and gloom have not been recently material. So to conclude that market conditions have changed is just too cute. KPMG is probably hiding behind a legal wall just so they can say “We told you so”.

Lawyers need to examine the timeline on this opinion. The amount of debt has been well known for months. So to come out at this late date and say that it is the problem is inadequate. But if someone comes up with a small technical change can KPMG now go back and say it’s all good. Then again the lenders are supposed to be savvy financial types maybe they will elect to ignore KPMG and stop relying on third party cover.

Tuesday, November 25, 2008

Remy Cointreau Price Increase

Remy Cointreau ( announced results. Strong sales in China and Russia. Satisfactory in UK and Germany. Flat in the US. OK so lets go to across the board price increases. Or as they said in the press release: “The Group continued to implement a deliberate policy of price increases in all markets.” Then the press release concludes with this comment :

For the financial year ending 31 March 2009, the level activity at the year end as well as the Chinese New Year will remain key. In view of the temporary cost overruns generated by the establishment of its distribution network, Rémy Cointreau does not anticipate, at this stage, organic growth in its current operating profit.”

Remy needs to reconcile its price increases to its increasing cost structure. Price increases with no bottom line implications are useless to dangerous.

Monday, November 24, 2008

Citigroup Triage

Citgroup (C) was bailed out and had to give up a preferred share issue to stay afloat. In addition the Fed, Treasury and every assistant deputy dog in the financial world are pretty well guarantying anything that looks like a problem. The common stock dividend all but disappears. So where does the board stand in all of this. They have helped steer the ship onto the rocks and have essentially proven they were not a good board. There are other banks in much better shape than Citi.

From a governance point of view the board will do what they are told to do by the regulator. So why keep them? The Fed and treasury have made what may become Warren Buffet like investments. So where does the Saudi Prince stand. (Prince Alaweed) His previous investment looks shaky. He went in and bought significantly more just before the announcement. Was he negotiating in some fashion? His purchase was on the open market and therefore was not new capital to Citi and therefore did not help solve any of the current problems.

Emergency room triage is a fast pace process even when performed on corporate boardroom tables. Who bears responsibility for the reasons why it had to be done?