Latest / Bloomberg Intelligence / BI Weekend: Union Pacific Deal, Novo Nordisk Earnings

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BI Weekend: Union Pacific Deal, Novo Nordisk Earnings · Bloomberg Intelligence

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Speaker 2: Today, we'll look at why the planemaker Boeing reported am
1:00
Speaker 2: moreer than expected loss last quarter, plus.
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Speaker 4: Well discuss why the Dutch brewing company Heineken reported a
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Speaker 4: decline in beer volume sales.
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Speaker 3: But first we begin with news in the railroad industry.
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Speaker 4: This week, Union Pacific agreed to buy Norfolk Southern and
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Speaker 4: a seventy two billion dollar cash in stock transaction. The
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Speaker 4: merger would create the first and only US transcontinental Railroad.
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Speaker 3: For more on this in.
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Speaker 2: The Future of the Railroad Industry, guest host Isabell Lee
1:22
Speaker 2: and I were joined by Lee Clascow, Bloomberg Intelligence senior
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Speaker 2: Transport Logistics and chipping analysts. We first asked Lee to
1:28
Speaker 2: give us his outlook on how this mega deal can
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Speaker 2: get done.
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Speaker 5: Yeah.
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Speaker 6: I think the whole speculation before the deal was formally
1:35
Speaker 6: announced about a possible consolidation, and I think people are
1:39
Speaker 6: just trying to take maybe a breather right now because
1:41
Speaker 6: there are some execution risks. Right this deal is not
1:44
Speaker 6: going to close. If it does close until early twenty
1:48
Speaker 6: twenty seven, it needs regulatory approval, which is not an
1:52
Speaker 6: easy thing to do. There were certain rules that were
1:55
Speaker 6: created at the Surface Transportation Board to make it very
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Speaker 6: difficult for large Class one rail mergers to happen. That
2:03
Speaker 6: was because at one time in the eighties and nineties,
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Speaker 6: those sorts of deals resulted in terrible service. I think
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Speaker 6: that the rails today were much more cognizant of service
2:17
Speaker 6: as it relates to integration. And I don't really think
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Speaker 6: you know, either company once once, assuming a merger does happen,
2:24
Speaker 6: are going scorched earth in terms of, you know, what
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Speaker 6: they're going to do to their networks. You know, they
2:30
Speaker 6: mentioned on the call that they had earlier today that
2:33
Speaker 6: they're really not going to lay off any uh, you know,
2:35
Speaker 6: frontline workers. Most of the probably layoffs are going to
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Speaker 6: happen you know, in in in in the offices. So
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Speaker 6: you know, that would just mean that services would prevail.
2:50
Speaker 6: And one of the reasons why they are doing this,
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Speaker 6: you know, from an outsider looking in, you know, it
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Speaker 6: does make complete sense. Between the two of them. They
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Speaker 6: interchange around a million and car loads a day and
3:02
Speaker 6: if they're just able to if that's that car load
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Speaker 6: is able to be on the same network, it's not
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Speaker 6: only going to improve network fluidity, it will actually lower
3:11
Speaker 6: the railroads their costs. Let's hope they pass on some
3:15
Speaker 6: of that cost savings to their shippers. I think that's
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Speaker 6: what shippers might be concerned about.
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Speaker 7: And it'll it'll provide probably a better service product that
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Speaker 7: they can go out and compete against other modes such
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Speaker 7: as trucks, and you know that's you know, also a
3:32
Speaker 7: good thing because you know, from an environmental standpoint, railroads
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Speaker 7: are less fuel efficient, you know, trucking kind of deals
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Speaker 7: with you know, turnover issues and trucker availability issues.
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Speaker 6: Right now that's not an issue, but at times it
3:46
Speaker 6: can be. And so you know, it is definitely a
3:50
Speaker 6: very interesting deal. It will create the first trans continental railroad.
3:55
Speaker 6: But you know, they do have their work cut out
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Speaker 6: for them to get that regulatory approval.
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Speaker 8: So the deal is worth eighty five billion dollars, How
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Speaker 8: do they plan to make money back? What are the
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Speaker 8: financial wins so to speak, to justify that happy price?
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Speaker 5: Tad.
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Speaker 6: Yeah, they laid out two point seven five billion in synergies,
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Speaker 6: about one point seven five and that two point seventy
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Speaker 6: five is going to be from revenue. So what they're
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Speaker 6: saying is that, you know, we can probably get more
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Speaker 6: volume onto the network because it all of a sudden
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Speaker 6: becomes a much more compelling service offering, and then about
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Speaker 6: a billion dollars in cost savings and some of that. Again,
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Speaker 6: you don't need to CEOs, you don't need two CFOs.
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Speaker 6: You don't need two corporate headquarters, you know, the dimension.
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Speaker 6: They are going to have their headquarter in Omaha where
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Speaker 6: Union Pacific is located, and keep a I think they
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Speaker 6: worded a major presence in Atlanta where Norfolk is currently
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Speaker 6: So but you know, obviously they're not going to need
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Speaker 6: as much space as they once have. And then there's
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Speaker 6: technology benefits, you know, so you're only you know, money
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Speaker 6: in technology once, not twice to get those productivity improvements.
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Speaker 6: So I think those are the major aspects of it.
5:10
Speaker 6: And you know, they mentioned that you know, they could
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Speaker 6: be you know, EPs a creative after year or two.
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Speaker 2: Well, he mentioned a lot of regulatory agencies are going
5:20
Speaker 2: to weigh in here on this deal. I also think
5:23
Speaker 2: President Trump is likely to weigh in. Do we know
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Speaker 2: anything about how he might view this deal or just
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Speaker 2: consolidation in general?
