Volvo (VOLV) Q2 2016 Conference Call

Martin Lundstedt, President and CEO

Declining sales but improved operating profits reflective of cost cutting efforts

“Sales decreased with 7% to 3%, excluding FX and divested units, the underlying performance of the business improved from 7.1% to 7.8%, and in particular then that the Truck business, the global Truck business, reached 10% operating margin excluding the provision we made during June 4, the European Union investigation.”

Volumes lower in the US and higher in Europe

“When it comes to volume development in the second quarter, truck volumes were down with 5% whereoff Volvo down with 9%, in particular the US minus 39% that couldn’t fully be offset by Europe that was up 17%.”

They are positive on Europe with no sign on Brexit effect

“For Europe, we have a continuous good momentum and our expectation is that the market will land on somewhere around 290,000 and that is the forecast that we’re also keeping from quarter one reporting. And as I said, we have no strong signs of Brexit so far.”

Providing quality more important to them than chasing market share.

Main priority now is not really to hunt market shares without maintaining the right quality when it comes to our different deals to our customer base because we have the necessary scale already in the system, but with good quality we will grow eventually also with our customers. And we will grow with quality.

On Construction Equipment

“…we see growth in Europe and we see a slowing North America, specifically on general purpose equipment, larger machines related to oil and gas and mining, and the continuous weak situation in emerging markets and the big volume drop.”

Joint Press Release on the ‘1+6’ Round Table July 22nd 2016

Participants: Premier Li Keqiang, World Bank Group President Jim Yong Kim, IMF Managing Director Christine Lagarde,  WTO Director-General Roberto Azevedo, ILO (International Labor Organization) Director-General Guy Ryder,  OECD Secretary-General Angel Gurria  and FSB (Financial Stability Board) Chairman Mark Carney

Sluggish global growth, significant risks persist

The global economy is sluggish and faced with downside risks and uncertainties…We recognize that aggregate demand will remain weak in the short run, and it will take time for supply-side policies to show effects, so a comprehensive package of policies are needed to strike a good balance between short-term and long-term goals…Notwithstanding the improvement in resilience brought about by post-crisis financial reforms, the global financial system faces pronounced risks, which could be amplified by the slow-down in global growth.

Monetary, Fiscal and and Structural tools to be used and communicated effectively

Strong, combined and coordinated efforts are needed, including use of all policy tools – monetary, fiscal and structural – to deal with risks and uncertainties in the world economy, safeguard financial stability and support economic growth. …Well-calibrated and effective communication of policy stances will help to boost confidence, enhance policy effectiveness, and limit negative spillovers.

China continues to play a key role in recovery

China has taken the initiative to adapt to and guide the economic New Normal. While supporting aggregate demand, China continues to strengthen the structural reform, especially the structural reform on the supply-side, break a path for growth, accelerate the shift of growth models from emphasizing size and speed to quality and efficiency, and boost sustained driving forces for growth

Shared directions of structural reforms to play a key role in fostering global economic growth  

While country circumstances differ, there are shared directions of reform in general terms, including deregulation, enhancing competition, encouraging innovation, promoting fiscal reform, promoting trade and investment, strengthening the financial system, advancing labor market reform, improving infrastructure, enhancing environmental sustainability and promoting inclusive growth.

Mixed global employment outlook

The current global outlook for jobs is mixed with slower growth leading to weaker prospects for employment and wages in many countries. Rising inequality and the risk of setbacks to the global drive to reduce poverty, make policy initiatives to increase opportunities for decent work a priority.

Lockheed Martin (LMT) Q2 2016 Results Conference Call

Marillyn A. Hewson – Chairman, President & CEO

Increased full-year guidance

“Turning to the summary financials, our team continue to deliver broad-based results across the corporation, the second quarter numbers exceeding all of our internal plans. This strong year-to-date performance enabled us to increase full-year 2016 guidance for sales, segment operating profit, earnings per share, and cash from operations.”

There´s some progress on divesting IS&GS. Expect updated outlook if completed soon.

