Breakin’ Up Is Hard To Do!

Breakin’ Up Is Hard To Do!                                                               18 November 2021

Ahead of the Dubai Air Show, HH Sheikh Mohammed bin Rashid Al Maktoum tweeted that “Dubai is back again, and the global aviation sector is returning through Dubai and the UAE. The world gathers with us in the Emirates to talk about its economy, future and culture. Welcome everybody”. The country has returned to ‘a new normalcy’, as daily cases, at the beginning of the week, reached only sixty-six, with 8.81 million (out of a total population of around ten million) having been vaccinated; total doses administered are 21.5 million, the equivalent of 218 doses per 100 people. The Dubai Ruler noted that “today, I witnessed part of the activities of Dubai Air Show where 148 countries, 1.2k companies, and 85k visitors are expected this year.”  The beginning of the week saw cricket’s T20 World Cup Final take place, with Australia coming out on top, and by mid-November, the greatest show in earth, Dubai Expo 2020, had welcomed 3.58 million individual visits. All three events show the world that Dubai is well and truly open for visitors. With oil prices nearing US$ 85 a barrel, and the emirate’s property prices skyrocketing, there are many reasons for Dubai to be reasonably happy with its post-Covid progress.

At the world’s first major global aerospace exhibition in two years, dozens of multibillion-dollar commercial and military deals were signed. Today, 18 November, at the close of the five-day event, deals had topped US$ 78 billion, surpassing the pre-pandemic contracts in 2019 by US$ 27 billion. Airbus received orders and commitments for 408 aircraft, comprising 269 firm orders and 139 provisional orders, including a firm order for 255 A321 Neo family aircraft, valued at $32 billion at 2018 list prices. US rival Boeing scored an order for 72 737 Max jets valued at nearly US$ 9 billion at list prices. UAE’s Ministry of Defence announced 22 deals, worth US$ 6.17 billion awarded to local and international companies.

At Dubai Airshow 2021, Emirates announced that it will retrofit 105 of its wide-body aircraft, (fifty-two A-380s and fifty-three Boeing 777s), with its Premium Economy product, in addition to other cabin enhancements. The eighteen-month programme will start late next year. It is also considering installing a brand-new Business Class product on its Boeing 777 aircraft, with customised seats in a 1-2-1 layout, with details to be made known later. The entire retrofit project will be conducted in Dubai. Premium configuration on both types of aircraft will be 2-4-2. Five rows located just behind Business Class in the 777 will be removed to install twenty-four Premium Economy and on the A380, fifty-six Premium Economy seats will be installed at the front of the main deck.

Emirates signed an agreement with GE Aviation committing to develop a programme under which an Emirates Boeing 777-300ER, powered by GE90 engines, will conduct a test flight using 100% sustainable aviation fuel by the end of next year. Emirates SkyCargo announced that it will introduce two new Boeing 777 freighters into its fleet in 2022 and signed an agreement with Israel Aerospace Industries for the conversion of four Boeing 777-300ER passenger aircraft into full freighters, starting in early 2023. Emirates was also engaged in “positive” talks with Boeing regarding the delivery time and supply chain for the 777X programme.

Having been cash-positive since November 2020, flydubai expects to return to annual profitability by the end of the year, driven by ramping up its operations, keeping its costs in check and deferring some payments. Interestingly, last month witnessed the airline exceeding pre-Covid levels in terms of the number of flights, passenger traffic and number of destinations, compared with the same month in 2019. So far this year, it has opened twenty-two destinations, as global travel restrictions are lifted. Over the next fourteen months, it plans to take delivery of thirty-three 33 Boeing 737 Max 8 jets, (whilst retiring seven Boeing 737 Next-Generation planes) and hire a further 900 employees; this will bring the fleet to eighty-one planes – fifty-one Max 8s, twenty-seven NGs and three Max 9s.