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Speaker 3: What's the views as to the Trump administration?
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Speaker 6: I mean, we don't. The language that management noted on
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Speaker 6: the call is like they wouldn't have moved forward with
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Speaker 6: this transaction if they felt that it was impossible to
5:46
Speaker 6: get regulatory approval. So whether that means they were talking
5:50
Speaker 6: to the administration, whether that means they were talking to
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Speaker 6: the STB or the DOJ, or everybody in between. That's
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Speaker 6: kind of you know, if you read between the lines,
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Speaker 6: is what they were saying. The fact that they're not
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Speaker 6: going to lay off any union folks is probably a
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Speaker 6: net positive for a Donald president Donald Trump to say,
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Speaker 6: you know, this is okay with me.
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Speaker 7: You know.
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Speaker 6: So there's a lot of unknown still and again this
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Speaker 6: is this is going to take a long time. So
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Speaker 6: we have a deal. It has to get Surface Transportation
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Speaker 6: Board approval, which you know won't happen at least for
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Speaker 6: a year and a half.
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Speaker 8: Could this park more railroad mergers in the US? And
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Speaker 8: if it goes through, what will shipping look like in
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Speaker 8: five to ten years? You said, absolutely, please elaborate.
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Speaker 6: Yeah. So, so the other railroads in the US are
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Speaker 6: Burlington Northern, which is you know, owned by Berkshire Hathway.
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Speaker 6: They may make their own bid for Norfolk Southern or decide,
6:50
Speaker 6: you know, we're just going to go after CSX because
6:54
Speaker 6: if they do not merge, then they're going to be
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Speaker 6: at a competitive disadvantage. Why would you want to send
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Speaker 6: your freight across two railroads when you can send it
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Speaker 6: across one. So it just would make sense. And if
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Speaker 6: there is regulatory appetite for this kind of a transaction.
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Speaker 6: You know, you could see a Berkshire hacked the way
7:17
Speaker 6: and CSX coming and you know, if their competitors were
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Speaker 6: able to get a deal, there's no reason why you
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Speaker 6: wouldn't get a deal done between the two. A lot
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Speaker 6: of ifs and butts and candies and nuts, but we'll
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Speaker 6: see what happens.
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Speaker 5: Our.
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Speaker 4: Thanks Salie Clascow, Bloomberg Intelligence Senior Transport, Logistics and shipping analysts.
7:35
Speaker 3: Move next to news in the drug and pharmaceutical space.
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Speaker 4: This week, the Danish drug maker Novo Nordisk announced that
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Speaker 4: insider Masier Mike Dustar would need to take over as
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Speaker 4: the company CEO. This came after Novo cut its full
7:47
Speaker 4: year outlook, stating that it's seen a decline of its
7:49
Speaker 4: blockbuster weight loss drug wig Goovi for more.
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Speaker 2: Guest host Isabel Lee and I were joined by Michael Shaw,
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Speaker 2: Bloomberg Intelligence Senior pharmaceutical and biotech analyst. Your First asked
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Speaker 2: Michael to break down Novo's a recent guy.
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Speaker 9: It's reported guidance now is calling for some percent sales
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Speaker 9: growth six percent operating profit growth after adjusting for currency,
8:07
Speaker 9: and that compares to fourteen and fifteen percent respectively previously.
8:12
Speaker 9: Now a lot of that is related to the US market. There,
8:15
Speaker 9: they're still seeing headwinds from compound and GLP one, which
8:18
Speaker 9: seems to be the main driver that's affecting wegov growth.
8:21
Speaker 9: And there's a lack of visibility here. So all of
8:24
Speaker 9: that creates uncertain z for investors and also kind of
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Speaker 9: questions around not only only twenty twenty five numbers, but
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Speaker 9: the exit rate into twenty six. So there's concerns about
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Speaker 9: you know, mid to long term growth given how concentrated
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Speaker 9: or how reliance orry Novo is on WE'REGOVI for growth.
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Speaker 9: The other headwind is competition to a zepic, So that's
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Speaker 9: the GLP one for diabetes and that's another you know,
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Speaker 9: key growth driver for the for the company. Second piece
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Speaker 9: of news new CEO appointment. So they went with an
8:57
Speaker 9: internal candidate. I think the market was perhaps expecting them
9:02
Speaker 9: to go for an external candidate, so you know, perhaps
9:05
Speaker 9: a bit of disappointment there. But that said, you know
9:08
Speaker 9: he's been at the company. So this is Mike Dudster.
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Speaker 9: He's been at the company since ninety two. He's been
9:14
Speaker 9: heading up international operations since twenty sixteen and over that time.
9:18
Speaker 9: You know, we've seen international operations sales double to around
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Speaker 9: eighteen billion dollars, So you know, he's an internal higher,
9:25
Speaker 9: he's familiar with the company culture. I think it's a
9:29
Speaker 9: bit too early to to, you know, to write him
9:31
Speaker 9: off before he's even started. Now, his focus is going
9:34
Speaker 9: to be on re get gaining ground to Lily in
9:37
Speaker 9: the obesitie space, maintaining leadership in a diabetes space, and
9:41
Speaker 9: then improving execution. And that's something that's going to be
9:44
Speaker 9: key ahead of the Cagary Semma launch as well as
9:46
Speaker 9: the launch for its oral JP one in a in obesity,
9:50
Speaker 9: particularly given you know Cagary Summer perhaps isn't as differentiated
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Speaker 9: as we had hoped for, and then the oral JLP
9:57
Speaker 9: one profile perhaps trails of Lily's.
