Australia’s Macquarie upgrades 2021 profit due to U.S. freeze

SYDNEY (Reuters) – Macquarie Group Ltd said on Monday it expects its fiscal 2021 profit to jump by as much as 10% due to demand for heating caused by extreme weather in North America, sending the Australian company’s shares up more than 4%.

Macquarie’s Commodities and Global Markets division – which contributes close to 40% of its group earnings – is North America’s No. 2 physical gas marketer.

“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.

Severe cold conditions in Texas and other U.S. states have left millions of people without power or heating for days.

Some customers in Texas, particularly, pay wholesale prices that rise along with demand, which skyrocketed after a deadly winter storm caused widespread blackouts.

The developing situation has seen Macquarie significantly upgrade its earnings forecast for its commodities and global markets division over the span of two weeks.

Macquarie first put the unit’s after-tax net profit guidance for fiscal 2021, compared with the year prior, at “significantly down”, before upgrading that to “slightly down” and then Monday’s forecast that the dvision will push entire group profit to be “about 5% to 10% higher.”

Macquarie’s shares were 4.31% higher at A$148.39 on Monday morning, the highest level in a year, outperforming a broader market that was slightly higher.

“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 company and upgraded its price target to A$160, from A$155 currently.

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

Three analysts covering Macquarie said it was unlikely the performance of the Commodities and Global Markets unit would be replicated in the future.