Although still some way off pre-pandemic numbers, passenger traffic numbers at DXB continue to head north, with YTD figures of 20.7 million, including a 20% growth over the last four weeks. With the recent uptick, it is expected that numbers will be 28.7 million by year end – two million higher than initially forecast. Over the nine months to September, flight numbers were up 17.1%, at 155.7k, with 56.3k movements in Q3. After twenty months’ inactivity, Concourse A will reopen by the end of this month, returning the airport to 100% capacity. The airport’s five leading countries are India, Pakistan, Egypt, US and Turkey,  with passenger traffic numbers of 2.8 million, 1.0 million, 753k, 710k and 598k respectively.

According to YouGov’s latest survey, which measures the likes of the average impression, quality, value, satisfaction, recommendation and reputation, Emirates Airlines has managed to retain its top position, as the best brand in the UAE for the fifth consecutive year. Not surprising, because of the Covid impact, the airline posted a 1.8 decline and recorded 58.1 this year to retain its position, followed by Adidas, 50.6, Samsung, 47.7, Almarai, 47.6 and You Tube, 47.3. Nike, Apple, iPhone, Google and WhatsApp made up the top ten, with scores ranging from 43.1 to 46.3. Noon.com was the most improved brand of the year, with a +6.2 change in score, as KFC, Expo 2020, Share and Red Bull came in behind, improving by 4.7, 4.6, 3.0 and 2.9 respectively.

The UAE has been selected as the host country for the 28th Conference of the Parties in 2023, with the UN Framework Convention on Climate Change (UNFCCC) having officially announced that the country will host COP28. Even before the announcement, HH Sheikh Mohammed bin Rashid Al Maktoum said the UAE would be fully prepared if selected and that “the UAE has submitted a request to host the COP28 conference in 2023, the largest global conference of heads of state and government on climate and environmental issues.” The current COP26 meeting concluded last Saturday in Glasgow, with COP27 scheduled to take place in Cairo next November.

With the aim of assisting the establishment of 1k digital companies in Dubai, over the next five years, the government is to invest US$ 272k in its Future District Fund. The target is to support and encourage tech companies, to enhance the emirate’s digital economy and projects to eventually list on the local bourses.

Effective 02 February, Federal Decree Law no. 33 of 2021 will enhance the current labour legislation and will introduce three-year contracts and conditions while employing teenagers over fifteen years. The new legislation, speeded up because of the Covid impact, will regulate labour relations in the private sector across different work models, including part-time and temporary work, along with safeguarding employee rights and introducing new leaves policy. New forms of working – including part-time work, temporary work and flexible work – are covered under the new law which also encompasses freelancing, condensed working weeks, shared job models and self-employment. The new law defines one type of contract, namely a limited (or fixed term) contract, which may not exceed three years and is renewable for a similar or lesser period upon the agreement of both parties.

Other interesting features of Federal Decree Law no. 33 include:

  • employees can choose to finish their forty hours in three days instead of one week as per the contract signed by both parties
  • two people able to share the same job and split the pay based on an agreement with the employer
  • workers are exempted from judicial fees at all stages of litigation, enforcement and petitions filed by workers or their heirs with a value that does not exceed US$ 27.2k (AED 100k)
  • employers cannot confiscate employees’ official documents. Workers also should not be forced to leave the country after the end of the work term
  • the provisions of the law shall apply to unlimited contracts enclosed in the Federal Law No. (8) of 1980
  • the employer shall bear the fees and expenses of recruitment and employment and shall not recover them directly or indirectly from the employee
  • employees are entitled one paid day off with the possibility of increasing weekly rest days at the discretion of the company
  • workers are entitled to a ten-day study leave per year provided that they are enrolled in an accredited institution within the UAE, following two years of work with an employer
  • maternity leave in the private sector can extend to sixty days – forty-five days with full wage, followed by fifteen days on half wage
  • employees are to be protected against sexual harassment, bullying, or the use of verbal, physical, or psychological violence by their employers, superiors, and colleagues
  • employers may not use any means of force, threaten to penalize employees or coerce them to perform an action or provide a service against their will
  • discrimination on the basis of race, colour, sex, religion, nationality or disability is not allowed
  • teenagers are not allowed to work more than six hours a day with one-hour break and should be allowed to work only after submitting a written consent of a guardian and a medical fitness report
  • it is prohibited for employees to work over five consecutive hours without at least one-hour break. No more than two hours of overtime are allowed in one day for workers
  • should the nature of the job require more than two hours overtime, employees must receive an overtime wage equivalent to regular hour pay, with a 25% increase. If conditions required employees to work overtime between 10pm and 4am, they are entitled to an overtime wage equivalent to regular hour pay with a 50% increase. People on a shift basis are exempted from this rule
  • If workers were asked to work on a day off, they must receive a one-day leave or an overtime wage equivalent to the regular day pay with a 50% increase