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Speaker 8: The new CEO said he's planning to review the company's
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Speaker 8: cost base with outstting specific targets and metrics. So could
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Speaker 8: this indicate indicate that Novos preparing for a period of
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Speaker 8: solar growth after the initial surge and demand, especially the
10:15
Speaker 8: blockbuster we Go V drug.
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Speaker 9: I mean, I think it will be hard to slash
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Speaker 9: R and D to be honest, So I mean, and
10:26
Speaker 9: they would need to you know, continue marketing, continue to
10:29
Speaker 9: do DTC in order to you know, in order to
10:33
Speaker 9: compete with Lily. They're obviously healy heavy investing into Capex
10:38
Speaker 9: at the moment, but there is probably some operating leverage
10:41
Speaker 9: in there, you know, to provide some sort of relief.
10:44
Speaker 9: I mean, the company's got a margin about forty five,
10:48
Speaker 9: which is at the top end for large farmer.
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Speaker 2: Hey, Mikey, is there any reasons to believe that maybe
10:52
Speaker 2: the marketplace has been over estimating the size of this
10:55
Speaker 2: OBC drug market?
10:59
Speaker 9: I think, I mean, yeah, I think there's always a
11:02
Speaker 9: risk with it with an indication this size when you
11:04
Speaker 9: look at the market potential. You know, in the US alone,
11:07
Speaker 9: it's one hundred and thirty one hundred and forty million patients,
11:12
Speaker 9: which which is a target population.
11:14
Speaker 3: There is a population head.
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Speaker 9: Yeah, I mean there is a risk that you know,
11:19
Speaker 9: perhaps consensus did get ahead of itself. But the difficulty
11:22
Speaker 9: here is, you know, you have you know, huge runway
11:26
Speaker 9: of patients. There's obviously limited supply, so that it's difficult
11:31
Speaker 9: to know kind of you know, how quickly that supply
11:34
Speaker 9: can come on board. Now, you know, Nova gives guidance
11:38
Speaker 9: around you know, the growth prospects. You know, where they
11:40
Speaker 9: think sales et cetera are going to go, but they
11:42
Speaker 9: keep they don't necessarily quantify, you know, the cadence supply
11:49
Speaker 9: and how that how quickly that's going to come online.
11:51
Speaker 9: So that kind of makes forecasting quite difficult. And obviously
11:54
Speaker 9: they don't want to give that information because it's competitive
11:57
Speaker 9: information and they want, you know, lily to know about it.
12:00
Speaker 4: Our thanks to Michael Shaw, Bloomberg Intelligence senior BARMA biotech analysts.
12:04
Speaker 4: Coming up, we'll discuss the importance of Samsung producing AI
12:07
Speaker 4: chips for the ev giant Tesla.
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Speaker 4: Bloomberg Intelligence. We move on to earnings and the aerospace
12:45
Speaker 4: and airline industries.
12:46
Speaker 2: This week, planemaker Boeing recorded a smaller than expected loss
12:49
Speaker 2: for the second quarter, along with revenue that beat analyst expectations.
12:53
Speaker 2: Going also said it almost halted its cash burn last quarter.
12:57
Speaker 4: Separately, Jet Blue Airways posted a smaller than expected lost
13:00
Speaker 4: in the second quarter as the man rebounded.
13:02
Speaker 2: For more guess Isabel Lee and I were joined by
13:04
Speaker 2: George ferguson Bloomberg Intelligence. Senior Aerospace, Defense and Airlines analyst.
13:09
Speaker 2: First asked George for his key takeaways on Boeing's earnings.
13:12
Speaker 10: The free cash flow is still a little bit negative,
13:15
Speaker 10: not much cash from operations positive a little bit two
13:19
Speaker 10: hundred million. I think it was roughly on two hundred
13:22
Speaker 10: negative free cash flow to a positive and cash flow,
13:24
Speaker 10: I think roughly. So we're seeing an inflection point here
13:29
Speaker 10: in cash flow.
13:29
Speaker 6: So cashflow had.
13:30
Speaker 10: Been negative for the last I think it was six
13:33
Speaker 10: quarters before this, and I think that's just the sign
13:36
Speaker 10: of they're getting more aircraft delivered. They're gonna you know,
13:40
Speaker 10: they've got a lot of inventory still, they'll pull off
13:42
Speaker 10: the shelf to build aircraft going forward to pull a
13:46
Speaker 10: bigger report proportion of stuff off the shelf than they
13:49
Speaker 10: would during normal times, which should juice that cash flow up. Uh,
13:53
Speaker 10: you know pretty well. So I think it's you know,
13:56
Speaker 10: the turnaround is still in uh is underway. It looks
14:00
Speaker 10: like it's you know, well in you know, in swing
14:05
Speaker 10: in the results we saw and the way you know,
14:08
Speaker 10: company management commented on the end of the year and
14:11
Speaker 10: so you know, I think it was a pretty good
14:15
Speaker 10: results quarter for Boeing again, turn around intact.
14:18
Speaker 8: How are they addressing quality in safety issues, especially when
14:21
Speaker 8: it comes to the seven three seven MAX program.
14:23
Speaker 10: Yeah, I mean there it's you know, as Kelly Oprok said,
14:27
Speaker 10: it's a process. I think just the sign of seeing
14:31
Speaker 10: increased deliveries is showing us that the quality improvement at
14:36
Speaker 10: Spirit you know, has has seen success. And they're talking
14:42
Speaker 10: about you know, they're at thirty eight seven thirty sevens
14:45
Speaker 10: a month now. Kelly Opork says he's going to approach
14:48
Speaker 10: the FA in a short period of time and work
14:52
Speaker 10: on the forty two. It's seven thirty sevens a month.
