China Aftershocks Ripple Through Earnings From Audi To Iron Ore

by Phil Serafin at Bloomberg

China’s market slump is making itself felt in corporate earnings around the world.

French distiller Remy Cointreau SA, U.S. fast-food company Yum! Brands Inc., U.K. luxury-goods maker Burberry Group Plc and South Africa’s Kumba Iron Ore Ltd. are among the companies taking a hit from China, where a monthlong rout in stocks wiped out almost $4 trillion in market value. The International Monetary Fund sees China’s economy expanding this year at the slowest ratesince 1990, and said the country is a source of potential risk to global growth.

The effect is likely to be be highlighted over the next few weeks as the bulk of the world’s biggest companies report second-quarter earnings. China has been among the fastest-growing markets in the past decade for cars, luxury goods and raw materials, and the slowdown is particularly unwelcome now because emerging markets such as Brazil and Russia are also struggling and can’t pick up the slack.

China “is clearly a weakening environment in the near term,” John Haynes, head of research at Investec Wealth Investment, said in an interview on Bloomberg Television. “For us that’s an opportunity, not something to worry about.”

Remy Cointreau shares dropped the most in 11 months Tuesday after the company’s quarterly sales missed estimates because Chinese wholesalers continued to hold back on cognac orders. Demand for pricey drinks, as well as expensive wallets and watches, has slumped amid a clampdown on graft and lavish spending, which has hit gift-giving.

Falling Sales

Yum, the owner of KFC, Pizza Hut and Taco Bell, last week posted revenue that missed estimates as second-quarter same-store sales in China plunged 10 percent.

Kumba Iron Ore, Africa’s largest producer of the steelmaking ingredient, eliminated its dividend on Tuesday as the Pretoria-based company announced that first-half profit sank 61

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