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European Business News (EBN), 97-09-01

European Business News (EBN) Directory - Previous Article - Next Article

From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated Mon, September 01 6:25 PM CET


CONTENTS

  • [01] Princess Diana's funeral to be held at Westminster Abbey on Saturday
  • [02] Promodes bids $4.56 billion for Casino and parent, Rallye
  • [03] Russia will join Paris Club in two weeks, Moscow official says
  • [04] Burmah Castrol reports 11% gain in net profit despite strong pound
  • [05] Bell Atlantic intends to leave Infostrada joint venture
  • [06] Brocades profit slips in first half; firm sees decline for the year
  • [07] Club Med posts first-half loss of $68 million
  • [08] Tabacalera first half net profit rises 12.7%
  • [09] Iberdrola first half profit rises slightly to $324 million
  • [10] Corporate and Economic Briefs

  • [01] Princess Diana's funeral to be held at Westminster Abbey on Saturday

    Princess Diana's funeral will be held at Westminster Abbey on Saturday morning.

    Buckingham Palace said the burial will be at Althorp, the Spencer family seat in Northamptonshire, north of London.

    Diana's coffin was moved earlier Monday to the Chapel Royal at St. James's Palace.

    There will be no lying in state, Buckingham Palace said. At the request of both the royal family and the Spencers, the coffin will lie privately in front of the altar of the Chapel Royal until the funeral.

    Flags will be flown at half-staff up to and including the day of the funeral. 'Although there is no lying in state, obviously we want to ensure that as many of the public who wish to can share in the grieving,' a palace spokeswoman said.

    In Paris, the prosecutors office said the driver of the car that crashed, killing Princess Diana and her boyfriend, had an 'illegal' level of alcohol in his bloodstream at the time of the accident.

    'The blood analysis revealed that the alcohol level was illegal,' prosecutors said in a statement. They did not give the level or identify the driver by name.

    The driver reportedly was the No. 2 security man at the Ritz Hotel where Diana and millionaire boyfriend Dodi Fayed had dined before they died. He was not a professional chauffeur.

    Europe 1 radio reported Monday that the driver, identified only as 'Monsieur Paul,' was not Fayed's regular driver, who had left earlier in another vehicle as a decoy to throw photographers off the trail.

    Mercedes-Benz confirmed Monday that the sedan in which the couple were riding was an armoured vehicle. Because of their extra weight, such vehicles can be difficult for an inexperienced driver to handle.

    The prosecutors office also indicated that at least some of the seven photographers currently detained would be placed under formal investigation. They did not specify the grounds, but suggested it could be because they did not extend help to the victims of the crash.

    'The investigation has allowed (us) to determine in a more precise manner the behaviour of certain people who did not give the aid and assistance normally required in case of an accident on a public road,' the office said.

    The seven were detained Sunday after witnesses said they saw photographers on motorcycles swarm the car just before it crashed.

    [02] Promodes bids $4.56 billion for Casino and parent, Rallye

    Rumours of a merger between Promodes and Casino have been rife for some time, but Casino has so far resisted, saying it wanted to develop independently.

    The move comes at a time of consolidation in the French distribution industry.

    In a bid to protect small businesses from the stiff competition of hypermarkets, the former conservative government of France last year adopted a law virtually banning the opening of new giant shops. This leaves groups wishing to expand little choice but to launch takeover bids.

    According to the Wall Street Journal Europe, financial sources say the bid follows unsuccessful talks between Promodes Chairman Paul-Louis Halley and Jean-Charles Naouri, chairman of Euris, which controls Rallye and Casino. Euris controls about 75% of Rallye, which in turn controls 28% of Casino.

    Promodes said that its takeover represents good value for shareholders of both Casino and Rallye, given the buoyant tone of the Paris bourse in recent months. Casino shares have risen by 25% since the beginning of this year.

    Promodes said the takeover price for Casino's securities represent a premium of 15% over the average traded price on Aug. 29, and a premium of 19% over the average of the last three months.

    Meanwhile, Promodes said its 1997 first-half consolidated net profit came in at 528 million francs, up 66% from 317 million francs in the corresponding 1996 period.

    [03] Russia will join Paris Club in two weeks, Moscow official says

    Russia will sign a formal agreement in the next two weeks joining the Paris Club of creditor nations, a top finance ministry official said.

    Deputy Finance Minister Alexei Kudrin also said Russia will sign a final agreement on debt rescheduling with the London Club group of creditors sometime this fall.

    Separately, Russian Prime Minister Victor Chernomyrdin said that Russia's economy was stable for the third consecutive month in August, and is now on the threshold of growth.

    Chernomyrdin said gross domestic product was steady on a year-on-year basis during August. Inflation, which has fallen steadily in the past two years was subdued, and consumer prices declined by 0.1%, the Interfax news agency reported.

    Russia's consumer price data is not seasonally adjusted, and inflation typically falls sharply in the summer months, when food is more plentiful.

    'I understand that these figures look fairly modest,' Chernomyrdin told a gathering of the Asian Bankers Association. 'But for us they already mark success beyond which there will come qualitative changes in the state of the Russian economy.'