The National Central Cooling Company, better known as Tabreed, reported a 5.8% increase in Q3 profit to US$ 42 million on the back of higher revenue, up 8.7% at US$ 162 million. During the period, it took full ownership of the operator of the district cooling unit that serves Al Maryah Island in Abu Dhabi, after it bought an additional 50% stake in Al Wajeez Development Company from its JV partner, Mubadala Infrastructure Partners. Tabreed is keen to expand operations regionally and is looking at brownfield or greenfield projects in both in India and Egypt, as well GCC markets, especially Saudi Arabia.

Excluding fair value losses on investment properties, Amlak’s Q3 income increased by 367% to US$ 340 million, on the back of the settlement of the arbitration, which included both plots and cash to the value of US$ 238 million, and gains resulting from its debt settlement arrangements. Quarterly revenue, from financing activities, dipped 2.3% to US$ 34 million, whilst rental income almost halved to US$ 5 million. Both operating costs and amortisation came in higher – by 46.7% to US$ 30 million and 56.2% to US$ 34 million respectively. By the end of September, Amlak’s total assets were at US$ 1.09 billion. For the nine-month period, net profit reached US$ 294 million, compared to a US$ 7 million loss posted last year.

Deyaar Development, majority owned by Dubai Islamic Bank, reported an 80.6% hike in Q3 profit to US$ 2 million, on the back of a 6.3% rise in revenue at US$ 33 million. YTD, to 30 September, the Dubai company saw a doubling of its profit to US$ 8 million, with revenue 45% higher at US$ 114 million. The developer noted that it made “noticeable progress” in the construction of phases three and four of its Midtown mega-project at Dubai Production City, as well as sales at its newly launched Regalia project in Business Bay topping US$ 272 million (AED 1 billion).

Emaar Development recorded a more than sixfold increase in Q3 property sales, worth US$ 1.94 billion, with impressive increases in both revenue and profit – up 66% and 170% to US$ 1.05 billion and US$ 238 million. The developer, majority owned by Emaar Properties, posted its highest ever nine-month figure, with sales at US$ 5.70 billion, 382% higher on the year. YTD, the company reported a 63% hike in net profit to US$ 649 million and revenue, 75% higher at US$ 3.159 billion. It now has a sales backlog of US$ 7.75 billion, which will be recognised in the future as revenue for the business. Emaar Development has delivered over 3.7k residential units YTD 2021, across locations such as Dubai Hills Estate, Dubai Creek Harbour, Downtown Dubai, Dubai Marina and Emaar South. To date, it has delivered more than 51k residential units, with over 25k residences currently under development in the country.

Driven by strong Dubai property sales, Emaar Properties saw its Q3 net profit almost trebling to US$ 277 million, year on year, with revenue 64.6% higher at US$ 1.85 billion. In the first nine months of the year, Dubai’s leading developer posted a doubling of property sales to US$ 7.13 billion, with domestic property sales accounting for US$ 5.72 billion. Revenue rose 59.0% during the first nine months to US$ 5.26 billion, as profit came in 25% higher at US$ 703 million.

