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| Hello Insiders!! Today’s Business newsletter covers: - 🌿 Amazon invests in technology to suck carbon out of the air
- 🔍 Deep Dive: Alibaba investors lose faith in the spinoff
- 🤝 Smurfit Kappa, WestRock to merge in $11B deal
If you enjoy reading this newsletter, please share it with your friends and colleagues. Make sure to continue reading for Quick Hits and the Knowledge Hub. Thank you!! Shriram
p/Shriram | |
| 1 | | Amazon is making its first investment in direct air capture (DAC) technology, focusing on reducing atmospheric pollutants. To achieve net-zero carbon emissions by 2040, the business intends to purchase 250,000 metric tons of removal credits from the 1PointFive DAC facility in Texas over the next 10 years. More: - Due to ongoing emissions from fossil fuels, many experts think DAC is necessary to achieve the climate targets outlined in the Paris Agreement.
- Tech behemoths like Amazon and Microsoft are investing more and more in DAC technology.
- With Scope 3 emissions included, Amazon's carbon footprint for 2022 was 71.27 million metric tons.
- The business intends to deploy a range of carbon offsets, including those from DAC and nature-based programs, to reach its net-zero goal.
Zoom Out: Q: Companies like Amazon and Microsoft are increasingly investing in DAC technology. What are the potential long-term implications of tech giants entering this space? Join the conversation here. |     | |
| 2 | | 
What the numbers say: Alibaba's Hong Kong-listed shares dropped 3% due to reports of a possible IPO delay for its Freshippo grocery chain and an unexpected personnel change. While Alibaba's overall business has rebounded with a 14% increase in YoY revenue, its cloud unit, a key segment, struggled with only 4% growth in the June quarter, resulting in a modest 2% gain in the company's shares for the year. Relevance: Unexpected developments, like a potential IPO delay reported by Bloomberg and a leadership transition, have cast doubt on Alibaba's restructuring plans, especially regarding the spinoff of its cloud business. These changes occur as China's economic difficulties and unfavorable mood affect the company's future and investor interest in Chinese stocks. More data: Alibaba said in March that it would divide into six divisions, consider going public, and complete the separation of its cloud business by May 2024. The negative attitude toward Chinese assets may impact the valuation of Alibaba, especially its cloud business and other businesses like Freshippo. | | | |
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| 3 | | A large packaging sector company with an Irish-American footprint will be created when Smurfit Kappa Group acquires WestRock Co. for $11.2B. Smurfit Kappa stockholders hold a majority position in the newly renamed company, Smurfit WestRock, with a stake of roughly 50.4%, giving them a 28% premium at $43.51 per share in cash and shares as part of the purchase. More: - Smurfit Kappa management, including CEO Tony Smurfit, Chairman Irial Finan, and CFO Ken Bowles, will be responsible for Smurfit WestRock.
- According to the statement, As of June 30, the merged business will have adjusted 12-month sales of about $34B and adjusted EBITDA of approximately $5.5B.
- Smurfit Kappa's shares saw a sharp drop of up to 13% in early Dublin trading, while WestRock experienced an increase of as much as 7.2% in U.S. trading, reflecting market reactions to the deal, which offers a 28% premium to WestRock's closing price on Monday.
- Smurfit Kappa's superior profit margin impacted the decision-making of the new entity's leadership.
- The purchase seeks to increase Smurfit's presence in North America by filling a prior portfolio gap.
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| 4 | | American retail company Kroger produced earnings per share in the fiscal second quarter of $0.96, more than analysts' expectations of $0.91. However, the company's $33.85B in revenue fell short of the predicted $34.13B, with the reduction in inflation impacting sales due to stabilized or dropping pricing. More: - A $1.4B charge for settling claims relating to the opioid crisis contributed to the $180M net loss Kroger recorded for the quarter.
- In the second quarter, Kroger's identical sales without gasoline increased by 1%, less than the predicted 1.2% increase.
- Digital sales at Kroger increased 12% year over year during the third quarter, and the company has expanded into new locations, including Florida, by establishing enormous warehouses to fulfill online purchases.
- The company updated its full-year forecast, anticipating identical sales excluding fuel in the 1% to 2% range.
- CFO Gary Millerchip said there is a "more challenging economic environment for consumers in the upcoming months and expects inflation to continue to slow down."
- U.S. Bureau of Labor Statistics data reveals that food prices for at-home consumption rose 3.6% YoY in July, marking a slower increase.
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| 5 | | The U.S. Securities and Exchange Commission has received an initial public offering (IPO) filing from Birkenstock Holding, which plans to float on the New York Stock Exchange with the ticker code "BIRK." A U.S. private equity group named L. Catterton is mentioned as the selling shareholder in the filing, indicating that it intends to take Birkenstock public even though the document is unclear on the share quantity and price range. More: - According to reports, Birkenstock may be valued at over $7B after the IPO.
- Birkenstock reported revenue of $1.33B and a profit of $200M for the fiscal year 2022.
- The company's revenue increased to $691M during the six months that ended March 31, 2023, from $582M the year before, while its profit fell from $78M to $43M.
- Birkenstock, established in 1774, became well-known for its brown suede sandals, notably those worn by computer legend Steve Jobs, which in 2022 fetched $218,000 at auction.
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| 6 | | UPS has recently inked a five-year labor agreement with Teamsters-represented employees, encompassing around 340,000 UPS workers across the U.S., costing less than $30B. Under this deal, wage and benefit expenses are set to grow at a compound annual rate of 3.3% throughout its duration. More: - According to Brian Newman, CFO of UPS, the arrangement would cost less than the $30B the union predicted.
- Following this remark on Tuesday, shares of UPS fell 2.3%
- When the contract expires in August 2028, the typical UPS full-time driver will earn roughly $170,000 in compensation and benefits annually.
- Part-time union employees will get a salary of $25.75 per hour and comprehensive health and pension benefits.
- This year, approximately 46% of the agreement's pay and benefit costs will be incurred.
- The overall impact of the contract is likely to be in line with the company's expectations, although contract-related expenses in the second half of 2023 are estimated to be around $500M higher than anticipated.
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- According to research, the WTO cautions against the division of international trade into allied blocs, citing the possibility of increased costs and armed conflicts as a result of countries shifting their supply chains to exporters who are less productive.
- Following the completion of Endeavour Group Holdings Inc.'s agreement with WWE, TKO Group, the company that includes WWE and UFC, made its New York Stock Exchange debut with shares starting at $102 each.
- The European Central Bank persisted with its tenth consecutive interest rate hike to combat high inflation despite concerns over its impact on a potential economic downturn.
- Biden's efforts to reduce automobile emissions are up against a significant legal challenge in federal appeals court, including the U.S. Court of Appeals for the District of Columbia Circuit, with possible Supreme Court involvement.
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INSIDE BUSINESS LEADERBOARD (7 DAYS) |
 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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