ZURICH – Swiss engineering group Sulzer has put its Russia business up for sale, joining the exit from the market hit by Western sanctions over Moscow’s invasion of Ukraine.

The sales process will begin immediately, on Tuesday without providing further detail. A spokesperson said all options were open, including a buyout by local management.

The company had already announced that it had scaled back business in Russia, where it has 300 staff. Russia accounted for 2.7% of group sales of 3.2 billion Swiss francs ($3.33 billion) in 2021.

“The board regrets the necessity of this decision after decades of operations in Russia, but after careful review of the possible options, concludes that it is the best solution for all the stakeholders,” it said.

The Swiss pumpmaker agreed in 2018 to buy 5 million shares from shareholder Viktor Vekselberg, taking the Russian oligarch’s holding below the 50% threshold where U.S. sanctions against Russian President Vladimir Putin’s inner circle took effect at the time.

It has started to wind down its business in Poland this month due to sanctions levied by the Polish government on Vekselberg.

Sulzer is fighting the Polish move as it views the sanctions are unfair given that Vekselberg has no control over any group businesses.

($1 = 0.9620 Swiss francs)

(Reporting by Michael Shields; editing by Jason Neely)

By Jonathan Cable

LONDON -Growth in euro zone business activity slowed this month but was still relatively strong despite a cost of living crisis putting a dent in consumer spending power and a shortage of raw materials holding back expansion in manufacturing, a preliminary survey showed.

S&P Global’s flash Composite Purchasing Managers’ Index (PMI), released on Tuesday and seen as a good guide to overall economic health, fell to 54.9 in May from 55.8 in April, lower than the 55.3 predicted in a Reuters poll.

Any reading above 50 indicates growth.

“The small fall in the euro zone Composite PMI in May suggests that activity is holding up better than we had feared. But the services rebound is likely to run out of steam amid high inflation and the drop in new orders bodes ill for industry,” said Jessica Hinds at Capital Economics.

May’s services PMI fell to 56.3 from 57.7, well below the 57.5 predicted in the Reuters poll, as sharply rising prices kept some consumers cautious.

Growth in demand for services weakened – the new business sub-index fell to 55.2 from 56.6 – but firms did increase headcount at a faster rate than in April.

A sustained rebound in services helped business activity in Germany, Europe’s largest economy, grow although there are signs rising prices, market uncertainty and supply problems are starting to put pressure on demand, a sister survey showed.

In France, the bloc’s second biggest economy, growth slowed slightly as inflationary pressures took the shine off a reduction in COVID-19 restrictions.

Momentum in Britain’s economy, outside the euro zone and European Union, slowed much more than expected this month, adding to recession worries as inflation pressures ratcheted higher, another survey showed.

A flash PMI covering the euro zone manufacturing industry fell to 54.4 this month from 55.5, worse than the 54.9 predicted in a Reuters poll and its lowest since November 2020. But the output index, which feeds into the composite PMI, rose to 51.2 from 50.7.

Renewed COVID-19 lockdowns in China and Russia’s invasion of Ukraine have disrupted supply chains that were only just recovering from the pandemic, sending costs soaring and limiting access to raw materials.

Euro zone manufacturing input and output prices both remained high and factory managers passed on the increasing costs of materials to customers. The output prices index only nudged down from April’s record high of 77.3 to 76.0.

Inflation in the euro zone was a record 7.4% in April, official data showed last week, and a recent Reuters poll of economists predicted the European Central Bank would raise its deposit rate in July.[ECILT/EU]

Suggesting more momentum might be lost, the future output index, which monitors expectations for the year ahead, fell to 59.6 from 60.5, its lowest since July 2020.

“The growth outlook is clearly worsening, but the current impact of high inflation and the war (in Ukraine) is not yet contractionary according to the survey,” said Bert Colijn at ING.

(Reporting by Jonathan Cable; Editing by Catherine Evans and Susan Fenton)

(Reuters) – Russia’s biggest mobile operator MTS said on Tuesday it has started selling discounted and used smartphones, offering Russian consumers cheaper alternatives as inflation bites and Western brands suspend shipments.

