Shell sees earnings plummet after impairment charges

 
Harriet Green
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It’s the first set of results for new chief executive Ben van Beurden and, in the first quarter, Shell saw a 36 per cent drop in income before tax, down to $8.6bn (£5.1bn) from a year earlier.

But shares have gained over three per cent this morning, to their highest since 2012. With several numbers beat expectations, and when put against rival BP's results yesterday, the reaction makes sense.

Analyst Chris Beauchamp of IG comments: "BP is still hobbled by a variety of problems, but Shell has been able to spin a much more optimistic story and investors are reacting accordingly."

On a current cost of supplies basis, earnings fell 44 per cent to $4.5bn, as the firm took a $2.9bn charge hit in the period, mainly reflecting impairments related to refineries in Asia and Europe.

Earnings per share fell to $0.72 from $1.30, but Shell has, as expected, upped its dividend four per cent to $0.47.

Van Beurden has said profitability was more robust in the first quarter, but the firm continues to struggle in an industry “where high volatility remains”.

The new CEO’s been focusing on running a tighter ship, improving cash flow and delivering better returns for shareholders, and Shell’s working on making $15bn of divestments this year and next.

Van Beurden commented:

The impairments we have announced today in Downstream reflect Shell's updated views on the outlook for refining margins. There are substantial pressures on the industry from excess capacity, changing product demand, and new oil supplies from liquids-rich shales.

The divestments underway in Downstream in four countries are part of Shell's drive to improve our competitive position. Downstream has the potential to average 10-12 per cent return on average capital employed (ROACE), more than double current levels, and to deliver around $1bn of annual cash flow.