“Significant progress towards transaction closure continues to be achieved. We commenced our exchange offer on Monday of last week. Also last week, the Competition and Markets Authority in the United Kingdom concluded its review, satisfying another condition to closing…the offer provides Lockheed Martin stockholders the opportunity to exchange their shares of Lockheed Martin for shares of stock in a Lockheed Martin subsidiary, which then become shares of Leidos common stock upon completion of the transaction.”

Note: IS&GS (Information Systems & Global Solutions) is one of five business units in LMT. The transaction alluded to here is the separation of IS&GS business from LMT and the merger of IS&GS with Leidos Holdings, Inc. which is expected to close in the third quarter of 2016.

The F-35 has significantly improved capabilities.

“Overall the [F-35 Joint Strike Fighter] program program continued to achieve good progress across the multiple fronts of winding down development activities, ramping up production rate and sustainment activities and securing customer support and demand….The tremendous technological leap in capabilities that the F-35 provides are being demonstrated on a daily basis to a growing number of domestic and international customers as the aircraft is fielded at additional sites.”

There´s been notable demand from customers n the US and internationally…

“Turning to customer support and demand for the F-35, key milestones this past quarter on the domestic side include revalidation to Congress by the Department of Defense of the critical and unchanged procurement requirement to replace legacy aircraft with 2,443 JSF fighters for the U.S. Air Force, Navy and Marines. Internationally, support remains strong and growing…I was able to see firsthand the growing international interest and support of the F-35 earlier this month, when I had the opportunity to attend both the Royal International Air Tattoo and Farnborough air shows in the United Kingdom.”

…as customers get exposed to its capabilities. 

“Customers and attendees were able to see up close the revolutionary capabilities of both CTOL and STOVL F-35 aircraft at the air shows as they performed their aerial maneuvers. This marked the debut of the F-35 at major international air shows, demonstrating the increasing maturity and progress on the program.”

They’re on track on production and cost reduction strategy.

“On production, we are on track to increase our deliveries to 53 aircraft this year and have delivered approximately 180 aircraft since program inception. In the area of cost reductions, we continue to make significant progress on our previously announced blueprint for affordability, shared commitment between the government and industry.”

Bruce L. Tanner – CFO & Executive Vice President

Improved top line and bottom line growth.

“Sales were higher by $1.3 billion or 11% this year than last year, driven by the inclusion of Sikorsky in the results of MST for about $1.2 billion and nearly $250 million in growth at Aeronautics driven by $400 million higher F-35 volume which more than offset two fewer C-5 deliveries in the quarter compared to last year…Our EPS in the quarter was $3.32, which represents about a 13% increase over the EPS in the second quarter of last year. “

Significant capital return via dividends and share buybacks.

“We generated $1.5 billion in cash from operations and returned $1 billion of cash to our stockholders in the quarter…With just over $1 billion returned to stockholders evenly split between dividends and share repurchases, we returned over 80% of free cash flow in the quarter.”

NB: In Q2 2016, LMT repurchased 2.1 million shares for $501 million (4.9 million shares for $937 million in Q2 2015) paying cash dividends of $501 million ($467 million in Q2 2015)

They might do some more share repurchases coming up.

“30%, 35% of our investor base is sort of income base. So, that’s a pretty significant element of our ownership that is driven, in fact, by the dividend yield. So, that’s an important aspect of capital allocation going forward…there’s still a backlog of options out there that as those do get exercised, we will clearly do share repurchases to offset that dilution. We will do share repurchases to offset dilution from the equity compensation as well.”

F-35 production step ups not expected in the H2 2016.

“We don’t currently have plans for F-35 production step-ups for the rest – or for the second half of the year, and so that’s one of the things that will cause the second half of the year to look a little wider probably than the first half of the year.”

Pershing Square Capital Management, L.P (PSCM) Q2 2016 Conference Call Presentation

(Available at till Wednesday, August 3, 2016)

Bill Ackman, Founder and CEO

Q2 performance positive but year to date negative 

“Q2 [performance] was between 5 and 6 % depending upon the funds. The performance month to date is between 3 and 3 ½ %…Year to date numbers are in the -14% range for the private funds  and -18% for Pershing Square holdings…The difference in performance is because PSH is leveraged.”