Apple paused all product sales in Russia in early March, one of many Western companies to distance itself from Moscow since it sent tens of thousands of troops into Ukraine on Feb. 24 in what it called a special military operation.

Sales of Chinese smartphone brands in Russia doubled in the first two weeks of March, Kommersant newspaper reported at the time.

Now, MTS is offering smartphones from Chinese brands Huawei, Honor and Xiaomi, as well as South Korean producer Samsung, for up to 50% less than new devices at its Moscow stores and online. MTS said the brands offered and locations where they are sold would be expanded.

“This is a good opportunity for our company to offer consumers an additional way to save on purchases of quality gadgets,” said Pavel Sukhovarov, head of MTS’ retail network development, who said consumers could now buy used gadgets at bargain prices.

Inflation is hovering above 17%, eating into Russians’ purchasing power, although the central bank has said the firming rouble and a decline in recently elevated consumer demand are helping to put the brakes on.

Discounted devices that MTS is selling include models that were returned within two weeks or have a packaging defect, and will come with a 90-day warranty.

The telecoms company last week reported a 76.2% year-on-year drop in first-quarter net profit to 3.9 billion roubles ($67.83 million) which it blamed in part on higher interest rates.

($1 = 57.5000 roubles)

(Reporting by Reuters)

LONDON -Boohoo has reached a final settlement over a U.S. class action claim alleging the British online fashion retailer’s promotions in California misled shoppers, it said on Tuesday.

The group, which sells clothing, shoes, accessories and beauty products aimed at 16- to 40-year olds, had agreed terms for a preliminary settlement of the action in November.

Boohoo said the settlement is without admission of liability and within its existing legal provisions, which stood at 17.8 million pounds ($22.4 million) as of Feb. 28.

The settlement remains subject to review and approval by the United States District Court for the Central District of California.

“It must be a marginal positive to have the issue resolved and covered by existing provisions,” said analysts at Jefferies.

However, shares in Boohoo were down 4.5% at 0743 GMT, extending 2022 losses to 36%.

The sector was weak with ASOS down 2.4% and Next down 1.7%.

Earlier this month, Boohoo warned sales growth would slow this year, hit by a squeeze on consumer spending, higher product return rates and continuing supply chain and delivery problems.

($1 = 0.7943 pounds)

(Reporting by James Davey, editing by Elizabeth Piper and Jason Neely)

By Huw Jones

LONDON – Britain’s accounting watchdog said on Tuesday it has fined KPMG 3.3 million pounds ($4.16 million) over the company’s audit of aero engine maker Rolls-Royce more than a decade ago.

The fine relates to payments made by Rolls-Royce to agents in India and is the latest in a string of penalties imposed on KPMG, one of the world’s “Big Four” accountants, over its audit of the aero engine group.

The Financial Reporting Council (FRC) said it had initially imposed a fine of 4.5 million pounds on KPMG over the payments to agents in India but reduced that to 3.3 million pounds after admission of failures by KPMG.

Rolls-Royce was fined almost 500 million pounds by Britain’s Serious Fraud Office in 2017 over the payments to agents in India, under a Deferred Prosecution Agreement.

The FRC said it fined Anthony Sykes, KPMG’s audit partner in the Rolls-Royce audit, 150,000 pounds, reduced to 112,500 pounds for his admissions of failures.

“Allegations of bribery and malpractice through the use of intermediaries and ‘advisers’ in the defence field were prominent at the time of the audit,” the FRC said.

KPMG will also have to pay for an external review of its policies on how it audits a company’s compliance with laws and regulations.

Jon Holt, KPMG’s UK chief executive, said he was pleased to have concluded this “historic matter” and was sorry that parts of the audit did not meet the professional standards required.

“In addition to resolving legacy cases, we are also investing significantly in training, controls and technology to improve quality and resilience in our audit practice,” Holt said.

