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Macquarie lifts profit guidance after U.S. winter freeze

energy business

Macquarie said it expects its fiscal 2021 profit to jump by 10%, after warning just two weeks ago that earnings would be slightly down

Australia’s Macquarie Group lifted its profit guidance on Monday, sending shares to 12-month highs, as its large North American energy business profits from the deep freeze across southern states including Texas.

Macquarie said it expects its fiscal 2021 profit to jump by 10%, after warning just two weeks ago that earnings would be “slightly down”.

The energy business unit, designed to move large quantities of gas to meet unexpected demand, has single-handedly increased the overall profit forecast of the investment bank by about A$400 million, analysts said.

Extreme winter weather conditions in North America have significantly increased short-term client demand for Macquarie’s capabilities in maintaining critical physical supply across the commodity complex, the company said in a statement.

Macquarie is the second biggest gas marketer in North America, behind oil major BP.

The winter storm that crippled infrastructure and left the state without power meant electricity generators had to compete for natural gas supplies, which pushed up prices sharply in the deregulated market.

The urgent supply situation has provided Macquarie with an unexpected windfall.

Macquarie appears to be capitalising well on volatility and financial market dislocation, Bank of America Securities analysts said in a note, as it increased its earnings forecasts for the Sydney-headquartered company.

Macquarie’s performance was hurt last year by the pandemic, as subdued deal-making and deteriorating economic conditions led to a rise in impairment charges.

But a strong initial public offering (IPO) of its majority-owned data analytics software business, Nuix, late last year and a boost in the energy business have helped its share price back to pre-pandemic levels.

The company, which also operates Australia’s largest asset manager and investment banking business, is set for extra boost from a rebound in local M&A activity this year.

Macquarie’s shares were 4.31% higher at A$148.39 early on Monday, the highest level in a year, outperforming a broader flat market. The share price eased slightly in afternoon trading.

Earlier this month, the Sydney-based financial conglomerate had forecast full-year earnings for the group to be “slightly” lower than in fiscal 2020.

Macquarie’s Commodities and Global Markets division contributes nearly 40% of its group earnings. Analysts had previously raised concerns that the pandemic could erode profits from the division if high energy-use industries shuttered.

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