14:55
Speaker 10: So again he must have some level of confidence that
14:58
Speaker 10: his quality and his engineering is good in order in
15:02
Speaker 10: order to go further. It's not perfect. They've been slowed
15:05
Speaker 10: down a little bit in the certification of seven three
15:08
Speaker 10: seven DASH ten and DASH seven. They've pushed them into
15:11
Speaker 10: twenty twenty six. I think it's okay. It's not a
15:14
Speaker 10: big move. You know, we'd like to see them come
15:17
Speaker 10: faster because seven thirty seven DASH ten is a large
15:21
Speaker 10: competitor to the Airbus A three twenty, which is very
15:23
Speaker 10: successful and one of the reasons they saw United place
15:27
Speaker 10: a big order with Airbus. But again, I think that
15:30
Speaker 10: you can't expect this stuff to go in a straight line.
15:32
Speaker 10: And the fact that they think twenty twenty six is
15:34
Speaker 10: when they could get certification, it doesn't tell me anything's broke.
15:38
Speaker 10: It just tells me the process is nonlinear, and I
15:41
Speaker 10: think to be expected in aerospace, all right.
15:43
Speaker 2: Also, jet Blue posted a smaller than expected loss. Here,
15:47
Speaker 2: what's going on with Jet Blue and the airline business?
15:49
Speaker 2: He's aces because I know the last quarter, Boy, these
15:52
Speaker 2: airline companies are really reticent to give any kind of guidance.
15:56
Speaker 10: Yeah, I mean a lot of them have come back
15:58
Speaker 10: with guidance in a lot of cases is lower a
16:01
Speaker 10: lot you know, the airline business right now is really
16:03
Speaker 10: counting on less capacity in the second half of twenty
16:07
Speaker 10: twenty five, and we'll see how that goes. Last time
16:09
Speaker 10: I looked at domestic capacity plans for three Q it's
16:13
Speaker 10: kind of about zero growth. I mean, I think they
16:16
Speaker 10: need to cut capacity in the marketplace. If you look
16:18
Speaker 10: at jet Blues results, load factor fell by I think
16:22
Speaker 10: it was around three hundred basis points down to the
16:26
Speaker 10: low eighties from mid eighties they and they held fares
16:31
Speaker 10: pretty much flat, yields were kind of just up a
16:34
Speaker 10: little bit. So that just tells me that there's too
16:36
Speaker 10: much capacity in this market. They just can't fill airplanes
16:40
Speaker 10: at the right price. Jet Blue has other problems like
16:43
Speaker 10: you know, the gear turbo fan keeps them from expanding.
16:46
Speaker 10: That means costser ballooning on them. But I don't see
16:48
Speaker 10: how they'd want to expand right now. What I see
16:51
Speaker 10: as a market that has can't fill airplanes at the
16:54
Speaker 10: price that's going to keep them very profitable, and so
16:58
Speaker 10: someone's got to cut. And the question is who the
17:00
Speaker 10: full service carriers are saying, Hey, we got premium to
17:03
Speaker 10: subsidize us. We don't care. The low costs are going
17:06
Speaker 10: to have to jet Blue will cut in three Q
17:09
Speaker 10: but every time they cut, their costs go high or
17:11
Speaker 10: per seed, so they're a bit of a challenging position.
17:15
Speaker 8: It does seem like the issues just compound for the
17:17
Speaker 8: companies in this space from aircraft shortages.
17:19
Speaker 4: Delivery delays, pilot shortages.
17:21
Speaker 8: Wage inflation, labor and negotiation and so on. Are there
17:26
Speaker 8: differences in how Boeing and Jet Blue addressing the issues
17:29
Speaker 8: or is really an industry wide consensus and problem.
17:33
Speaker 10: Well, I mean if you talk to Boeing, everybody wants
17:36
Speaker 10: an airplane, right and they're sold out in the seven
17:38
Speaker 10: thirty seven and seventy eight seven to the end of
17:39
Speaker 10: the decade. Everybody wants the newest, and I think what
17:42
Speaker 10: needs to happen is, again the airlines are just putting
17:45
Speaker 10: too much capacity in the marketplace, especially in the US,
17:48
Speaker 10: and someone has to cry uncle and say, hey, you know,
17:52
Speaker 10: we can't take the profitability at these levels. Park some
17:55
Speaker 10: airplanes get them out of the business so they can
17:59
Speaker 10: write size compacity, and I think nobody wants to do it.
18:03
Speaker 10: You have some competitors that are in a situation where
18:06
Speaker 10: they they've you know, some of them are declared Chapter
18:09
Speaker 10: eleven it's like spirit and then and then refashion themselves
18:12
Speaker 10: and got back out in the marketplace. But it's either
18:15
Speaker 10: someone's gonna have to go away or the market's going
18:18
Speaker 10: to have to get negative enough and profitability that people
18:21
Speaker 10: start to park airplanes. As we get into laid end
18:24
Speaker 10: of this year, four Q and one Q, those are
18:27
Speaker 10: weak quarters for the US airline industry. If something doesn't improve,
18:31
Speaker 10: If you've got a Jet Blue that's barely positive and
18:33
Speaker 10: profitability in two Q without a change in this market,
18:37
Speaker 10: that's that's a strong negative. Near the end of the year,
18:40
Speaker 10: people will start to cut capacity and try to boost fares.
18:43
Speaker 2: So, George, who does that? Is it one of the
18:44
Speaker 2: big three? I mean, Jet Blue can't drive capacity in
18:48
Speaker 2: this industry.