The FRC last week asked an independent tribunal to endorse a 14.4 million pound fine for KPMG after the auditor admitted it misled the watchdog during spot checks on audits of construction group Carillion and software firm Regenersis.

Over the past year KPMG has also received fines for its work with bed maker Silentnight, and audits of convenience store chain Conviviality and Revolution Bars

The FRC is separately investigating KPMG’s audit of Carillion.

($1 = 0.7942 pounds)

(Reporting by Huw Jones; Editing by David Goodman and Susan Fenton)

By Jeffrey Dastin and Dmitry Zhdannikov

DAVOS, Switzerland -Palantir Technologies Inc and global commodities trader Trafigura have set sights on a new market, their chief executives told Reuters on Monday: tracking carbon emissions for the oil, gas, refined metals and concentrates sector.

The companies are building a platform for oil majors and other commodities firms to vet the environmental impact of their supply chains, applying Trafigura’s data to Palantir’s operating system, known as Foundry.

The effort represents a potentially lucrative long-term opportunity at a time when Palantir’s revenue outlook has fallen short of expectations, with shares trading down 57% this year.

The firm co-founded by billionaire entrepreneur Peter Thiel in 2003 to aid in U.S. counter-terrorism operations now derives almost half its sales from the private sector. BP PLC is among its fossil-fuel extracting customers, which have pledged a green makeover in the coming decades.

In a joint interview at the World Economic Forum’s annual meeting in Davos, Palantir’s Chief Executive Alex Karp said, “This is going to be one of the biggest things we’ve ever done.” Jeremy Weir, Trafigura’s CEO, said the market is “massive. In terms of size, I think it touches everybody.”

The idea grew out of a pilot last year. Trafigura’s global head of carbon trading approached Palantir with a desire to better assess indirect carbon footprints, known as “Scope Three” emissions.

Making the trial into a joint marketing partnership represents a familiar playbook for Palantir. The company, which recently relocated from Palo Alto, Calif. to Denver, earlier partnered with planemaker Airbus SE to sell a “central operating system of the airline industry,” according to Palantir’s latest annual report.

Customers can subscribe to the new platform and take part in what Palantir and Trafigura are calling a consortium. They did not disclose financial terms.

Concerns about energy security fueled by Russia’s invasion of Ukraine have not dampened interest in sustainability, said Weir. “We’ve got a severe bump in the road, but we still have to decarbonize,” he said.

For Palantir, the war, which Moscow has called a “special operation,” has meanwhile created potential for other products it developed, such as secure data transfer across allies.

“You’ll have to use your imagination to figure out how those things may be in use, but we play a crucial role in the security of the West,” Karp said.

(Reporting by Jeffrey Dastin and Dmitry Zhdannikov; Editing by Christopher Cushing and Alexander Smith)

By Tim Hepher, David Shepardson and Eric M. Johnson

(Reuters) -Jet engine maker CFM International is facing industrial delays of six to eight weeks in the wake of supply-chain problems and some French labour unrest, but expects to claw most of this back by early in the fourth quarter, three people familiar with the matter told Reuters.

Co-owned by General Electric Co and France’s Safran, CFM is the largest jet engine maker by units sold, and powers three out of four narrowbody jets including all Boeing 737 MAX and about half of Airbus’ A320neo.

Some Airbus customers have been warned deliveries of aircraft, already partially delayed by European factory congestion, could be pushed back further as a result of the CFM engine delays, said the people, who asked not to be named.

Two of the people said there had also been delays in sending engines to Boeing though there were no immediate signs that this was affecting airplane deliveries. Boeing is building at a slower rate as it clears jets stored during a safety crisis.

“We are working diligently with our suppliers to mitigate supply-chain constraints, and we are closely coordinating with our air frame partners to accelerate delivery and meet customer demand,” a CFM spokesperson said in answer to a Reuters query.

An Airbus spokesman said it had nothing to add to recent supply-chain comments given with its quarterly results.

