The Artic Effect of Earnings Announcements in FTSE 250 Companies

Running head: ACCOUNTING
ACCOUNTING
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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Conclusion................................................................................................................................17
References................................................................................................................................18
Appendix..................................................................................................................................22

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Introduction
The report consists top ten companies of FTSE 250 and evaluates the wealth effect of
earnings announcements that has been taken place between 1 July 2019 and 31 December
2019. The article reflects five good news announcement and five bad news announcement of
each of the company. Even reasons have been mentioned classifying why the announcement
is a good one or bad one. All the selected companies comes under the top ten FTSE 250 firms
of United Kingdom. The ten companies operates in different sectors and assumes to be the
largest British companies in the FTSE 250 firms.
Discussion
Rio Tinto (Metals and Mining Industry)
Good Announcements
“Rio Tinto share price: iron ore shipments hit 86.1mt in Q3”
The production and shipment activities of the company reflects positive outcomes in the third
quarter by rising to some 0.45% as the operational issues and weather condition improved to
some extent (IG, 2020).
“Rio Tinto investment in Pilbara haul truck automation proving to be successful”
By end of 2019, the company is expecting 50% of its iron ore truck fleet to be autonomous
(International Mining, 2020).
“The company reflects decline in H1 net profit however, declared $1B special dividend”
Surge in iron ore prices the firm pays $1B special dividend and even interim dividend raised
to $1.51 per share (Seeking Alpha, 2020).
“WA contractor saved $250m of Rio Tinto work”

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The progress of the West Angela’s will be profitable for the company, as it will sustain the
manufacturing of premium Pilbara Blend iron ore product (Australian Mining, 2020).
“The company provides extra $1bn”
In the first half of 2019, the firm handed out $1bn special dividend to shareholders despite
various issues in iron ore production (Investorschronicle.co.uk, 2020).
Bad Announcements
“Rio Tinto shares fall 6% as iron ore outlook grows gloomy”
Iron ore is an important element of steelmaking, reflects price rise to $120 from $70 due to
which the company has to bear a fall in share price more than 6% (IG, 2020).
“Rio Tinto shares drop 4.3% as a $1 billion special dividend is revealed”
The company failed to meet the interim dividend expectations due to specific reason one of
which is Trump’s tweet on increasing tariffs by additional 10% (IG, 2020).
“Rio Tinto addresses operational problems, delivers record pay-out”
Due to some micro-economic tensions in China, growth slows down and China is the biggest
iron-ore customer of the Rio. The manufacturing of Pilbara iron ore asset has been impacted
due to operational issues (REUTERS, 2020).
“The firm’s share slumps to 3 month low irrespective of highest earnings”
The operational activities of the company are getting affected due to unclear energy policy
and raising energy prices (The Sydney Morning Herald, 2020).
“Price falls and iron ore miners slammed”
Rio Tinto fell 4.2% and since July 3, the company is down by more than 10%.

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Diageo (Beverages, Wineries and Distilleries)
Good Announcements
“The Diageo gained 82% in its share price”
The company outperformed in the market and shareholders are expecting more profit.
“Diageo sales increases because of Games of Thrones inspired scotch”
The annual profit of company increases because of the popularity of scotch inspired by
Games of Thrones.
“Due to strong demand Diageo profit rises”
Production of innovative products such as Smirnoff vodka, Johnnie Walker Scotch Whisky,
and Guinness stout has increased the operating profit of the company by 10% (CNBC, 2020).
“White Walker proves to be profitable for Diageo”
Launching of this product increased the sales to 12.9 billion and even there is a rise in the
profit of the company.
“Diageo increased marketing investment by 8%”
The net sales increased that gives the opportunity to raise the marketing investment by 8% to
£2bn.
Bad Announcements
“The Diageo workers of Scottish denied the insulting pay offer”
The workers rejects the pay offer of increase in 2.5% and said it be insulting for the excellent
workers and could even go for a strike for this insulting offer.

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“Despite increase in sales and profit the outlook of the company disappoints the
shareholders”
The growth in operating profit is not as per the expectations and even the shares fell by 1.6%.
“Diageo resilient in face of tariffs threat from US”
US is the biggest exporter of scotch by value and it has given threat to slap tariffs in Scotch
whisky imports to the Diageo (Press and Journal, 2020).
“Distilleries disrupted because of strikes in Diageo”
The operational activities of the Scotch whisky activities will be affected due to various
strikes conducted by the workers over company’s insatiable corporate greed.
“Whisky production abrupt due to strike related to over pay dispute”
The union declared strikes related to over pay issues and because of this, the production of
whisky is disrupted.
British American Tobacco (Tobacco Industry)
Good Announcements
“BAT not out of puff just yet”
The use of e-cigarettes assumes to be less harmful than the traditional ones and the vaping
market has grown exponentially.
“FDA looking forward to ban flavoured e-cigarettes”
The Food and Drug Administration plans to ban flavoured e-cigarettes in US and this step
could be profitable for the BAT.
“BAT reflects rise in share prices”

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Shares in tobacco and cigarettes production were trading over 2% higher rate and even the
revenue is expected to increase to 5% in coming future.
“BAT reflecting profitable outcomes”
The firm is showing profitable results both in terms of growth in price and decline in net debt.
The overall performance of the company is strong in both traditional tobacco and new
category products of the business.
“Market supports BAT strategy to cut top staff”
BAT plans to form a simple structure and the reduction of staff would result in obtaining
reinvestment opportunity in growth of new products that includes tobacco heating products,
oral tobacco, and many more (Iol.co.za, 2020).
Bad Announcements
“2,300 jobs has been cut globally by British American Tobacco”
Increase in the demand for e-cigarettes has led to retrenchment of employees as the demand
for traditional tobacco declines.
“Nigerians may lose their jobs as mass sack looms at BTA”
To sustain in long-run and to drive more revenue the company has taken this big step. The
company wants to attract a sustainable return for the shareholders.
“Philip Morris-Altria Combo proves to be threat for BAT”
If the New York based Philip Morris-Altria combines with Richmond, Virginia-based Altria
then it will be a threat for BAT. Even the share price of BAT has fall to 6.5%
(Bloomberg.com, 2020).
“BAT -5% after trading update”

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The demand for cigarettes has fallen due to which the sales volume will approximately fall
around 3.5%. BAT is planning to invest in profitable portfolios that consists of Vype and
Vuse pens.
“Global sales dwindle that affects the BAT share price”
Demand for traditional cigarettes declines greatly affecting the sale of BAT products. The
shares of the company fell around 4%.
BHP (Industrial Metals and Mining)
Good Announcements
“BHP shows miners are turning to low carbon leaders”
The company is trying to use more resources to obtain low-carbon energy production.
“BHP CEO focuses on social licence and improving efficiencies”
The company CEO is trying to focus more on safety and social licence.
“The share price has gained 63% and shareholders are expecting more”
The EPS has changed within the last three years and it is extremely profitable for the
company.
“BHP reflects positive results in terms of annual profit, pays record dividend”
The company shows 2% rise in annual profit due to increase in iron ore prices.
“Despite challenges in the productivity process the company offers record return”
Even after facing productive challenges such as resource headwinds and unfavourable
climatic condition, the company delivers an impressive return.