18:48
Speaker 10: It's got to be one of the big three, right, Yeah, Look,
18:51
Speaker 10: I don't think it's. The big three are in a
18:54
Speaker 10: game of chicken with the low cost right they think
18:57
Speaker 10: that they've got pole position here and that they just
19:00
Speaker 10: keep capacity and someone's going to fail on the low
19:04
Speaker 10: cost side because the low cost doesn't have this premium seating.
19:08
Speaker 10: They might be right right right now, it looks like
19:11
Speaker 10: their profitabilities hanging in there. The low cost carriers are
19:14
Speaker 10: the ones taking it on the chin our.
19:16
Speaker 4: Thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense and
19:19
Speaker 4: Airlines analysts.
19:21
Speaker 3: We moved to news from the ev giant Tesla.
19:24
Speaker 4: This week, we heard Samsung will make AI chips for
19:26
Speaker 4: Tesla in a sixteen point five billion dollar multi year deal.
19:30
Speaker 4: That's according to Tesla CEO Elon Musk, must be the
19:32
Speaker 4: statement on x where he stated that the strategic importance
19:35
Speaker 4: of this deal is hard to overstate.
19:37
Speaker 2: For more guestos, John Tucker and I were joined by
19:39
Speaker 2: Craig Trudell, Bloomberg Global Autos Editor. We first asked Craig
19:43
Speaker 2: what this deal between Tesla and Samsung will do for
19:45
Speaker 2: the carmaker.
19:46
Speaker 11: Samsung is an existing supplier of these high powered semiconductors
19:52
Speaker 11: that are used for its driving systems that it markets
19:56
Speaker 11: as a full self driving and autopilot. Contrary to those
20:00
Speaker 11: names that you know, you cannot buy a Tesla today
20:03
Speaker 11: and have to drive itself for you. You still need
20:06
Speaker 11: to pay attention and keep your hands on the wheel
20:10
Speaker 11: and eyes on the road. But uh, it is the
20:12
Speaker 11: case that those systems are are becoming more more capable
20:16
Speaker 11: and that Tesla's trying to kind of press the issue
20:19
Speaker 11: with them to the point where uh, you know, they're
20:21
Speaker 11: they're taking people out of out of the driver's seat
20:24
Speaker 11: and and having uh you know, supervisors in the in
20:29
Speaker 11: the passenger seat of cars in Austin, Texas, and and
20:32
Speaker 11: trying to to take that elsewhere as well. Uh this
20:36
Speaker 11: this will be interestingly. Musk announced that they will be
20:40
Speaker 11: going to a T S M C chip for for
20:44
Speaker 11: the next generation of Semis that they use and then
20:48
Speaker 11: go to Samsung, relying on on supply from from this
20:51
Speaker 11: plant in Texas that that Samsung is boys to to open,
20:55
Speaker 11: uh in the near future.
20:57
Speaker 12: And what near future? How how long does it take
21:01
Speaker 12: to build a fab plant? The cool kids say fab right.
21:06
Speaker 11: Yeah, that's right. Yeah, I mean I think, uh, you know,
21:09
Speaker 11: the the this is a project on Samsung's part that's
21:12
Speaker 11: been in the worse for some time, right, and and
21:14
Speaker 11: so uh they they you know, were sort of moved
21:18
Speaker 11: actually by the Chips Act under the Biden administration, and
21:21
Speaker 11: Trump uh was was critical of of the Chips Act,
21:25
Speaker 11: you know, on the on the campaign trail. And yet
21:27
Speaker 11: we've seen uh sort of a continuation and somewhat of
21:30
Speaker 11: an embrace of it. Uh you know, as we've we've
21:33
Speaker 11: seen a change in the White House, uh in terms
21:37
Speaker 11: of the exact timing of when exactly this new AI
21:41
Speaker 11: chip uh you know, will will be coming out of
21:44
Speaker 11: that Texas factory. It's it's not yet clear, and the
21:47
Speaker 11: companies have have not said much because uh, you know,
21:50
Speaker 11: they of course agreed to uh you know, some some
21:53
Speaker 11: privacy here that must proceeded to to sort of loosen
21:57
Speaker 11: up on you know, at least over social media.
22:01
Speaker 2: Craig, do we know at this stage to what extent
22:04
Speaker 2: Elon Musk is engaged in the day to day the
22:07
Speaker 2: strategic of Tesla and any stepped back from his doze responsibilities.
22:13
Speaker 11: I mean, I think you can you can glean so
22:15
Speaker 11: much from his his you know activity on x as
22:20
Speaker 11: to what he's paying attention to. And it absolutely is
22:22
Speaker 11: the case that we're seeing him him posting more about
22:26
Speaker 11: things like this deal with Samsung, and I do think
22:28
Speaker 11: that that's helpful sort of for for sentiment around Tesla.
22:31
Speaker 11: And yet I would say too that you know, if
22:35
Speaker 11: if there was a sort of you know, scorecard, sort
22:38
Speaker 11: of an informal scorecard that you'd be keeping track of
22:41
Speaker 11: where he's sort of devoting most of his time and
22:44
Speaker 11: attention to I would say it's as much or more
22:47
Speaker 11: on XAI and just ai in general than it is
22:50
Speaker 11: on Tesla specifically. You know, you heard from him a
22:54
Speaker 11: few months ago that he would really be turning his
22:57
Speaker 11: attention back to Tesla, you know, as he was making
23:01
Speaker 11: his way out of the White House. But I think
23:03
Speaker 11: you know, the amount of attention and emphasis he's put
23:06
Speaker 11: on trying to catch up to the likes of open
23:08
Speaker 11: AI and Google in our artificial intelligence and LMS is
23:14
Speaker 11: you know, definitely exceeds you know, the amount of you know,
23:18
Speaker 11: noise we're hearing from him about the day to day
23:20
Speaker 11: interworkings of Tesla.
