0:03

Good morning from the Financial

0:05

Times. Today is Wednesday, April

0:07

twenty Fourth and this is

0:09

your F T News briefing.

0:11

Tesla shares jumped yesterday despite

0:14

a rough earnings report and

0:16

Spot of Fi. Looks like

0:18

it's entering a new era.

0:20

Plus, Egypt was thrown a

0:22

lifeline to deal with it's

0:24

debt crisis. Nobody has an

0:26

interest in seeing Egypt collapse,

0:28

and I think that's why

0:30

there has been this rush

0:33

to. Salvage the economy. I'm Sonia

0:35

Hudson and here's the news you

0:37

need to start your day. Tesla.

0:52

Put out a pretty brutal earnings

0:54

report yesterday, the company outlined a

0:56

nine percent decline in revenue last

0:58

quarter. that was it's first year

1:01

on year quarterly drop. Since the

1:03

beginning of Twenty Twenty, the electric

1:05

car maker is dealing with a

1:07

slow down and vehicle deliveries it's

1:09

had to/prices as a result, and

1:12

Tesla announced earlier this month that

1:14

it would cut more than ten

1:16

percent of its workforce. But despite

1:18

all the bad news, Tesla shares

1:21

jumped more. Than ten percent and

1:23

after hours trading. That's because the company

1:25

took the moment to announce that it's

1:27

speeding up the launch of cheaper models.

1:30

The Boost yesterday was a gift for

1:32

the company. It shares have fallen about

1:34

forty percent since the start of the

1:36

year. Spot.

1:44

If I Ceo promised a

1:46

new phase for the streaming

1:48

service and based on yesterday's

1:50

earnings report, Daniel Act is

1:52

starting to make good on

1:54

that promise. The company turned

1:57

it's largest quarterly profit ever.

1:59

Investors worse. singing the company's praises,

2:01

shares in Spotify ended the day up more than

2:03

11%. I'm

2:06

joined now by the FT's Ana Nicolel. Hi

2:08

Ana. Hi there. So

2:11

why is Spotify doing so well? Spotify

2:14

is doing really well because

2:16

they've pivoted their business effectively

2:18

to start making

2:20

money, which doesn't sound that revolutionary,

2:23

but in this world

2:25

it kind of is. So they

2:27

yesterday reported their biggest quarterly

2:29

profits they've ever had. They

2:32

made about 200 million euros in

2:35

net income, which again,

2:37

it's all relative of course, that's not a massive amount

2:40

of money for a company that

2:42

big, but it's kind of symbolic

2:44

I would say in a sense, because

2:46

they have entered this new era

2:48

where their focus is on actually

2:50

making a profit. So before

2:52

this, the focus was not on

2:55

saving the money they were making, it was on

2:58

investing and spending it. So they were losing money,

3:00

but still had this kind of shine on Wall

3:02

Street because they were growing so quickly and it

3:04

was very clear that they were the future. And

3:08

that patience ran out and

3:10

now we're seeing more of a

3:12

maturing of the business model. Yeah,

3:15

so tell me a little bit more about this

3:17

new phase for the company. What was

3:19

X strategy? So

3:21

his strategy has been cutting costs.

3:23

They fired more than 2000 people

3:25

last year, about a quarter of their

3:28

workforce. They've been

3:30

raising prices for consumers. So in

3:33

the US, they raised prices last year for

3:35

the first time since they had launched here

3:37

and it's just paying off. Okay,

3:40

so Spotify, big cost cutting that's

3:43

helped its bottom line. Was

3:45

it all good news in the earnings report? It

3:48

was not all good news. So the one

3:51

thing that was quite interesting that the

3:53

CEO, Daniel X said on the earnings call was, Spotify

3:57

missed its forecasts for monthly

3:59

active. users. And

4:01

that's pretty unusual for them. There were

4:03

two reasons they cited. And the first,

4:06

which was interesting, was they said that

4:09

because of all those layoffs they had,

4:12

operations were just a little bit messier and the

4:14

impact was bigger than they had expected. And

4:17

the second was that they were spending

4:19

less money promoting their app to people.

4:22

The big picture is still, you know,

4:24

efficiency, making a profit. But there

4:26

was a wrinkle in it, I would say, with

4:28

that. Although Wall Street does not seem to mind.

4:32

How worried is Spotify? I mean, are they going

4:34

to make any changes in light of that active

4:36

users number? They

4:39

say that they're already making changes. They didn't go

4:41

into detail about what that means. But I would

4:43

guess that they'll, you know, increase

4:45

their budgets a little bit on marketing again, and

4:48

try to see what the right amount is. Even

4:51

when they announced this new era and

4:53

all these cuts, they kind of acknowledged

4:55

that it was a pretty extreme move.

4:58

And so I think it's very much startup culture to

5:00

say, you know, we're going to make big swings and

5:02

changes, and then we will adjust them and we'll keep

5:05

making changes until we figure it out. Right? So

5:07

I think there's a bit of experimentation here in terms

5:09

of figuring out what is the right formula

5:11

for them. Anna

5:13

Nicholau is the FT's U.S. media correspondent.

