Jarden Brief: Corporate giant laying off thousands in world’s biggest consulting cutbacks

Irish-American consulting giant Accenture has followed McKinsey and KPMG in announcing layoffs. Photo / Joan Cros, NurPhoto, Getty

Keeping you up to date with the latest market moves, in association with Investment firm Jarden.

International

US

Consulting firm Accenture has announced it will cut 19,000 jobs, the largest reduction in the consulting sector in the year to date.

The cuts will affect 2.6 per cent of Accenture’s staff and are expected to be completed over the next 18 months. Half of the employees will leave by the end of August, with the remaining cuts affecting mostly corporate functions.

The move is intended to help the firm meet its profitability targets in the face of rising costs and an uncertain economic outlook. Accenture is not alone in making job cuts, with McKinsey and KPMG also making similar moves.

Despite the cuts, Accenture reported revenue growth of 5 per cent in the three months to February, but consulting revenues fell by 1 per cent.

Packaged food company General Mills raised its fiscal 2023 forecasts for the fourth time due to higher prices and steady demand for its products.

In Q3, the company’s organic sales rose by 16 per cent due to increased prices, while sales volumes remained unchanged.

The company now expects organic net sales to rise between 10 per cent and 11 per cent and adjusted profit per share to rise by 8 per cent to 9 per cent in fiscal 2023.

In Q3, the company’s net sales increased 13 per cent to around US$5.13 billion, beating Refinitiv data estimates of US$4.97 billion. General Mills’ shares rose 3.0 per cent at the time of writing.

Rest of World

The Swiss National Bank (SNB) raised its benchmark interest rate by 50 basis points in response to stubborn Swiss inflation, which remains outside the SNB’s target band of 0-2 per cent.

The move came after the multi-billion Swiss francs rescue package brokered by the SNB, government, and regulator on Sunday prevented a systemic crisis, according to SNB Chairman Thomas Jordan.

He also said UBS’s takeover of Credit Suisse averted a financial disaster and it was now critical the merger took place in a smooth and fast way to maintain financial stability. The central bank said further rate hikes could not be ruled out and is willing to be active in the foreign exchange market if necessary.

The SNB’s move on Thursday matched the European Central Bank’s 50-basis-point increase last week, while Norway’s central bank also raised its benchmark interest rate on Thursday.

Chinese social media giant Tencent saw its shares up 7.0 per cent on closing in response to reporting year end results, reporting a 15 per cent rise in online advertising revenue in Q4 2022.

The result marks a resumption in growth after a regulatory crackdown since 2021 stunted growth in the gaming and content sectors. Despite Tencent’s core social and gaming businesses being hard to disrupt with AI technology, the company plans to implement artificial intelligence tools across its suite of products.

China has voiced its strong opposition to the US’s demand that TikTok cut its ties with the country ahead of a crucial hearing in the US.

TikTok, which is owned by Beijing-based ByteDance, is used by over 150 million Americans.

US officials have cited national security concerns to demand the company’s Chinese owners sell their stakes or potentially face a ban. In response, the Chinese commerce ministry warned that a forced sale of TikTok would damage the confidence of investors worldwide.

TikTok’s CEO is due to testify before Congress to determine the app’s future in the US.

Commodities

Gold and silver prices rose significantly during Thursday’s trading following the Federal Reserve’s 25bps increase in interest rates.

However, the Federal Reserve Chair Powell’s recent comments were more dovish than expected, which boosted prices of precious metals.

At the same time, the US dollar weakened on the foreign exchange market. At the time of writing, gold was up 1.5 per cent on the day. Oil prices fell by 1.6 per cent to US$75.50 a barrel despite the Federal Reserve’s policy outlook and mixed US supply and demand.

Australia

Investors in Australia bought bonds, gold, and consumer staples stocks on Thursday as safe haven assets after the Fed warned of more interest rate increases.

This caused the S&P/ASX 200 Index to fall by 0.7 per cent, with two of the benchmark index’s top five performers from the gold sector. The best-performing sector was consumer staples, with Woolworths and Coles supermarket operators among the outperformers.

Brickworks, an Australian company, saw total revenue rise by 13 per cent to A$584 million and underlying profit was up 24 per cent at a record A$410 million for the first half of the year.

However, the record profit was tarnished by underperformance from its Austral Bricks Western Australia business, which lost market share, and resulted in a A$32 million post-tax, non-cash impairment.

Brickworks property division was a standout and contributed to a revaluation gain despite increasing capitalisation rates.

The company also reported a higher contribution from its investments, and earnings from its building products were steady. Sales have remained robust across most businesses despite a decline in new home sales.

Brickworks expects a “significant increase in rental income” over the coming years as new developments are completed and rent reviews are undertaken.

Washington H. Soul Pattinson and Company, an investment firm owned by the Millner family, has announced a 24.1 per cent higher interim dividend and a 38 per cent rise in profits to A$475.7 million in the six months to January 2023.

The company has adopted a more defensive stance in response to growing market volatility, investing in higher yield investments and agriculture and ‘real’ assets in the half year.

New Zealand

Multiline retail company The Warehouse Group saw a 13.5 per cent decrease in their stock price, in response to half year ended January 23 financial results.

While the company’s group sales increased by 4.8 per cent, net profit fell by 60.9 per cent, and earnings before interest and tax decreased by over 42 per cent.

The company attributed some of the decrease in profit to increased expenses related to ongoing investments into their systems, container detention costs, supplier cost inflation, and restructuring costs.

The company has also announced plans to cut up to 340 jobs and reduce future capital expenditure to improve profitability of the business.

While the company’s grocery sales grew 34 per cent over the previous half, it had a negative impact on margin by 90bps due to promotional activity surrounding the category but remains a focus going forward.

The Ministry for the Environment is looking at changes to its Emissions Trading Scheme (ETS) to encourage businesses to reduce gross emissions rather than relying on carbon credits from forestry.

Omaru Falls and native forest in Waitomo district. The Government wants to encourage more native tree planting. Photo / Hamilton and Waikato Tourism.

The ETS has been criticised as it encourages companies to seek carbon offsets through tree planting, rather than investing in gross emission reductions.

The review follows recommendations from the Climate Change Commission and will consider shifting the balance between gross and net reductions, assessing the impacts and risks associated with this shift.

The ETS will continue to support afforestation, but the Government wants to encourage more native tree planting to become a more permanent carbon sink. The review is likely to lead to significant policy changes and disruption in the existing carbon and real estate markets.

ANZ’s Truckometer data for February 2023 was published yesterday.

The Light Traffic Index went up by 2.9 per cent, while the Heavy Traffic Index went down by 0.7 per cent. The recent traffic data would suggest that retail spending has slowed down to an extent.

The first quarter of 2023 may also be affected by the recent cyclone, but early data suggests the quarter may be stable. Overall, caution is needed when interpreting the data as a measure of the economy’s effects.

Coming up today

Today’s news includes the March 2023 release of the Judo Bank PMI Composite pertaining to Australia which measures changes in business activity in the private sector. Infrastructure Investment company Infratil will hold its Investor Day event for 2023.

For more information on the latest market moves, get in touch with Jarden.

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All market pricing and announcements are sourced from Refinitiv, NZX and ASX.