Leading with Mondelez, Lagging with Valeant

“In terms of contributive performance for the quarter, Mondelez is the biggest contributor at between 3 and 4 %…Valeant, a detractor, between -1.6 to -2.1%…Of course, our performance to date is a negative number, -14% negative for the private funds  and -18% for Pershing Square Holdings .”

Significant redemptions but lower than industry averages

“We think about redemptions as a percentage of capital and not obviously the absolute dollar amount…Redemptions [this quarter] were 37% lower than the average of the last eight years. My guess is that our redemptions that we’ve received as a percentage of capital are probably among the lowest in the industry, and that’s really because we benefit from a very stable capital base and that’s because our investors have been incredibly supportive of us.”

On Valeant

“Valeant was at a total shareholder return of -23.4% for the quarter. It represents 6% of capital…During the quarter, we restructured our option position in the company…People have mischaracterized Valeant’s R&D programs. Historically, this company has one of the most productive R&D programs of any pharmaceutical company in the country.”

On Herbalife

“We´re short the stock not for emotion, not for anything else other than we believe this is a massively overvalued company. We believe the company is a fraudulent business [and] will not survive.”


Ali Namvar – Partner

On Mondelez´s offer to acquire Hershey

“While an acquisition of Hershey would strengthen Mondelez´s confectionary presence in North America., whether or not a deal creates value for shareholders depends on the price paid, the acquisition currency used and, importantly, the ability to generate significant cost savings at Hershey.”

Cost savings at Mondelez should continue even with acquisition

“So in short, as shareholders, we would find it unacceptable for an acquisition of Hershey by Mondelez to delay or derail the productivity and cost savings transformation that’s under way at the company.”

Mondelez and Hershey seem like a good fit

“Mondelez does not have a strong confectionary presence in the U.S. and clearly Hershey is the dominant US confectionary player. One of the reasons we do like Mondelez though is that it has exposure to international markets where there is more growth in these categories than in North America. So we do have a question as to what Hershey’s growth rate is in the future, and whether it would be better for Mondelez to invest more in its emerging markets businesses and grow the assets there.”


Extra notes on their Herbalife Presentation, No longer business as usual

  • “We believe the implementation of the settlement will cause the pyramid scheme to collapse.”
  • “The FTC findings confirm our long-held allegation that Herbalife operates as a pyramid scheme.”

European Central Bank (ECB) Monetary policy decision July 2016


Rates left unchanged

“…the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.”

Interest rates expected to be lower for longer

“The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.”

Monthly asset purchases to continue

“Regarding non-standard monetary policy measures, the Governing Council confirms that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.”

European Central Bank (ECB) Press conference July 2016

Mario Draghi, ECB President

Financial markets were resilient post-Brexit with help from central banks

“Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained.

The intention is to meet policy objectives by all instruments necessary

“Governing Council continues to monitor economic and financial conditions very closely and safeguard pass-through of monetary policy…If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate.”

Sluggish growth in the Euro area in Q2 2016 expected to persist in the near term

“Euro area real GDP increased by 0.6%, quarter on quarter, in the first quarter of 2016, after 0.4% in the last quarter of 2015. Growth continues to be supported by domestic demand, while export growth has remained modest. Incoming data point to ongoing growth in the second quarter of 2016, though at a lower rate than in the first quarter. Looking ahead, we continue to expect the economic recovery to proceed at a moderate pace.”

Significant headwinds inform a negative growth outlook

“headwinds to the economic recovery in the euro area include the outcome of the UK referendum and other geopolitical uncertainties, subdued growth prospects in emerging markets, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms. Against this background, the risks to the euro area growth outlook remain tilted to the downside.”

To generate optimal results, monetary policy needs to be augmented by structural reforms and fiscal policy

“in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries….Fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the European Union.”

Bank of England (BoE) Agents’ summary of business conditions

Intelligence report on businesses and consumer actions post-referendum


Little to moderate change in annual rate of activity growth

“The annual rate of activity growth had remained moderate and little changed in the month up to the EU referendum. Consumer spending and construction output growth had eased a little, offset by a pickup in manufacturing growth from a low base. There had been further signs of uncertainty leading to delays in decision-taking, including on capital spending, hiring and property investment.”