Hamad Ali has done a lot since his appointment as chief executive of the DFM and Nasdaq Dubai earlier in the month. This week, the DFM unveiled an incentives programme to encourage new IPOs and listings from private sector companies in key economic sectors that contribute to the country’s GDP. Such incentives include financial support towards the cost of setting up an IPO, as well as post-listing support through participation in its international roadshows regionally and globally; it will also include a three-year waiver on listing fees, AGM fees and dividend distribution fees. The new incumbent noted that “Dubai is home to an unparalleled portfolio of regional and international private companies. Attracting new IPOs will provide DFM’s global network of investors from over 208 nationalities with new investment opportunities.” To encourage smaller investors, in August, the DFM waived the minimum commission fee on the trade of all listed securities, in a move that will boost trading, add liquidity and increase volumes. The ultimate objective is to see Dubai a global capital hub, with the government launching a US$ 544 million project to attract listings from sectors such as energy, logistics and retail.

At the beginning of the month, it was announced that the Dubai government planned to list ten state-owned companies on the Dubai bourses, in a bid to double the size of the capital market, with DEWA being chosen to be first off the block. This week, the Dubai Financial Markets and Exchanges Development Committee approved the future listing of the Salik road toll system, which the RTA introduced in 2007. There are three million vehicles registered in the system and eight Salik toll gates throughout the emirate.

The DFM opened on Sunday, 14 November, 365 points (13.1%) higher the previous four weeks, gained a further 124 points (3.9%) to close the week at 3,265. Emaar Properties, US$ 0.25 higher the previous three weeks, closed US$ 0.07 higher at US$ 1.39. Emirates NBD and Damac started the previous week on US$ 3.88 and US$ 0.39 and closed on US$ 3.87 and US$ 0.38. On Thursday, 18 November, 582 million shares changed hands, with a value of US$ 225 million, compared to 538 million shares, with a value of US$ 173 million, on 11 November.

By Thursday, 18 November, Brent, US$ 0.87 (1.1%) higher the previous week, shed US$ 0.62 (0.7%), to close on US$ 82.05. Gold, US$ 74 (4.1%) higher the previous week, nudged US$ 4 (0.2%), to close Thursday 18 November on US$ 1,870. 

In October, the Australian Foreign Investment Review Board approved the August takeover of Tasmania’ s Huon Aquaculture by Brazilian meat processing giant JBS, in a US$ 403 million deal including debt. This will be their first foray into aquaculture, but the company is foreshadowing more investment in the sector, with Huon Aquaculture currently making up about 2% of JBS’s global operations. The Brazilian newcomer is among the world’s biggest meat processors in beef, chicken and pork., and it is confident that “there are areas in their business that we can add good expertise and help.”

Confidence in the Indian stock market was dented by the fact that its largest digital-payments provider, Paytm, lost 27.4% in value on its first day of trading – one of the worst-ever debuts by a major technology company. Such a fall in One 97 Communications, operator of Paytm, shocked even those sceptics, who had questioned the company’s valuation, and left the many retail investors wondering what happened as they nursed heavy losses. Even some of the big players, including BlackRock and the Canada Pension Plan Investment Board, were involved and may have damaged Mumbai’s efforts to become a global capital centre, particularly for technology investors looking for alternatives to China. This IPO raised US$ 2.5 billion and was nearly twice over subscribed.

On Thursday, the Turkish lira tumbled to a record low, falling by 6% to 11.3118 to the US dollar, after the central bank cut borrowing costs for a third consecutive month; the official one-week repo rate was reduced by 100 bp to 15%, at a time when October consumer inflation neared 20%. A further lowering of the rate – which has fallen 400bp since September – is a political move, influenced by President Recep Tayyip Erdogan, and has manged to cut any investor confidence in the market to zero. The lira has lost 20% in value since the rate cuts started in September and is a third lower YTD. Other emerging markets have reacted differently – both South Africa and Mexico raising rates during this week.