23:23
Speaker 4: Our thanks to Craig Drudell, Bloomberg Global Autos Editor. Coming up,
23:26
Speaker 4: we'll discuss the impact of President Donald Trump's a big,
23:28
Speaker 4: beautiful bill on green hydrogen.
23:30
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23:33
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23:35
Speaker 2: hundred and thirty industries.
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24:05
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24:07
Speaker 4: Bloomberg Intelligence.
24:08
Speaker 3: We moved next to the consumer goods industry this week.
24:10
Speaker 4: The Dutch brewing company Heineken reported a decline in beer
24:13
Speaker 4: volume sales during the second quarter. This came as Heineken
24:16
Speaker 4: feest disputes over price increases with regional buying groups in
24:19
Speaker 4: Western Europe.
24:20
Speaker 2: The More guest host John Tucker and I were joined
24:22
Speaker 2: by Duncan Fox, Bloomberg Intelligence senior consumer products analysts. First,
24:25
Speaker 2: they asked Duncan for his take on honingg it's most
24:28
Speaker 2: recent guidance.
24:29
Speaker 13: Essentially, European retailers decided not delayed pushing the prices up
24:35
Speaker 13: after I suppose last year wasn't particularly big on pricing
24:38
Speaker 13: the last three percent of the local Heinegen brown, but
24:41
Speaker 13: the previous two years when inflation was raging, you know,
24:44
Speaker 13: they did get fourteen and ten percent respectively. In twenty
24:47
Speaker 13: two and twenty three. Costs of goods are not really
24:51
Speaker 13: going up, so I think the retailers just pushed back
24:53
Speaker 13: and he took them longer to push to get a
24:56
Speaker 13: small price through in Europe and that's just hit the
24:59
Speaker 13: So it's about fifty of the overall business.
25:02
Speaker 12: What is what is a Heineken class in the pub?
25:07
Speaker 13: Well, if you're in London, a heck of a lot.
25:09
Speaker 13: It's it's probably eight pounds plus I can be about ten,
25:15
Speaker 13: which they are either the Dorset, you'd be lucky to
25:18
Speaker 13: get it. You know, it's sort of around five to
25:20
Speaker 13: six pound. But nonetheless, you know, when you're pushing the
25:25
Speaker 13: price up the premium Heinegen brand, which is probably twenty
25:29
Speaker 13: percent more expensive than any other sort of mainstream beer
25:34
Speaker 13: that they've got on the pulfo, you can see why
25:37
Speaker 13: the volumes struggled in the short term given cost of
25:39
Speaker 13: living crisis. So it's something they will resolve and hope
25:43
Speaker 13: they have evolved in fact on the pricing, so one
25:45
Speaker 13: hope it will get better as we go to the
25:47
Speaker 13: second half. With that's a weather that we've found in Europe.
25:50
Speaker 2: So we we had I guess the announcement of a
25:53
Speaker 2: trade deal between the US and the EU, I don't
25:56
Speaker 2: think what's it mean for the spirit's business, the beer business,
26:00
Speaker 2: line business asking for a friend.
26:03
Speaker 13: I hope you've already stocked up that fifteen percent is
26:07
Speaker 13: probably is probably a good outcome given some of the
26:10
Speaker 13: rumors that were going around from April on was that
26:12
Speaker 13: he could have gone up to two hundred percent. But
26:15
Speaker 13: obviously the cost of beer coming in for someone like
26:18
Speaker 13: harnek and they basically ship in from either Holland or Mexico.
26:24
Speaker 13: Some of the Mexican beer may well be tariff free
26:26
Speaker 13: on the us NCA agreement, but then you've got the
26:29
Speaker 13: out sort of the cans, So lord knows how much
26:33
Speaker 13: that will push the price up. But yeah, they'll just
26:36
Speaker 13: have to push prices up on beer and spirits. Spirits
26:40
Speaker 13: at fifteen percent probably say it's not huge, but it'll
26:45
Speaker 13: mean pushing prices up three four percent something of that
26:48
Speaker 13: order on top of what they would normally try and get.
26:51
Speaker 13: So it's it's not going to be easy to do,
26:54
Speaker 13: but it's not as disastrous as thirty percent or something
26:57
Speaker 13: like that, which Renby said would take thirty five million euros,
27:01
Speaker 13: So a little bit better than expected or feared, but
27:07
Speaker 13: it's still not going to be great and use wine.
27:09
Speaker 6: There really isn't.
27:09
Speaker 13: Anybody that exports wine that's quoted, so it's a bit
27:15
Speaker 13: difficult to say all the impact is, but it will
27:17
Speaker 13: certainly make it more expensive compared to your good, US
27:21
Speaker 13: great varieties that come on the market. So I would
27:24
Speaker 13: have thought you'd see people switch to US lines.
27:26
Speaker 12: I find that's kind of disturbing. This part of the
27:28
Speaker 12: story where you quote the CEO of Heineken beer markets
27:33
Speaker 12: have declined that a pace Heineken has rarely seen any
27:36
Speaker 12: time before. Is this the end of humanity as we
27:40
Speaker 12: know it?
27:42
Speaker 13: Well, if it carries on you, I think there was.
27:45
Speaker 13: There's been stories that, you know, the gen Z's have
27:48
Speaker 13: given up and drink. I think that's wildly wrong. But
27:52
Speaker 13: there's certainly people are abstaining during the week a little bit.
27:56
Speaker 13: But the real problem is that people are drinking more
27:59
Speaker 13: at home going to the pub, and that's sort of change.
