Market commentary

Gushing profits have given BP the power to wrestle its balance sheet under control, and the oil major has seized that opportunity with both hands. 

Underlying profits leapt by 48% quarter-on-quarter and almost 300% year-on-year to $8.5bn, as soaring refining margins and stronger gas trading sent earnings through the roof.

Refining and trading delivered $5.7bn to underlying profit before interest and tax, up 80% from Q2. Cash money is pouring in too, with operating cash flow climbing to $14.8bn and allowing BP to wipe $8.4bn off net debt within the period. 

BP hasn’t even needed to fund this reduction with asset sales, and it's worth noting that an estimated $6bn in sale proceeds from Castrol are still to be recognised.

It wasn’t all good news though, as $4.0bn in impairments, largely tied to energy transition projects, rained on the parade.

Shareholders might have hoped outsized profits and cashflows would mean bumper dividends and buybacks. Instead BP has decided pick up the tab for the past. Net debt reduction targets have now been reached, and the company announced its intention to use further excess cashflow to fulfill settlement commitments related to the Deepwater Horizon tragedy 2010. 

Beyond this, the business is in a state of flux, planning to back out of its historic North Sea home, exit US biogas assets and otherwise streamline. A report this week from Semafor even suggested some board members want the business broken up, though BP was quick to rubbish this. 

Whatever the case, the cash pouring into the business will give CEO Meg O'Neill bandwidth to help shape transformation plans. But the current state of elevated oil prices can’t last forever, or so beleaguered consumers hope. So the key question is, what’s coming down the pipeline for BP?

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There are now two Unilevers. Emerging markets grew 9.5%, led by India at 15%, while sales fell in Europe, mostly because prices came down. Emerging markets now make up six in every ten euros of sales. That’s where Unilever’s future lies.

Price rises are back, and volume growth slowed to 2.9% in the quarter. Even so, Unilever has upgraded its full-year volume forecast to at least 3%. It really thinks shoppers will keep paying for its brands.

The food business Unilever is handing over to McCormick is the one that’s not growing. So Unilever’s timing looks good, but McCormick will have some fixing to do. Food is where cheaper supermarket own brands bite hardest. Shampoo and deodorant are a different beast. Staple brand Dove, launched in 1957, grew double digits in hair care, deodorants, and body wash.

Next week’s investor day is where Unilever sets out what’s next without its food arm. It’s chosen New York over London for its big day, which says a lot about where it sees its investors. 

A leaner soap, shampoo, and deodorant business looks better than the sprawling group it’s leaving behind. Unilever is shrinking itself into a better business.

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GSK is racing against the patent countdown. Its biggest HIV drug, dolutegravir, starts losing protection from 2028, so long-acting injectables are doing a lot of heavy lifting. They delivered 80% of HIV growth this quarter. The question is whether they can grow fast enough to fill the gap.

GSK spent £10.5bn on three biotech deals this year, most of it on lung cancer specialist Nuvalent, pushing net debt above £20bn. Add in a £2.4bn restructuring plan to pour more money into research, and GSK is spending big to replace the sales it will lose when its patents run out.

Hibsago could be the next big thing. Just approved in Japan and the US, it’s a first-of-its-kind treatment for chronic hepatitis B, a disease affecting hundreds of millions of people, and it can effectively cure some patients rather than just keeping the virus in check.

More than half of GSK’s sales now come from the US, where it has traded lower drug prices for protection from tariffs until early 2029. That buys time, but it leaves the firm exposed to whoever’s in the White House next.

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Sainsbury’s growth is moving from the aisle to online. Supermarket sales rose just 1.6%, while online grew 9%, with rapid delivery up 27%. Sainsbury’s is selling more food, but with margins barely moving, it’s working harder than ever for every pound.

Shareholders are getting pretty much all of the free cash Sainsbury’s generates, through dividends and buybacks. With fewer shares in issue, earnings per share grew by more than 10%, far faster than the underlying business.

Nectar is becoming Sainsbury’s most valuable asset. The data behind it powers personalised pricing, an advertising arm on track for £100m of extra profit, and now loans and savings with NatWest. Despite handing back its banking licence, Sainsbury’s still wants a slice of shoppers’ finances.

Selling Argos ends a costly decade-long experiment and leaves Sainsbury’s a food-first business. It has gone back to being just a supermarket. Now it has to prove that’s enough.

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BP spent years trying to reinvent itself as an energy company, and this quarter it looks set to have made its money being a very good refinery. Oil prices slipped, but Middle East disruption sent refining margins soaring, though some of that looks to have been given back on the forecourt.

BP isn’t pumping much more oil and gas than it was a year ago. The company reported an earnings boost, but most of the help came from events outside its control, and if, or when, the Middle East calms down, refining margins could fall as fast as they rose.

Another $3bn to $4.5bn of expected write-downs, mostly on low-carbon businesses, shows the cost of transitioning away from a green focus. 

BP is on course to hit its net debt target more than a year early, which leaves its balance sheet in much better shape than it has been for years.

Attention now turns to BP’s strategy update in New York in December, Meg O’Neill’s first as chief executive. With the debt largely dealt with, shareholders will want to know what comes next, whether that’s bigger buybacks or a clear plan to grow production.

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Greggs is quietly becoming a drinks brand. The home of the sausage roll leaned on matcha and cherry lemonade to get through a scorching summer, and its push into protein, salads, and functional drinks shows it’s following customers towards healthier habits.

New shops are doing most of the work. Existing stores delivered less than half the growth, and once inflation is taken into account, customers aren't buying much more than they did a year ago.

Q4 will see a sprint on the building sites. To hit its target, the sausage roll superpower needs to open roughly three-quarters as many shops in the final quarter as it managed in the first nine months.

The factory shake-up is the tougher news. Around 740 jobs could go, which is a big call for a business proud of making its own products, though spending £60m to save £20m a year pays for itself in about three years.

Savour the 2026 upgrade, because Greggs is already flagging higher costs and inflation for 2027. The high street stalwart has survived a heatwave and a cost-of-living crisis, but a £1.50 sausage roll could be a real test of loyalty.

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