The ceo of the unit steps down. Samsung flags up a sharp drop in profits for q2 as consumers in china and europe hang up the hand set. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. A warm welcome to worldwide exchange. U. S. Regulators look to be turning their sights on germany on a crackdown on some of europes biggest banks. They have begun settlement discussions with commerzbank. The bank could be facing a fine around 500 million as part of the settlement. I believe in their latest financial accounts, theyve provisioned around 930 Million Euros for this. Given what weve seen from bmp, what does this turn out to be the size of the fine . Moving on, air france has cut its guidance. The profits this year could be 12 lower than expected, mainly as a result of overcapacity. Shares are trading lower, bringing down other Airline Stocks in sympathy. Weve got aig down just shy of 3. 75 . Ez jet lower by 2. 5 , too. I guess we shouldnt be surprised given what weve heard from lufthansa this quarter already. Absolutely. The reasons were given this morning are almost the same as the reasons given two weeks ago by lufthansa. Resulting in lower prices on lower margin, air france says that the overcapacity is quite important on north atlantic and asian routes. Stressing the level of bookings for the summer period. France says its going to its new guidance is 12 lower than the previous one. Its targeting a growth operating profit between 2. 2 and 2. 3 billion euros for the year. Thats compared with the previous guidance of 2. 5 billion euros this year. Theyre suffering from the challenging situation with one of the airlines which has been blocked by the local authorities due to currency related dispute. The government requires airlines to sell certificates in the local currency. Air france says that 290 million of revenue are blocked until the dispute will be resolved. Now, on a positive note, air france insisted that, first of all, despite the 12 drop in the guidance, the ebitda will be 20 higher than last year and that the debt target remains unchanged. Air france plans to reduce its debt burden to 4. 5 billion euros by tend of next year, mainly thanks to the Cost Reduction plan implemented by the airline. Nevertheless, the stock is trading 4. 3 lower right now and it comes to up more than 3 decline on the session yesterday. Over to you. Thanks, stephane. Philips was warned investors its Second Quarter earnings will miss forecasts. The ceo of that unit is also stepping down. In a statement, the performance of the division has been disappointing, agd he would be implementing a new manager structure in health care due to its performance. Weak demand for samsung as well as low competition from the competitors. Samsung Earnings Guidance for the Second Quarter is showing operating profits at 7. 2 trillion yuan. This is a significant drop from its 10. 2 trillion yuan in the Third Quarter of last year, which was its peak. This is also its Third Straight quarter of declining profit. Revenues for the Second Quarter are estimated at 53. 1 trillion yuan, also down 10 year on year. Anything below 8 trillion yuan in operating profit was seen to be an earnings shock. Samsung has admitted that this is true as a number of bigger expectations as this drop is cutting from weaker sales from its mobile business which continues to see stiffer competition both by apple to the upside and chinese manufacturers to the downside, including manufacturers like shaumi and a strong yuan didnt help out, either. But what samsung says about outlooks in the Third Quarter is that it is expecting a recovery, again, repeating this from the First Quarters earnings released, less reliance on the mobile business and increasing demand for tvs and displays are expected to help out this time around. They also hinted that its new product will be coming out and this is expected to help the Third Quarter numbers, as well. Also, a stronger yuan, which was one of the main factors in Second Quarters earnings expectations miss is seen by samsung to be less of a for the Third Quarter. Global Consumer Electronics industry joining us now. Nichola, still, 60 of their revenues comes from mobile at this stage. Are we looking at a more attractive period of decline for samsung here, do you think . I think definitely youre going to see deteriorating situation and operating environment in mobile. Like you mentioned before, theres a lot o Companies Looking to become a lot more competitive than they have been in the past. In the past, if you were buying basically a mobile phone, in most countries, you were most likely choosing a samsung. But now we see a lot more competitive product lineups, not just from Companies Looking to come back line sony, lg, but also looking at shao mi, some of the Smaller Companies and those are coming into some oovt lineups. Weve got the likes of lenovo and others moving up the quality curve. On the top end, we have the iphone 6 coming out. Do you expect the market share to be cannibalized on both ends here . I believe that that is part of it, but i dont think the iphone is as much of this story as it has been, maybe, in the past. By now, basically, whatever shares apple could take from samsung has already been done. This is much more of a story that it has happened. Now its a story about these new up and commerce taking shares away from samsung. In q2, what was the expectation for that pushing forward, too . I think thats what really they thought put a damper on some of the declining revenues and profitability in the Second Quarter, especially coming from the Mobile Division. So they thought