28:03
Speaker 13: That's the big change from COVID. So you've got to
28:06
Speaker 13: make sure you get your pricing at retailer's right. Goes
28:09
Speaker 13: back to your original question, because people that know it's
28:13
Speaker 13: sort of more like eighty percent drinking at home in
28:16
Speaker 13: the US, it's anywhere between sort of fifty and twenty percent,
28:22
Speaker 13: depends on where you're on in the world. There are
28:23
Speaker 13: a lot more people drinking at home and going to
28:25
Speaker 13: pugs and clubs, so the mix is poor really or
28:30
Speaker 13: has been, and it needs the good summer would help
28:34
Speaker 13: and in these people to have a bit more money
28:36
Speaker 13: in their pocket as well, so maybe feeling a little
28:39
Speaker 13: bit more confident that they can go out and spend
28:41
Speaker 13: with their friends rather than buying it cheap from retailers
28:45
Speaker 13: and entertaining at home.
28:47
Speaker 2: Don't get are one of this is a national phenomenon
28:49
Speaker 2: because it's a phenomenon on the Jersey Shore, which is
28:52
Speaker 2: people are drinking like these iced tea vodka things, the
28:55
Speaker 2: White Claws, all this stuff that's not beer.
28:59
Speaker 3: Are you seeing that? Is that a trend around the world?
29:02
Speaker 13: Unfortunately, it seems to be that is a trend. You
29:04
Speaker 13: get a lot of ready to drinks being being pushed
29:08
Speaker 13: and they big for sort of twelve eighteen months, and
29:12
Speaker 13: it does tend to go against the beer volume more
29:15
Speaker 13: than anything else. Spirit companies are doing it with no
29:19
Speaker 13: alcohol spirits now and they're also pushing you in bigen
29:23
Speaker 13: and tonic or already drink gin and tire and stuff
29:25
Speaker 13: like that. So there's just a lot more choice to
29:27
Speaker 13: the consumer than there was, you know, when I was
29:30
Speaker 13: a kid, So it just takes a little bit of
29:34
Speaker 13: a shine off. You can try new things, and I'd
29:38
Speaker 13: say people are spending more or spending a similar amount
29:41
Speaker 13: of arcoli just buying less of it in terms of volume.
29:44
Speaker 13: So it's all about getting the value right. Premium brands
29:47
Speaker 13: are doing well in Premium brand did very well in
29:49
Speaker 13: these results, but it's only twenty four percent of their
29:52
Speaker 13: overall volume, So you know, four point five percent on
29:55
Speaker 13: twenty four percent doesn't sort of help.
29:57
Speaker 4: Part thinks Sid Duncan Fox Bloomberg Intelligence Senior Consumer Products analysts.
30:01
Speaker 2: Each week we look at research from Bloomberg n EF,
30:04
Speaker 2: previously known as a New Energy Finance.
30:06
Speaker 4: They're the team at Bloomberg that tracks and analyzes as
30:08
Speaker 4: the energy transition from commodities to power, transport, industries, buildings,
30:12
Speaker 4: and agriculture sectors. This week, we looked at the impact
30:15
Speaker 4: of President Donald Trump's Big Beautiful Bill on US clean
30:18
Speaker 4: energy spending and on hydrogen For more.
30:20
Speaker 2: Guest host John Tucker and I were joined by Martin Tangler,
30:23
Speaker 2: Bloomberg n EF's head of hydrogen Research. First to ask
30:26
Speaker 2: Martin how the Trump administration is impacting the hydrogen sector.
30:29
Speaker 5: Hydrogen was being portrayed, as you've kind of implied, as
30:33
Speaker 5: this huge economic opportunity until recently, and if you've been
30:39
Speaker 5: following the news, then you may have noticed that there
30:42
Speaker 5: was There has been a lot less news on hydrogen
30:44
Speaker 5: these days, with a couple exceptions, and I think this
30:50
Speaker 5: was to be expected. The industry right now is what
30:54
Speaker 5: we have called it bn EF and what Gardner of
30:56
Speaker 5: course has called in their high cycle theorem a truffle disillusionment.
31:00
Speaker 5: So previously people were too excited. We had this this
31:03
Speaker 5: inflated expectation about how much hygiene we were going to use,
31:07
Speaker 5: and we were going to use it in cars, We're
31:09
Speaker 5: going to use it in heating, We're going to use
31:10
Speaker 5: it everywhere, and b and EF Bloomberg NEF you're saying, no,
31:14
Speaker 5: that's not going to happen. Let's take a step back.
31:17
Speaker 5: And now we're kind of there. So we're seeing projects
31:19
Speaker 5: canceled and fid's final investment decisions turning out not to
31:23
Speaker 5: be final and being taken back. So what's the was
31:26
Speaker 5: the problem? I would say problem number one is low demand.
31:28
Speaker 5: So a lot of producers, a lot of companies want
31:31
Speaker 5: to make this stuff, but not so many want to
31:33
Speaker 5: buy it. Why do they not want to buy it?
31:35
Speaker 5: Because it's turned out to be more expensive, especially the
31:38
Speaker 5: green kind hydien made from water with renewed electricity, And
31:43
Speaker 5: why is that? Why is it expensive Because there's less
31:46
Speaker 5: insufficient policy than people expected, which kind of brings us
31:51
Speaker 5: now to Trump. So you're asking, what's going on with Trump?
31:55
Speaker 5: What's going on in the US. So, of course the
31:57
Speaker 5: obb B A but got the right number of bees
32:01
Speaker 5: and one big beautiful bill Act got passed just recently,
32:06
Speaker 5: and that had a lot of impact on of course
32:10
Speaker 5: clean energy and hydrogen as well. In one sentence, I
32:15
Speaker 5: would say it cemented the dominance of blue hydrogen over green.