Although just beaten by its German rival, Aldi, to be the UK’s cheapest supermarket chain, Lidl will become the country’s highest-paying, as it increases its minimum pay for employees outside London to US$ 13.62 (GBP 10.10) an hour, with rates of up to US$ 15.37, (GBP 11.40) for more experienced workers. It added that the increase recognised “the hard work and dedication of frontline colleagues during the last 18 months of the pandemic”. Earlier in the year, Morrisons had become the first UK supermarket with pay grades above US$ 13.48 (GBP 10.00). The fact that official data shows that employers are continuing to struggle to fill roles, affecting the hospitality and retail sectors, could be another reason for the latest supermarket rate hikes.

Amazon will stop accepting UK Visa credit cards, (but not debit cards) from 19 January, due to high credit card transaction fees, indicating that the dispute was to do with “pretty egregious” price rises from Visa over a number of years, with no additional value to its service.

Visa retaliated saying that it was “very disappointed that Amazon is threatening to restrict consumer choice in the future”. The tech giant is offering US$ 27, (GBP 20), for Prime customers to switch from using Visa, to an alternative payment method, and US$ 13.50 for other customers. Although Amazon declines to confirm Visa charges, the credit company claimed that on average it takes less than 0.1% of the value of a purchase.

Last Friday, Alibaba confirmed that, sales during its annual Singles’ Day shopping extravaganza, grew 8.5%, the slowest rate ever, with revenue figures of US$ 84.5 billion. The event, started in 2009, had always returned double digit growth, (2020 – 26% growth), but this year, the event was low profile because of the tech giants’ wariness of upsetting the Chinese administration which, over the past twelve months, has been cracking down on platforms such as Alibaba. It seems that the regulators have two problems with the tech giants – an alleged abuse of user data by them, and wider concerns that big tech had become too powerful and unregulated. Before the event, some analysts were forecasting poorer revenue because of slowing retail sales, supply shortages, power disruptions and Covid lockdowns.

Today, Alibaba shares have slumped by more than 10% in Hong Kong trade after it forecast that its annual revenue would grow at the slowest pace since its 2014 stock market debut in 2014, driven by a slowdown in consumer spending; this despite its Q3 revenue jumping 29% to US$ 31.4 billion. Further factors such as increasing competition and Beijing’s regulatory crackdown saw its shares on the New York bourse trading 11% lower on the news.

China’s property sector posted its biggest month-on-month decline since 2015, as new construction starts in January to October dipped 7.7%; new home prices declined 0.2% last month – the first decline in new home prices since March 2015. The country’s property slump has deepened over the year, as illustrated by the financial woes of Evergrande continuing to struggle to keep up interest payments on its huge debts. Only last week, Evergrande, which is saddled with around US$ 300 billion of debt, avoided defaulting on overdue interest payments of US$ 148 million. The sector, which accounts for about 25% of the country’s economic activity, will experience a further battering, as major power cuts are forecast towards the end of the year and a new Covid wave has hit certain parts of the country.

Badly hit by the ongoing – and seemingly never-ending – global supply disruptions, Japan’s economy contracted 3.0% in Q3, year on year, (and 0.8% on the quarter), having risen at a revised 1.5% a quarter earlier; this figure was much worse, and more damaging, than the expected 0.8%. Another factor that came into play to further disrupt supply, with a negative impact on both exports and business spending, was a rise in new Covid cases. It is likely that Q4 will return to growth but at a lesser pace than most would forecast. Compared to other major countries, the world’s third largest economy fared badly, with the USA 2.0% higher, driven by pent up demand. Most of Japan’s economic indicators pointed south in Q3, as the country’s over-dependence on the auto industry meant its economy was more vulnerable to trade disruptions than other countries. Consumption, capital expenditure and exports were all down by 1.1%, 3.8% and 2.1%, compared to Q2 growth of 0.9%, 2.2% and exports lower for the first time in five quarters. To try and speed up a recovery, Prime Minister Fumio Kishida is planning to introduce a large-scale economic stimulus package worth “several tens of trillion yen”, with details soon to be made public.