    Russia's GDP has declined steadily since 1991, and economists have hoped for a turnaround this year. Production declined on a year-on-year basis for the first five months of the year, before levelling off in June.

    Though growth has not yet begun, Chernomyrdin said, 'we have tangibly moved down the path of financial stabilisation.'

    On Russia's debt front, the country has already reconciled 75% of the claims under a debt-rescheduling agreement with the London Club, and has long expected to close the deal by the end of this year.

    Russia is seeking repayment of $37 billion in debt inherited from the Soviet Union. This is owed by poorer nations which have agreements with the Paris Club.

    The long process of arranging terms has been slowed by division over interest rates and the discount to which debt would be subject.

    Russia and the London Club of creditor banks plan to announce a timetable in September for closing a deal restructuring $35 billion in debt to the banks that Russia inherited from the Soviet Union.

    Completion of the agreement with the London Club has been delayed by the difficulty of establishing precisely how much money is owed to each creditor, a process known as reconciliation.

    [04] Burmah Castrol reports 11% gain in net profit despite strong pound

    Burmah Castrol said net profit rose 11% in the first half, despite the strong pound, exceeding analysts expectations.

    But the company said the continued firmness of sterling is likely to cut full-year pre-tax profit by 10%.

    Net profit in the first half rose to £75.0 million ($120.8 million) from £67.7 million the year earlier. Pre-tax profit after exceptional charges fell 30% to £103.9 million from £149.1 million.

    Chief Executive Jonathan Fry said the effect of the pound's strength on translation will be lower in the second half 'because as the year goes on you're comparing the current pound with a stronger pound last year.'

    He didn't sound too worried by the recent turmoil in Asia, but admitted that the recent fall in some South East Asian currencies 'may make a difference of a couple of million (pounds) or so' on translation. 'We see the Asian turmoil as affecting financial markets rather than trading,' he said.

    But he noted that Thailand will be the exception. The bad-debt difficulties of that country will restrict the country's overall growth, he said.

    Analysts were slightly more cautious.

    The company appears 'to have weathered the strength of sterling relatively well,' Daiwa International analyst David Stedman said. 'But we still face what will happen in the second half vis-a-vis the Asian economies that have been the real drivers of the group in the past five years,' he added.

    Fry said Burmah was in the advanced stages of selling its industrial adhesives operations at a significant profit.

    The sale earlier this month of Columbia Cement contributed to exceptional first-half costs totalling £26.6 million after tax. _An EBN Interactive Roundup_ UK lending and orders data ease concerns over how far rates might rise

    A surprise slowdown in lending to consumers and a subdued report on the state of Britain's manufacturers, suggested that interest rates may not have to head too much higher to ward off inflation.

    The Chartered Institute of Purchasing and Supply said its seasonally adjusted purchasing managers' index contracted 3% in August to 51.3 from 53 in July.

    A reading above 50 indicates that the manufacturing economy is expanding while a reading below 50 indicates a general contraction.

    'The index fell for the third month running...to record the slowest rate of growth since June 1996,' the institute said. It added that 'buoyant consumer-driven domestic demand continued to sustain order book growth, despite a further sharp fall in export demand which prompted the latest slowdown in activity.'

    Meanwhile, net lending to UK consumers fell by 57% to £507 million ($811 million) in July after seasonal adjustment from £1.18 billion in June. The figure was much lower the median forecast in a Dow Jones survey of £1.1 billion, which seems to have under-estimated the impact the recent windfalls on consumer demand for capital.

    Seasonally adjusted consumer lending covers unsecured lending by banks and building societies on credit cards and personal accounts as well as credit provided by retailers, insurance companies and other non-bank lenders such as specialist mortgage grantors.

    [05] Bell Atlantic intends to leave Infostrada joint venture

    Olivetti, the Italian holding company with interests in telecommunications, information services and office products, said that US company Bell Atlantic intends to exit their Infostrada joint venture.

    Olivetti also said that the Infostrada shareholders meeting set for today - Olivetti owns 67% and Bell 33% - has been postponed to allow an agreement on how Bell will leave the joint venture. No date on a new shareholders meeting was given.

    The meeting was to decide on a previously proposed capital increase that would give France Telecom a 49% stake in Infostrada, which offers telecommunication services in the areas of fixed-line telephony that have so far been liberalized in Italy.

    That move has been a contentious one as Bell Atlantic - also partners with Olivetti in the Olivetti-controlled Omnitel cellular telephone venture - is thought to want to keep France Telecom as far as possible from Omnitel.

    [06] Brocades profit slips in first half; firm sees decline for the year

    Brocades said that six-month net profit dropped 5.7% and that it expects earnings for the year to drop between 4% and 5%.

    The company said its bakery ingredients and food specialities divisions performed better in the first half of 1997 but results from the industrial pharmaceuticals division were less favourable.

    Lower operational results in the pharmaceutical division pushed net profit in the first half down to 65.7 million guilders ($32.4 million).

    'A sharp fall in the prices of penicillin and intermediates caused a decline in turnover and results on industrial pharmaceutical products,' the Dutch biochemicals company said.

