May 21, 2022

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– We are definitely the different country – E24

A sharp rise in commodity prices could make the Oslo Stock Exchange profitable this year. Investment director Robert Ness says the rise in oil, seafood, shipping and raw materials is giving “a full blow to Norwegian companies”.

Seeing the good times for stock exchange firms: Robert Ness, chief investment officer at Nordea.
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Oslo-listed companies will be on fire with their results in the coming weeks – figures released are expected to show money is pouring into oil and commodity companies.

Stock market giants such as Equinor, Aker BP and Hydro are riding a wave of higher commodity prices, while analysts expect strong earnings growth for seafood companies.

According to Nordea’s chief investment officer, Robert Ness, Norway currently expects the highest earnings growth in 2022, among the 24 countries included in the developed markets index.

– It’s unique. No other developed market has as high growth as Norway, Næss tells E24.

– There we are certainly different state, he says.

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  • Næss’ compilation of analyst forecasts shows profit after tax is expected to be 89 percent in the first quarter compared to the first quarter of last year, led by oil companies’ earnings growth of 131 percent.
  • At the same time, analysts expect earnings growth on the stock exchange to reach 42 percent on the Oslo Stock Exchange this year compared to last year. Oil companies also accounted for the largest assumed growth at 77 percent, followed by seafood at 65 percent.
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– Complete flap for Norwegian companies

Analysts expect other commodity companies to earn significantly more profits.

At Norsk Hydro, first-quarter earnings are expected to triple, while fertilizer giant Yara aims to double the result, according to estimates.

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Oil, of course, is a very important part. Then you have the cyclical companies that make up a fairly large part of the Oslo Stock Exchange. Ness says it also looks like seafood is doing well compared to last year.

– We check most things. In finance, there is little growth, but a number of other countries are struggling as a result of loans to Russia. But Norway avoids that.

The Oslo Stock Exchange is up 18 percent in the past year, and thus has outperformed the Frankfurt Stock Exchange (DAX), the US S&P 500 Index and the Stockholm Stock Exchange:

Analysts on average expect Equinor to generate a record after-tax profit of NOK 140 billion in 2022, according to estimates compiled by Bloomberg.

Næss also notes that expectations are for strong earnings growth at industrial company Elkem, oil company DNO and shipping company MPC Container Ships.

There is a fairly long list of companies that do better in Norway. Shipping is also going well. He says there is full weight for Norwegian companies in terms of profits.

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Analysts have also been busy updating their earnings forecasts, for both the full year and the first quarter.

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Since the beginning of 2022, the first has increased by 23 percent, while the second has increased by 28 percent.

– These are unusual numbers. For four years out of five there are cuts. Analysts started with optimism – everyone thinks things are going well – then there will be some disappointments. Ness says that you have adjustments relatively infrequently, and that you have as much adjustment as is unusual.

Sees risks in unpredictable commodity prices

The price of oil topped $80 a barrel in the new year, and rose further when Russia invaded Ukraine. At its peak in March, North Sea oil traded above $130 a barrel, before easing back to around $105.

At the same time, gas prices are still about five times higher than last summer, although the price has fallen by more than half from the high in early March.

The price of aluminum reached record levels at the beginning of March, and is currently up 36 percent in the past year.

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At the moment, it seems difficult to understand that oil, gas and commodity prices can go down. But we know that it is unpredictable. This could happen if we end up with less growth in the economy, companies selling fewer products and lower activity, says Ness.

It is in fact very likely that the profits we see now will not be the usual future. It is unusually good. And it might be extraordinarily good for a few more years, but to think that’s the right level of long-term earnings is probably optimistic, he says.

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Next week, 49 listed Norwegian companies will present their quarterly figures.

I think pricing power is critical

In the United States, a number of companies have already submitted their financial results, including several major US banks.

Nordea expects companies included in the US S&P 500 Index to see earnings growth of about ten percent in the first quarter.

Crucial for profit season in general is whether companies now seeing strong cost growth will be able to pass that on in prices, investment strategist Eric Bruce wrote in a weekly report.