Airbus Chief Executive Guillaume Faury told analysts on May 4 that he saw “a lot of challenges” in the supply chain in the short term, but felt comfortable enough on the medium- to long-term outlook to press ahead with planned output increases.

A Boeing spokesperson declined comment.

Shares in Airbus fell around 2% and Safran fell 3% in early trading on Tuesday.

Jefferies analyst Chloe Lemarie said supply disruptions had already been much discussed during the recent quarterly results season but 6-8-week delays “may be challenging” to recoup fully.

Airbus is likely to keep its forecast for 720 deliveries in 2022 but “there is likely only a very slim buffer” she said in a note to investors.

LABOUR TENSIONS

Two of the people said the CFM delays were mainly linked to supplier bottlenecks, but had been aggravated by recent industrial action in France. A third source said the recent Safran labour dispute was not the decisive factor, however.

Aerospace workers at Safran, a major supplier of other equipment including interiors and landing gear as well as the French pillar of the transatlantic CFM venture with GE, have held slowdowns or lightning stoppages over pay in recent months.

The French group awarded staff a 3% increase late last year as the industry began emerging from the COVID-19 crisis but unions say this is not enough to counter a spike in inflation. Safran has on average agreed to add a further 1%, they add.

CFM is not alone in wrestling with fractured supply chains. Aerospace companies worldwide have been counting the cost of supply-chain shortages. At the first-quarter results stage, GE said it was navigating supply-chain pressures, while Safran said supply chains and inflation were “two major watch items.”

Boeing said on May 11 that 737 production had been slowed by shortages of a single type of wiring connector.

Raytheon Technologies, whose Pratt & Whitney engines compete with CFM on the Airbus A320neo, said on April 26 it was facing supply-chain constraints across its business.

(Reporting by Tim Hepher in Paris, David Shepardson in Washington and Eric M. Johnson in Seattle; editing by Chris Reese and Jason Neely)

LONDON – Barclays has fired the starting gun on a 1 billion pound share buy-back programme aimed at reducing its share capital after refiling accounts with U.S. authorities on Monday.

The British lender was forced to resubmit its 20-F accounts after it discovered in March it had sold more than $15 billion of complex securities than it had permission to sell.

The buy-back, which was put on hold pending the new submission, will commence on Tuesday and end no later than September 30.

Barclays has instructed JP Morgan Securities to conduct the buy-back.

(Reporting By Sinead Cruise, editing by Huw Jones)

BEIJING -China will broaden tax credit rebates, postpone social security payments and loan repayments, roll out new investment projects and take other steps to support the economy, the official Xinhua news agency quoted the cabinet as saying on Monday.

Chinese policymakers have pledged to step up support for the world’s second-biggest economy, hit by COVID-19 outbreaks that have prompted stringent restrictions, disrupting supply chains and hitting production and consumption.

China aims to bring its economic operations back onto a normal track with a package of targeted, forceful and effective measures, the cabinet said.

“At present, the downward pressure on the economy continues to increase and it’s very difficult for many market entities,” the cabinet was quoted as saying after a regular meeting.

Many private-sector economists expect the economy to shrink this quarter from a year earlier, compared with the first quarter’s 4.8% growth.

Among the new steps, the government will provide tax credit rebates to more sectors and increase annual tax cuts by more than 140 billion yuan ($21 billion) overall to 2.64 trillion yuan, the cabinet was quoted as saying.

China will also reduce some passenger car purchase taxes by 60 billion yuan, state media said.

Authorities will postpone social security payments, including pension insurance premium payments, by small firms, individual businesses and some severely distressed sectors until the end of this year, the cabinet said.

The deferred payments are expected to reach 320 billion yuan this year, it added.

China will add 150 billion yuan in emergency loans for the ailing aviation sector and support the sector to issue 200 billion yuan in bonds, alongside a move to issue 300 billion yuan in bonds to fund railway construction, the cabinet said.

MORE STIMULUS STEPS SEEN IN PIPELINE

Last week, China cut its benchmark reference rate for mortgages by an unexpectedly wide margin, its second reduction this year as Beijing seeks to revive the ailing housing sector to prop up the economy.