Businesses weren’t prepared for the Brexit

“Many contacts planned to undertake strategic reviews of their operations over the coming months in light of the vote. For many, the result of the referendum was a shock; few had contingency plans and so for the time being were in a mode of seeking to maintain ‘business as usual’.”

Companies considering location changes and postponing FDIs

“As yet, there were few suggestions of disinvestment, such as exiting the United Kingdom in the near term, but there were a few reports of planned foreign direct inward investment being postponed. A number of companies were considering alternative European locations for aspects of their business, and some contacts within large international firms expected their continental European operations to receive a greater share of future investment than their UK ones.”

A ´risk off´ approach in the near term for firms

“The outlook for investment was uncertain. The majority of firms spoken with did not expect a near-term impact from the referendum result on their capital spending. But around one third expected some negative effects over the next twelve months, with reports of a ‘risk off’ approach to

expenditures and some imminent plans for spending slipping.”

Consumers are hesitant on higher value purchases

“There had been little evidence of any impact on consumer spending on services and non-durable goods, although there were some reports of consumers becoming more hesitant around purchases of higher-value goods.”

Companies expect to reduce hiring activity

“As yet, there had been few reports of major alterations to businesses’ employment intentions. But the vote to leave was expected to have a negative effect overall on hiring activity over the coming twelve months.”

Prices expected to rise but may not be passed to consumers

“Companies’ prices were likely to increase, as the fall in sterling passed through to higher import costs …Given intense competition, retailers reported seeking to minimise increases in consumer prices, with a view to protecting their market share. But in some services, such as catering, there were expectations that prices could rise relatively quickly.”

Lending unaffected, demand for credit easing.

“But the early evidence indicated that banks’ appetite to lend had been maintained following the referendum decision. There were reports that demand for credit was easing alongside lower expectations for investment spending.”

Johnson & Johnson (JNJ) Q2 2016 Earnings Call

Alex Gorsky, Chairman & CEO and Dominic J. Caruso, Executive Vice President, Chief Financial Officer  

An overall positive medium term outlook in line with growth expectations in global healthcare

“We expect global healthcare to grow at 3% to 5% over the next five years, and we have an objective to grow our sales organically at a faster rate than the market.We also intend to grow our earnings faster than sales. When we combine these objectives with our plans of continue creating value through strategic acquisitions and partnerships as well as our strong dividend yield, we believe the result to be a basis for compelling, long-term total shareholder returns. And that is our focus. We invest for the long-term success of our business.”

Their capital allocation framework focuses on shareholder returns and value creating acquisitions

“Our capital allocation framework starts with paying dividends to our shareholders, which is why we have increased our dividend every year for the last 54 years. Next, we seek value-creating strategic acquisitions and partnership opportunities. And finally, we consider other prudent ways to return value to shareholders such as repurchase programs.”

Strong underlying sales growth in the first half of 2016

“…we continued to deliver strong underlying operational sales growth of approximately 7.9% for the second quarter and our sales results are above analyst estimates. Our second quarter earnings were also above analyst estimates, driven by strong sales performance and operating margin improvement…our operational sales growth this quarter was 5.3% and excluding the impact of acquisitions and divestitures, hepatitis C sales and also the impact of the devaluation that occurred in Venezuela last year, it was strong at more than 8%.”

Sales growing faster in the US than outside the US

“Worldwide sales to customers were $18.5 billion, up 3.9% versus second quarter 2015. On an operational basis, sales were up 5.3%, and currency had a negative impact of 1.4%. In the U.S., sales were up 7.4%. In regions outside the U.S., our operational growth was 3.1% while the effect of currency exchange rates negatively impacted our reported results by 2.7%. “

The impact of the Brexit is indeterminable presently

“We are watching the euro and other currencies closely, as it is uncertain how they will eventually settle out for the year…we’re closely following the situation with the UK’s vote to exit from the EU. We expect this will take time to fully determine what the impact will be, if any. To put it into perspective, though, the UK represents about 3% of our total sales. “

Hospital admissions and surgical procedures have increased, physician visits have declined

“…we are seeing a pick up in terms of hospital admissions and surgical procedures. I think hospital admissions are up around 3%. We think the procedures are probably up around 3.5%. We continue to see some decrease overall in office physician visits, down a couple of a percent. And we think that that’s just due to a more moderated utilization at the front-end due to increased co-pays and a number of other dynamics. But overall, if we look at the core growth rate in the medical hospital device area, we’re encouraged by some of the recent trends that we’re seeing.”