that tvs would really especially because of the world cup, they would put a damper on that. But that largely hasnt really materialized. And we do expect about a 3 increase in the overall tv market this year. But basically, if they want to return to profitability, theyre going to have to do quite a bit more cutting. Were going to see quite a bit more of what weve seen in the past from the japanese manufacturers. They announced today that they will cut the production of their screen and similar moves may have to follow. How much damage has the strength of the currency done, too . Its trading at sixyear highs to the dollar. Do you get any sense of what theyre expecting from that in q3 and q4 and whether or not theyre hedged . Well, its really sort of out of control for the large part. The bigger concern is for the longer picture. So whatever happens in q3, i think the most important is will these sales gains, especially in tvs that they made in q11 and hung on to a little bit likely in q2, are these sustainable . If so, how long . How badly is he losing in the Mobile Division . Its not so much volume sales for samsung are declining. Its also that the average selling prices are declining because growth in developed markets and for the for some of the larger, more profitable emerging markets has started to slow down significantly. This year its under 20 . These are all this is all growth thats been driven largely by mobile devices that are going to some of the poorer emerging markets. So this is what really bring pressure on samsung more than any currency fluctuations that they cant really do much about. We spent a lot of time talking about the problems that they have right now. Some analysts say we should be selling off the Camera Division in particular. Is that a problem for investors still . The succession story, theres not much they can do in terms of very quick, snap divisions that will reverse the decline in profitability. What we have to also keep in mind is that a large part of profitability was due to samsungs compared to everyone else who is making android phones over the past few years. Now the Playing Field has leveled quite a bit. And whether anyone thought that was sustainable i dont think is the big question, but the question is can they produce the next it product such as galaxy phones and wearable. But streamlining operations, especially in the division, and possibly selling off or winding down operations in the Camera Division, that could be steps that could improve profitability in the short to medium term. Well wrap it up there. Thank you so much for talking to us this morning. And for those of you out there who think kids use their smartphones too much, take a look at this. One japanese city, the Education Board has asked High School Students not to use them phones after 10 00 p. M. And to turn them over to adults until 6 00 in the morning. But its just a recommendation, so theres no penalties if parents dont comply. Or if the children dont comply, either. Im not sure how will that would go over in one of the european countries. Moving on, italy must act fact on reform while problems remain low. Will those countries listen . Stay tuned. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. Welcome back to worldwide exchange. The stoxx europe 600 down by 0. 3 . We are trading on the session lows this morning. It seems to be a bit of consolidation continuing ahead of earnings season late this week. Air france is weighing on a number of Airlines Stocks across the markets, the likes of easyjet creating preb injury this morning, too. Concerns theyre moving towards the u. S. Authority sanctions. Weaker exports and import numbers this morning, twoob on the back of the Industrial Production numbers, the weaker retail sales. So a number of elements pointing to a softer q2 here. Its still going to be better than those names. Quick check on the asian markets, sideways news across these markets this morning. The shanghai composite managing to gain here. Over in australia, too, just shy of 0. 2 closing down in that session in particular, too. We have had a focus on samsung. Weve just been talking about that, too. Operating profits over 24 in the three months to june. In particular, taking a quick look at the nikkei, underperformer down 0. 4 . It reached sixmonth highs last week, of course, and were just coming off those levels. 15,300 right now wsh around that level. Euro dollar, still trading around that 11. 36 level. Draghi has to do something about the crazy, i quote, level of the euro right now. The outperformer was the aussie up 0. 3 after the rbs governor leaned on the currency strength this morning to business data. Coming out slightly stronger in this mornings session, too. What else is going on today . Eu countries will only be allowed flexibility over therefore budgets if they can demonstration longterm reforms being kwlemted. The message is from the euro Group President jerome. Annette, when we think of reforms, we think of italy right now. We knew parliamentary elections were going to make more difficult. The likes of berlusconis party, too, trying to short their own support. How are they managing to get by in the reforms . What does the finance minister have to say . Actually, the finance minister seems to be quite confident. They are saying its one of the reform agendas. But i was wondering whether this is lip service or whether theyre really delivering. That is what a lot of people are missing from the eye tall yaps to really deliver. They are very good at doing marketing when it comes to their reform efforts, but theyre not too