BP slips up - profits rise 'only' 39%

BP is on the rack today: 2008 profits are $1bn off expectations, and there's a row about its new chairman...

Last Updated: 31 Aug 2010

Annual earnings of $25.6bn - or £17bn if you prefer - may not sound too shabby in the current conditions, but remember that last year was the year when oil hit its record $147 a barrel price. Questions would be asked of any oil company which failed to make a fortune under those circumstances.

In all fairness, BP's results are pretty solid. What's worrying shareholders most is the severity of the decline seen in the last quarter of 2008. Profits were down 24% on the same period in 2007, and a whopping 74% on Q3 2008. Ouch. And the final three months to December give the best indication of what we can expect from BP this year, of course.

Coming less than a week after Shell posted its European record profit of over $30bn, City reaction has been rather cool. Although BP has taken a lead from Shell and boosted its full-year dividend by a hefty 40% to 29.4p a share, so shareholders do have something to get excited about.

Not that there's been any shortage of excitement amongst the firm's investors recently. For BP's backers have been getting distinctly hot under the collar recently over the knotty question of who is going to be the firm's next chairman.

Incumbent Peter Sutherland had said he would stand down at the AGM in April, but has now said he will stick around until autumn. Why? Because questions are suddenly being asked about the suitability of the man who had looked like a shoo-in for the job before Christmas, Paul Skinner.

Skinner has a very impressive track record over 30 years at Shell. And he wants the job - not something that could be said of everyone at the moment. But some major BP shareholders have voiced concern that in his current role, as chairman of Rio Tinto, he has presided over a couple of howlers: the firm's all-cash acquisition of Alcan for £28bn at the top of the market, and the rejection of what now looks like a generous £43bn takeover offer from BHP Billiton. Is this, they seem to be asking, the man we want to chair our firm?

Well, the answer to that question should probably be yes. Skinner is about as well qualified as it is possible to be for what is one of UK plc's biggest and toughest jobs. Detailed industry knowledge and management expertise needs to sit alongside diplomatic prowess and a serious grasp of international geo-politics. Those aren't skills that combine in one person every day of the week. And he's far from being alone in having failed to see the crunch coming.

BP's shareholders need to be careful that they don't reject the best candidate in favour of someone who hasn't made any mistakes because they have taken no risks at all. That would be a serious mistake.

In today's bulletin:
BP slips up - profits rise 'only' 39%
Vodafone cheers as sterling quarter adds £1.8bn
Football clubs do roaring trade
Fingers in tills: UK fraud cases on the rise
No business likes snow business 

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