5:16

Thanks so much. Thank you. The

5:25

Federal Trade Commission banned non-compete agreements

5:27

in the U.S. yesterday. These are

5:29

clauses in contracts that stop someone

5:32

from working for a competitor for

5:34

a set amount of time. The

5:37

FTC says 30 million workers

5:39

are currently subject to them. The

5:42

agency argues that non-competes undermine

5:44

competition and impact workers' personal

5:47

freedoms. Industry groups

5:49

that oppose the rule say it'll

5:51

increase business costs and put trade

5:53

secrets in jeopardy. Egypt

6:01

has sidestepped a major debt

6:04

crisis. President

6:06

Abdel-Fattah al-Sisi's government recently got access

6:08

to billions of dollars in

6:10

bailout loans and investments from abroad,

6:13

all in an effort to shore up the

6:15

country's shaky economy. Here to talk

6:18

to me about it is the FT's Hibba Saleh. Hi,

6:20

Hibba. Hello. So

6:22

get us up to speed here. Why

6:24

is Egypt's economy struggling and how big of

6:26

a debt problem does it have? Egypt's

6:30

economy has been struggling for

6:32

two years since Russia's

6:35

full-scale invasion of Ukraine,

6:37

which prompted short-term debt

6:39

investors to pull out

6:41

$20 billion in weeks.

6:46

And what this has done is

6:48

that it has revealed the weakness

6:50

of the economic model that Egypt

6:52

relied on. It borrowed

6:55

a lot from short-term debt

6:57

investors and used a lot

6:59

of money to fund major

7:01

infrastructure projects which produced

7:03

very little for export, produced

7:05

very little revenue in dollars.

7:07

So you end up with

7:09

Egypt being heavily indebted. So

7:11

it was a crippling crisis.

7:15

What about this support package that

7:17

the country recently received? Where does

7:19

it come from and what's included? So

7:22

Egypt received a very big

7:25

bailout. Most of it

7:27

is loans and investments from

7:29

the International Monetary Fund, from

7:31

the World Bank, and

7:34

from the Emirates, from an

7:36

Abu Dhabi state investment vehicle.

7:38

It has bought development rights

7:40

to a huge

7:42

piece of land on Egypt's

7:45

northwestern Mediterranean coast, which will

7:47

be turned into hotels, resorts,

7:50

tourism. So it's a

7:52

big bailout. It's a reset and

7:54

breathing space for the Egyptian economy.

8:00

Why are we seeing such a big influx

8:02

of money at this particular moment? I

8:05

think it has a lot to do with

8:07

the Gaza war. The war

8:09

has had a negative impact on

8:12

the Egyptian economy. We've seen Houthi

8:14

attacks on Red Sea shipping

8:16

slash Suez Canal revenue

8:19

also impact the

8:21

growth of tourism. And

8:23

because Egypt has been in crisis for two

8:25

years, I think there are fears of an

8:27

economic collapse in Egypt, a country of 106

8:29

million people. The

8:33

Europeans are afraid of a migration crisis.

8:36

Egypt plays a key role

8:39

due to its geographic location

8:41

right next to Gaza, due

8:43

to its ability to mediate

8:45

between Hamas and Israel. Nobody

8:48

has an interest in seeing

8:50

Egypt collapse. And I

8:53

think that's why there has been

8:55

this rush to salvage the

8:57

economy. And

8:59

how has Egypt's economy responded to this

9:02

influx of cash, at least in the

9:04

short term from what we've been able to see? It's

9:07

too soon to tell, but what

9:09

we're seeing is confidence

9:11

from short-term portfolio investors

9:14

who buy Egyptian debt.

9:17

They've been flocking back to Egypt. And in

9:19

the past few weeks, I mean, last month,

9:22

Egypt attracted something like $8.5 billion in

9:27

short-term debt investment.

9:30

And that, of course, is an influx of

9:32

dollar, which further helps the economy. Do

9:35

you think then that this latest round

9:37

of bailouts and investments could mark a

9:40

turning point for Egypt's economy? It

9:43

could mark a turning point, but

9:45

it is not certain. Egypt has

9:47

been granted a second opportunity. But

9:49

will it use these flows

9:51

to support reforms, to

9:54

promote the private sector, or

9:56

will it revert to old policies?

9:59

The problem... in the past

10:01

has been that Egypt is not

10:03

creating enough space for the private

10:06

sector to flourish. What

10:08

economists are saying is that Egypt needs

10:10

to invest in the real

10:12

economy in agriculture, in manufacturing,

10:14

in services, in exports, and

10:17

perhaps less in the kinds

10:19

of infrastructure investments that it

10:21

has focused on up

10:23

to now. Hibisale is

10:25

the FT's Cairo correspondent. Thanks,

10:27

Hibba. Thank you. Before

10:36

we go, here's something a little bitter

10:38

to chew on. The global supply

10:40

of cocoa is shrinking and

10:43

it's making chocolate more expensive. You

10:45

can blame sick crops, poor weather,

10:47

and government price fixes in West

10:50

Africa. As a

10:52

result, South American farmers are stepping

10:54

up to fill this cocoa void.

10:57

In places like Ecuador, analysts predict

10:59

that cocoa yields will actually surpass

11:01

Ghana, which is one of the

11:03

world's biggest producers. You

11:13

can read more on all these stories at

11:15

ft.com for free when you click the links

11:17

in our show notes. This has been your

11:19

daily FT News Briefing. Make sure you

11:21

check back tomorrow for the latest business

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news. Hi,

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