Analysts expect more stimulus steps, such as the potential issuance of special treasury bonds to fund fiscal outlays, and more measures to bolster consumption in the rest of the year.

“The government will continue to roll out stimulus packages in the second half of this year, through both monetary and fiscal channels,” Zhu Ning, professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, told Reuters at the annual meeting of the World Economic Forum in Davos.

“There are still a lot of options in the policymakers’ toolbox.”

The cabinet was quoted as saying that banks would also postpone repayments of some loans, including auto and consumer loans, by small firms and individuals in difficulties.

The national financing guarantee fund will boost its businesses by over 1 trillion yuan this year, it added.

China will also launch a number of new projects in water conservancy, transport, and urban shantytown renovation, and will kick off some new energy projects, the cabinet said.

The cabinet also pledged to increase domestic and international passenger flights in an orderly way.

($1 = 6.6470 Chinese yuan renminbi)

(Reporting by Kevin Yao and Beijing newsrooom; Additional reporting by Divya Chowdhury in Davos, editing by Philippa Fletcher, Tomasz Janowski and Hugh Lawson)

By Liangping Gao and Ryan Woo

BEIJING – China’s property market woes are likely to worsen this year with prices remaining flat and sales and investment falling further, while tighter and widespread COVID-19 curbs weigh on still fragile demand despite more policy easing.

The property market, a pillar of the world’s second-largest economy, was weakened by a government clampdown on excessive borrowing from developers last year.

Since the beginning of this year, over 100 cities have taken steps to boost demand via cuts in mortgage rates, smaller down-payments, and subsidies.

The outlook for the property market is expected to remain bleak in the first half of the year and for the whole of 2022.

Average home prices are estimated to fall 1.3% on year in the first half, according to a Reuters survey of 13 analysts and economists conducted between May 16 and May 23. That compared with a 1.0% fall in a Reuters poll in February .

For the full year, home prices are likely to be flat versus a forecast 2.0% rise in the previous poll.

“The current national housing inventory is in a high phase, and tier-three and four cities face large de-stocking pressure” due to demand slowing, said analyst Ma Hong at Zhixin Investment Research Institute.

“The turning point of home prices is likely to be in the third quarter, and home prices in tier-one and two cities may be the first to rebound.”

Analysts are also more pessimistic about housing demand and supply than in the last Reuters survey.

For demand, property sales are seen slumping 25.0% in the first half, widening from a 14.0% fall in February’s poll. Sales are expected to decline 10.0% for the full year.

Investment by real estate firms is expected to fall 5.0% in the first half and drop 2.5% for the whole year. Analysts previously forecast investment would drop 2.0% in the first half and gain 1.5% in 2022.

The gloomy outlook for property prices, sales, and investment was mainly due to frequent COVID-19 outbreaks.

The Chinese capital Beijing extended work-from-home guidance for many of its 22 million residents after the suspension of all dine-in services and indoor gyms, while Shanghai plans to lift a two-month lockdown in the first half of June.

The epidemic has had an impact on Shanghai’s property market, as developers and agents suspended offline operations and many residents were under quarantine, triggering a big fall in home sales, said analyst Wang Xiaoqiang at property data provider Zhuge House Hunter.

China on Friday reduced its benchmark reference rate for mortgages by an unexpectedly wide margin, a few days after a cut in mortgage loan interest rates for some home buyers, in a push to prop up its property market.

Analysts said authorities should introduce more policies targeting the supply side to restore market confidence.

Only nationwide measures to relax curbs on financing for real estate enterprises and steps like shantytown redevelopment projects can stabilise the property market, said Liu Yuan, a head of research at China’s biggest property brokerage Centaline.

(For other stories from the Reuters quarterly housing market polls:)

(Reporting by Liangping Gao and Ryan Woo; Additional Reporting by Shuyan Wang and Jenny Su; Editing by Sonali Desai)