32:20
Speaker 5: Of course, gray hydrogen one that we make from fossil
32:22
Speaker 5: fuels without any carbon capture and storage. We don't care
32:24
Speaker 5: how much we release. That's the one we make most
32:26
Speaker 5: of today.
32:27
Speaker 12: Hydrogen.
32:28
Speaker 5: Yeah, so blue hydrogen is hydrogen that's made the same
32:31
Speaker 5: way as gray from fossil fuels, which is made from
32:34
Speaker 5: natural gas, but where we try to capture some of
32:37
Speaker 5: the CO two that's released in the process and as
32:41
Speaker 5: you may be aware and of the Trump administration, they
32:44
Speaker 5: like the CO two or CO two capture, so they've
32:48
Speaker 5: improved some of the conditions for the forty five Q
32:52
Speaker 5: tax credit. Many of the tax credits got canceled or revised,
32:57
Speaker 5: but the forty five Q for capture, carbon capture and
33:00
Speaker 5: storage actually got better for blue hydrogen producers who now
33:04
Speaker 5: can make more money if they do the enhanced oil
33:07
Speaker 5: recoveries that they pumped the CO two back into an
33:09
Speaker 5: old field and extracted, they may now get the same
33:13
Speaker 5: amount of money as if they were just to bury
33:15
Speaker 5: that underground. So that's an improvement for blue hydrogen that's
33:20
Speaker 5: come out of the obbb A.
33:24
Speaker 12: The credits favor hydrogen that's kind of polluting and not
33:29
Speaker 12: the stuff that's the good stuff.
33:33
Speaker 5: I think I know that I wouldn't I would not
33:36
Speaker 5: go that far. So there's another kind of hydrogen's green,
33:39
Speaker 5: which I also want to talk about, which is made
33:42
Speaker 5: from renewables and the tax credits. There were very generous
33:45
Speaker 5: tax credits for that called forty five V, and those
33:48
Speaker 5: got scaled down very significantly. So you now must start
33:51
Speaker 5: construction by the end of twenty twenty seven, as opposed
33:53
Speaker 5: to end of twenty thirty two in order to be
33:57
Speaker 5: eligible for this very generous tax credit that was passed
34:00
Speaker 5: by the Biden administration in twenty twenty two. So that's
34:05
Speaker 5: been a reduction in support for the green kind, which
34:08
Speaker 5: is lower emissions, and improvement for the support very very
34:12
Speaker 5: limited improvement, but some improvement in the support for blue
34:15
Speaker 5: and then blue. There's a lot of questions around how
34:17
Speaker 5: much of the carbon you actually capture, but you could
34:19
Speaker 5: argue that you could capture ninety five percent, as much
34:22
Speaker 5: as ninety five percent in some situations has not been
34:25
Speaker 5: done yet but could be done. Then actually it's not
34:28
Speaker 5: so unclean. So there's lots of people. Some say it's
34:31
Speaker 5: it's it's very dirty, but others say it's it's it
34:34
Speaker 5: can be quite clean.
34:35
Speaker 3: Martin.
34:35
Speaker 2: To the extent that this administration is not as supportive
34:39
Speaker 2: of the energy transition that led let us say, is
34:41
Speaker 2: maybe some other administrations, What does that mean for the
34:44
Speaker 2: global trends here?
34:45
Speaker 3: How important is.
34:46
Speaker 2: The US in terms of this global transition to alternative
34:51
Speaker 2: energy sources?
34:52
Speaker 5: Well, I don't think I have the expertise to talk
34:55
Speaker 5: about more broadly alternative energy sources more broadly, but certainly
34:59
Speaker 5: in terms of hydrogen again, which is my field. I
35:04
Speaker 5: would argue the US is very important to the people.
35:07
Speaker 5: When the tax credits were announced back in twenty twenty two,
35:12
Speaker 5: everybody was really really afraid that the US would jump
35:16
Speaker 5: in and take over everything in hydrogen. And then people
35:20
Speaker 5: were waiting and waiting for the final guidance on these credits,
35:23
Speaker 5: which came very very late, and the US actually did
35:27
Speaker 5: not become a leader, but it can still be a
35:30
Speaker 5: leader on exports of especially that blue hydrogen that I
35:34
Speaker 5: talked about. The Japanese, the Koreans they're keen to import
35:37
Speaker 5: some of it to burn in power plants, which we
35:39
Speaker 5: have a whole series of report reports that says bad idea.
35:43
Speaker 5: But if the Japanese, Japanese and the Koreans want to
35:46
Speaker 5: do it, then I think the US is there and
35:48
Speaker 5: ready to sell that, and that actually happened. So we
35:50
Speaker 5: had a deal between for example, CF Industries and a
35:53
Speaker 5: couple of Japanese companies to sell that blue ammonia, which
35:57
Speaker 5: is a chemical made out of hydrogen to be burned
35:59
Speaker 5: in Japanese power plants are used in steel plants in Japan.
36:03
Speaker 5: And then you've got Europe, which is very very focused
36:06
Speaker 5: on green hydrogen. They really want to adopt green as
36:11
Speaker 5: opposed to blue to reduce dependence on fossil fuels. But
36:16
Speaker 5: we still see an opportunity for blue hydrogen from the
36:19
Speaker 5: US being exported to Europe if the carbon price is
36:23
Speaker 5: here in Europe rise to the levels that we expect
36:26
Speaker 5: them to rise to in twenty thirty at bnf.
36:29
Speaker 4: R thanks to Martin Tangler, beenap's head of hydrogen research.
36:33
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36:41
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