CAC 40: TotalEnergies, ArcelorMittal, Engie or LVMH… The giants of the CAC 40 are posting record profits

(BFM-Börse) – The CAC 40 giants are in splendid health despite the outbreak of war in Ukraine and inflation at its peak. The heavyweights of the Paris dimension are already accumulating almost 73 billion in profits in the first half of the year. That is 24% more than in the first half of 2021. TotalEnergies, ArcelorMittal, Engie and LVMH particularly stood out.

Nothing is stopping the growth of big French companies: despite the war in Ukraine and record inflation, the CAC 40 has already accumulated nearly 73 billion in profits in the first half of the year, thanks in particular to luxury and the rise in commodities, according to a count by AFP on Thursday.

So far, 38 companies in the CAC 40, the index that brings together the largest French market capitalizations from various sectors, have published their results, while train manufacturer Alstom and spirits specialist Pernod Ricard are having a mixed financial year. They achieved a profit increase of 24% compared to the first half of 2021, when the same companies had generated profits of 58.8 billion euros, while Eurofins Scientific was not yet in the CAC 40.

Large French corporations have therefore largely recovered from the Covid-19 pandemic and have continued to grow despite the outbreak of war in Ukraine at the end of February, further adding to inflation linked to the post-lockdown economic recovery. Economics Minister Bruno Le Maire is “proud” of the good health of these groups and speaks out against a tax on extraordinary profits, which was ultimately rejected after a debate in Parliament.

“It’s quite ambivalent because all the ingredients for a crisis were there (…) but the performance is good,” comments Bénédicte Hautefort, founder of fintech Scalens, specialized in the digitization of relationships between listed companies and investors, to AFP.

Commodities and luxury at the party

Inflation hasn’t hit all companies equally. In terms of raw materials and energy, for example, rising prices have given companies in the sector a boost.

Oil and gas giant TotalEnergies more than doubled its earnings in the second quarter, posting the CAC 40’s best-ever net result for the half-year at more than €10.4 billion. It is followed by the world’s second-largest steelmaker, ArcelorMittal, which took advantage of the rise in steel prices and reached almost 8 billion euros. Engie, the main gas supplier in France, has now more than doubled its profit to 5 billion euros.

Luxury, another heavyweight in the CAC 40, stood out despite a drop in sales in China, one of its main markets, as brands were able to raise prices without losing customers.

“They depend on a wealthy clientele that doesn’t mind price increases,” Mimoza Bogeska, chief executive of asset management firm Monocle Asset Management, told AFP. “They have also benefited from the strengthening of the dollar against the euro because their production costs are in euros and they sell a lot in dollars,” she adds.

LVMH, Kering and L’Oréal reported a combined profit increase of more than 36% compared to the first half of 2021 at comfortable margins. Luxury group Hermès, meanwhile, announced at the end of July a profit of 1.64 billion euros for the first half, up 39.7% year on year thanks to an increase in sales in all regions.

“The hardest thing is ahead of us”

For Ms. Hautefort, the good overall performance of the CAC 40 can also be explained by the cost-cutting plans that have been decided on to deal with the Covid-19 pandemic, which will continue to bear fruit in 2022.

Some groups have nevertheless suffered the shock wave of the war in Ukraine, such as Renault and Société Générale, which withdrew from Russia after the conflict erupted. Renault sold its stake in manufacturer Avtovaz, which notably makes the Lada, and Societe Generale its stake in bank Rosbank, resulting in billions of euros in charges.

“The hardest part is ahead of us,” says Ms. Hautefort, who believes the economic backdrop should weigh on companies in the second half of the year.

With inflation and the increase in the key interest rates of the central banks, which increase the cost of borrowing and thus make new financing more difficult, some economic actors are even anticipating a recession in the global economy.

A testament to investors’ distrust, the CAC 40 stock market index has lost around 10% since the start of the year, despite a very positive July with the release of the results. “Valuations have all been rising for some time, but fundamentals are catching up with the markets. The ratings remain high,” says Ms. Bogeska.

(With AFP)