They´re the lookout for strategic, value creating acquisitions

“And as we said for some time, whenever we’re looking at inorganic growth opportunities, we look at, tuck-ins, we look at mid-size deals. We’ll look at large deals. Of course, the tuck-in strategy, particularly in Pharma, actually in all of our segments -Medical Device and Consumer, are those that, where we feel that we can create the most value. But we do think that there’s other opportunities to create value as well in, again, in mid and larger deals. But we’re going to be very disciplined. We’re going to be very decisive about how we do it, and ultimately try to better serve patients and consumers.”

A continuing expectation of consolidation in the market

“Over the past three years or four years, I think we’ve been pretty consistent in our thinking and in our projections about the likely increase in consolidation among providers and hospitals, particularly here in the United States, and just broader healthcare systems. And as systems feel continuing pricing pressure, we think that will manifest itself by them having consolidation. I think we’ve seen those trends. And I think they’re clearly starting an effort to try and be as effective and as efficient as possible. So we do believe that that will be a longer secular trend that’s going to continue.”

A disciplined approach to acquisitions with consideration to valuations

“..We´re very disciplined in our approach to acquisitions. And although we’re actively involved in considering them, valuations come into play, and willingness of the other party to do an acquisition at certain valuations come into play. So that’s regardless of how much money we have available to spend.”

Some valuations of potential acquisitions are prohibitive

“There are some expectations that are still not, in our opinion, normalized for appropriate valuations in the market, so that’s a factor, and that will take time and we’re patient with that. And then we’ll see how the market evolves over time, or as we learn more about the acquisition candidates and their progress in various areas.”

Extra notes


  • The Company increased its sales guidance for the full-year 2016 to $71.5 billion to $72.2 billion.  Additionally, the Company increased its adjusted earnings guidance for full-year 2016 to $6.63 – $6.73 per share.
  • The Board of Directors declared a cash dividend for the 3rd quarter of 2016 of $0.80 per share on common stock with the ex-dividend date being August 19, 2016.





Ericsson’s (ERIC) Q2 2016 Earnings Call

Ericsson’s (ERIC) CEO Hans Vestberg Q2 2016 Results

Negative top line growth  and declining bottom line

“If you look into the sales first, you can see that we now have 10 out of 11 regions coming down… And then, the regions that we already saw the challenge like Middle East, part of Europe, Latin America continue them to have a challenge to grow the business right now.

Note from the second Quarter Report: Sales declined by -11% YoY. Sales, adjusted for comparable units and currency, declined by -7%. Mobile broadband sales continued to decline particularly in markets impacted by a weak macro-economic environment such as Brazil, Russia and the Middle East…Profitability declined sequentially.


Recovery not expected in some countries.

We don’t think that this second part of 2016, we don’t think that that will revert in countries like Russia, Brazil et cetera, Middle East which have had a tough time; we don’t think that they very quickly in short-term will recover.


Focus on significant cost cutting measures on cost of sales and Opex to bolster profitability

That means also that our cost program becomes even more important. We are on the program of the SEK 9 billion that we announced at the end of 2014; half of it going to OpEx and half of it to cost of sales. That program is tracking well. But, we’re also now initiating extensive and significant new cost reductions, given the scenario, both in order to cater for lower volumes but more important to see that we can improve — continuously improve on our profitability.


Cost reductions a sign of adjusting to negative industry trends

“Given current industry trends, we will intensify our activities to reduce cost of sales and adapt our operations to a weaker mobile broadband market.


Cost reductions necessitated by expected Lower volumes

“What we are now doing, we are basically doubling the reduction on OpEx for the same timeframe or the second half of 2017 run rate to reduce the double in OpEx. And the main reason is that of course we see a lower volume, but also that again we’ve put a new company structure that was designed to take out cost..