good to implement things. They are, to be fair, not the only ones not too good to implement stuff. But now the focus is on italy. We have a government pushing for reforms. Hes ambitious, but its realistic at the same time. If theyre growing discontent between your government and the German Government. We were hearing that in the press recently. Mr. Renzi was hinting at the bendus Bank President that he doesnt like his interference between power and politics. As far as the German Government is concerned, we are absolutely on the same line. Mr. Renzi with madam merkel and my relationship with mr. Schobel is very good. We wrote an article together. So were exactly on the same line. There is no disagreement. No disagreement on the notion of flexibility because he does not want to have more flexibility or stability in growth pack. There is full agreement that the way to boost growth in europe is through Structural Reforms. We are delivering on Structural Reforms in italy and my purpose as chair of the european presidency for this semester is to help all countries to find incentives and pressure to reform. We all need to have a reform agenda. So, you see, julia, delivery is key. What he had to say was about the italian reform efforts. I think theyre very ambitious. I, like you, am waiting for results. The same goes for the eurozone, needs to speak up, needs to become a lot stronger and i think the italian presidency has th that. Do you think the italians enough pressure for reform . No. But if you look at unemployment figures, that will tell you a story. A lot of work needs to be done. Italy has been showing almost a zero growth productivity for many years and that has to improve for the economy to become stronger. Are you also discussing in the end that the word will go up and that burden will be becoming very painful for a lot of european nations . Were talking about allowing us time to get this done. That we should use that time. You know the expression, dont waste a good crisis. Well, lets not waste a good recovery. Were in a phase of recovery. We should use this period to get some work done in terms of reform. If the yields do go up, were ready to carry that. Julia, from the german perspective, i can only say Structural Reforms which are really effective and kind of hurting in terms of losing social welfare, we had it in germany and probably need to see that also in other countries in the eurozone, such as italy. With that, back to you. Thanks so much, annette. To quote him, dont waste a good recovery. Dont waste a lackluster recovery b with too. Prime minister abe became the first leader to address Parliament Saying they should launch a special relationship. Japan is australias second largest trading partner after china. And the two are due to sign a Free Trade Agreement during abes trip this week. Tony abbott was careful to point out that the partnership was not to try and contain chinas rising influence. Australia welcomes japans recent decision to become a more capability Strategic Partner in the region. I stress, ours is not a partnership against anyone. Its a partnership for peace, for prosperity and for the rule of law. Now, crumb cup cakes which went public a few years ago is now shutting its doors in the u. S. It went public in 2011 selling giant cup cakes. The firm will close around 65 stores in the u. S. Days after it was delisted from the nasdaq. So if you consider this the moment the cup cake bubble popped, what will be the next fashionable food product . Let us know your tips by joining the conversation here on worldwide exchange. Cnbc. C cnbc. Com, cnbcwex or direct to me. Lets take a look at whats coming up on today aes show. What are we expecting from making bad money betts . Also, smoking out the drought. We hear about damage being done to californias water supply by the growing marijuana industry. And you cant park there, sir. Were bringing you the legislation clamping down on acts designed to help you find that parking spot. Coming up, marks expenser says its new website is to blame for poor sales. Are you buying that . Stay tuned, well bring you all the details. Bank shares are under pressure after reports commerzbank has begun talks with the u. S. Over possible sanctio s violations. Air france says its numbers are being hit on overcapacity on long routes and cargo demand. Philips warning its health kir division will forecasts. And blame it on the website. M s says the transition to its new site has contributed to a 12th consecutive drop in sales as investors gear up to move forward. Quick check on the european markets this morning. A bit of consolidation as we head towards the earnings season. Weve got Consumer Confidence and alcoa to watch for. We had german export and import data which perhaps is weighing on the market today. We had Industrial Production data yesterday. It is seemingly gearing up for q2 in germany. Euro dollar, still sitting around that 1. 36 level. We are seeing some movers here, aussie dollar, the Strong Business Confidence this morning. Marks expenser is blaming its new website for its drop in merchandise sales. It is clothing, footwear and home wear divisions fell by 1. 5 . Weve got helia with the details. Good morning. Take us through the details. Its all about the website. What details do you need to know . If you had read it three years ago, you can read it again today. Another quarterly update, another disappoint in closing. Internationals doing well, in the bad at all, but highly irrelevant. Yet again, general mts has gone down and the glitch that were talking about is an 8 drop, 8. 1 drop in its onlin