More than 300k people, working for the 9k employers, (including 50% of the FTSE 100 and the likes of Nationwide Everton FC and Burberry), who have voluntarily signed up to the Real Living Wage, are getting a pay boost of US$ 0.60 to US$ 13.30 an hour and US$ 0.27 to US$ 14.85 in London. Although this rate is different to- and slightly higher than – the Minimum Wage, which measures what wage should be earned to meet the real cost of living and everyday needs, it is estimated that 17.1% employees, equating to 4.8 million jobs, are still not receiving the Real Living Wage in the UK. Northern Ireland had the highest proportion of jobs paying below the Living Wage at 21.3%, while SE England had the lowest at 12.8%. (From 01 April 2021, the National Living Wage was increased to US$ 12.00 per hour, with a range starting from US$ 5.80, depending on age and if the person employed is an apprentice).

Because of higher fuel and energy prices, (gas and electric prices climbing 28.1% and 18.8% on the year), UK’s October cost of living has hit 4.2% – its fastest pace in almost ten years and up 1.1% on the month; other drivers included the cost of second-hand vehicles, (27.4% higher over the past six months), as well as higher fuel and energy prices. Having sat on their backsides for too long, the Bank of England may have to reluctantly raise interest rates in the “coming months”  – and perhaps even sooner than that – to tackle rising prices and to deflate the bubble before too much damage is done to the country’s economy.

Another reason why the BoE should act sooner rather than later, when it comes to raising interest rates, is the strength of the UK labour market, with latest data showing that there are 1.3 million job vacancies. UK’s unemployment rate dropped to 4.3% in Q3, as 160k people were added to payrolls. Even its governor confirms he is becoming uneasy about rising inflation and the latest jobs figures, with payrolls 235k higher than pre-pandemic levels of February 2020, not helped by underlying wage growth of around 3% before the pandemic. It is estimated that the country has a current workforce shortage of an estimated 950k, including over 500k of which are older workers. There are concerns that ongoing supply chain problems, not improving as quickly as initially thought, labour shortages in certain sectors and record high vacancies will have a negative effect on short-term growth.

Embarrassing news for the UK economy was the decision by Johnson Matthey to stop developing electric vehicle batteries, a niche segment of the market that the UK could have been a global leader. It was perhaps unfortunate that the decision was made the same week of the Cop 26 summit, where the company had a prominent presence, with its branding being posted on the side of the world’s first electric two-seater race car, manufactured in conjunction with Envision Virgin Racing. The company indicated that potential reruns could not justify the sizeable investments in a fast-moving industry, especially dealing with larger European peers who were already producing batteries on a mass scale. More attractive returns can be made by investing in hydrogen technologies, circularity and the decarbonisation of the chemicals value chain which Johnson Matthey already has leadership positions. News of the closure saw shares in the 204-year-old company tank 20%.

The UK government has introduced its twelve-point ‘Made in the UK, Sold To The World’ plan to boost the country’s annual exports by 67% to US$ 1.35 billion, (GBP 1.00 trillion), by the end of the decade. Part of the plan will see government agencies, such as UK Export Finance, offering new services to help UK exporters secure business; currently it is estimated that only one in ten UK firms trade overseas. To help companies exhibiting their products at international exhibitions, a new UK trade show programme will be established. UK exports, which have not recovered as quickly as other rich countries post-Covid, will need all the help they can get just to catch up. No doubt exports to the EU have suffered, with estimates that trade with its former partners may fall by some 15% in the longer run – despite this, the EU still remains the UK’s largest export market.

Official data from the Labor Department indicated that a staggering 4.4 million Americans had quit their jobs in September, highlighting how, even though there are a near record 10.4 million available positions, many sectors are having problems filling vacancies. It seems that many Americans are seeking other jobs because of record wage gains and other attractive terms offered by desperate employers wanting to ensure they have the available employees. This then has an economic impact, as higher wages increase cost of goods/services and pushes up the inflationary cycle. The quits rate, or the number of quits in the month as a per cent of total employment, increased to 3% in September, a figure not seen since 2000; sectors such as leisure, hospitality, manufacturing and healthcare have been badly hit and posted record quits. The hire rate was flat at 4.4%, while layoffs and discharges were little changed at 1.4 million. For every unemployed American in September, there were 1.4 openings.

The UN Food and Agriculture Organisation has estimated that the global food trade will hit a record high by the end of this year – 14% higher at US$ 1.75 trillion on the year and 12% higher than first forecast. The report noted that trade had shown “remarkable resilience” to disruptions throughout the pandemic, but rapidly rising prices, will badly impact poorer countries and consumers. Developing regions account for 40% of the total and they have been scarred by the double whammy of rising food prices and a threefold increase in freight costs, pushing up their food import bill by 20%. The situation will be even worse in Low-Income Food Deficit Countries. Product-wise, developing regions are facing sharp increases in basic staples such as cereals, animal fats, vegetable oils and oilseeds. The study uses the Food Price Index which has seen prices 34% higher on the year to August.

Australian Prime Minister Scott Morrison continues to upset many Australian voters – and other international onlookers – with his attitude towards combatting climate change. Although adopting a target of net-zero carbon emissions by 2050, he does not want to legislate that goal instead of relying on consumers and companies to drive emission reductions. This week he has urged MNCs to offer cheaper and more sustainable solutions to combat climate change and indicated that companies should change their “corporate mindset”, drive down costs to help stop climate change and stop relying on taxpayer subsidies. He also announced financial aid to support electric vehicles. Furthermore, the leader of one of the world’s top coal and gas producers, also rejected a global pledge, led by the EU and the USA, to cut methane emissions by 30% by 2030, arguing that governments cannot solve the emissions reduction issue through imposing mandates or through the pricing of carbon.

This month has witnessed three major global groups announcing a simplification of their corporate structures. Johnson & Johnson, founded in 1886, is splitting into two companies, separating its division selling Band-Aids and Listerine from its medical device and prescription drug business. The latter will keep its traditional name, whilst the new consumer health company, which has yet to be named, will house brands including Neutrogena, Aveeno, Tylenol, Listerine, Johnson’s and Band-Aid; this division will have an estimated US$ 20.1 billion revenue stream, a lot lower than the US$ 107.3 billion turnover from its other new business unit. The world’s biggest maker of health care products posted that the split would help improve the focus and speed of each company to address trends in their different industries. Currently, J&J is facing at least 38k lawsuits in the US over its talc-based baby powder, causing ovarian cancer, and last month, it settled most suits it faced from thousands of men who claimed its anti-psychotic drug Risperdal caused them to develop excessive breast tissue.

This week, US conglomerate General Electric announced that it would split into three separate companies, retaining only its jet engine maker GE Aviation. Founded by Thomas Edison, what used to be the world’s most valuable company will divest its healthcare business in early 2023 and combine its renewable energy, fossil-fuel power and digital units into one company that will be spun off the following year.

Toshiba has confirmed plans to split the company into three separate businesses., viz., energy/infrastructure, semiconductors and devices/storage. The move comes after increased shareholder and activist pressure to make changes, particularly since its 2015 accounting scandal, which rocked the Japanese corporate world, and huge losses linked to its US nuclear unit; it is expected that the reorganisation will be finalised by H2 2023, which to some observers is too long a process. The plans see semiconductors remaining, (with Toshiba continuing to own 40.6% of memory chipmaker Kioxia and other assets), but the other two being spun off. The aim of the exercise seems to be to increase the market cap of different businesses after facing pressure from shareholders. Splitting up conglomerates is never an easy exercise, and often falls short of the mark, and for Japan, it is a very rare occurrence, so it remains to be seen whether it will be successful, and more crucially if it is enough to please activist investors. Breakin’ Up Is Hard To Do!

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