    The group said prices unexpectedly dropped to an all-time low in the second quarter of 1997 but noted that 'tentative price recovery' has taken place since.

    Gist Brocades, one of the world's largest makers of baking yeasts, antibiotics and enzymes, said the Bakery Ingredients Division and the Food Specialties Division performed better in the first half of the year.

    The bakery division was helped by higher selling prices and sales of fresh and instant yeast improved from the first six months of 1996.

    It added that the cost price of instant yeast was hurt by the British pound and the Italian lira.

    Sales in the foods division were pushed up by last years acquisitions. The extra sales, together with a continued organic growth, should push up full year sales in the unit.

    [07] Club Med posts first-half loss of $68 million

    Club Mediterranee showed a loss of 413 million French francs ($68 million) for the fiscal first half due to charges related to the company's restructuring programme.

    French resort operator Club Med said that it expects to take further charges in the second half but that they would be below those of the first- half. The first-half charges totalled 630 million francs.

    Despite the first-half loss, the company's sales edged up 2.4% to 3.9 billion francs from 3.81 billion francs.

    Club Med Chairman Philippe Bourguignon replaced long-time head Serge Trigano in March and began its restructuring after the company ran up a loss of 743 million francs for fiscal 1996.

    Included in the 630 million francs in charges, the company wrote off 138 million francs from operating profit due to costs associated with reorganising the group.

    Another 450 million francs in exceptional items came from a 166 million francs write-off for the depreciation of certain assets, including 87 million francs related to the company's reservations software. The company also said it wrote down 284 million francs for risk-related provisions and legal charges.

    Club Med said those charges were partly offset by a one-time gain of 103 million francs from the March sale of Valtur, an Italian resort group.

    It also took an 18 million francs charge related to tax payments and another 22 million francs in costs associated with real estate write-downs in two villages.

    [08] Tabacalera first half net profit rises 12.7%

    Tabacalera posted a healthy 12.7% rise in first-half attributable profit, aided by strong sales, price rises and restructuring, analysts said.

    The results were slightly weaker than analyst expectations of a 16% rise.

    The company said increased sales volume for all tobacco products boosted earnings while rises in the price of blond tobacco helped the company recover margins after a setback from a special tax imposed in July 1996.

    'The results seem to be broadly in line with expectations at the ordinary level,' said BZW Securities analyst Emilio Sanchez de Corral.

    'The reasons for growth were volumes normalised this year for the first time because there was no overstocking by tobacconists and there has been a sharp margin improvement due to increasing prices in March and December and due to a lower VAT on sales of tobacco,' he added.

    Group attributable profit rose to 8.04 billion pesetas ($52.5 million) versus 7.13 billion in the same period last year. The company noted a sharp rise in operating profit to 8.24 billion from 5.58 billion.

    The lack of a hoarding effect helped sales in the first six months. In past years, first-half volume had been depressed by tobacconists stockpiling at the end of the year to avoid tax increases in the new year.

    Tabacalera said its continuing efforts to restructure had increased productivity and improved efficiency in operating costs.

    'There was a reduction in the costs of raw materials, continuing efficiency gains and a reduction in staff costs,' said Emilio Alvarez, equity analyst at Morgan Stanley Dean Witter.

    Tabacalera said the rise in profits came despite sales of the company's stakes in olive oil producer Koipe , sugar manufacturer Ebro and leaf tobacco dealer Intabex which reduced dividends but increased financial income.

    In the future, analysts said they would be looking for further news on restructuring and watching the performance of newly acquired Aldeasa, the Spanish duty-free shop operator, and the firm's new cigar business in the United States.

    [09] Iberdrola first half profit rises slightly to $324 million

    Iberdrola said its net profit rose 1.7% to 49.51 billion pesetas ($324.1 million) in the first six months of the year - almost exactly in line with analyst expectations.

    Despite an almost flat increase in profit Iberdrola's shares jumped after the results were released.

    'I don't think the results will have surprised anyone,' said Miguel Artola, utilities analyst at Schroders Securities in Madrid. He added that the share-price move is more likely attributable to the return of many traders and investors to the market after the long summer break.

    In Iberdrola's press release, the company said its sales declined 2.1% to 395.73 billion pesetas in the six months to June 30 because its electricity bills fell an average of 4.3% in price.

    [10] Corporate and Economic Briefs

    L'Oreal said 1997 first-half consolidated profit before taxes, employee profit-sharing and capital gains and losses rose 16% from the year before. The French beauty products and pharmaceuticals group said that it expects full-year profit to show an increase at least equivalent to the rise observed in the first half. First-half pretax profit came in at 3.56 billion French francs ($584 million), up from 3.09 billion francs ($507 million) a year before. L'Oreal observed that 1997 full-year profit will be affected by the French government's decision to increase corporate income tax.

    The European Union Commission launched a preliminary investigation into KLM Royal Dutch Airlines' plan to take over all of Air UK Holdings, the holding company of the Air UK group. Air UK operates within the EU, while Dutch airline KLM operates both on European and international routes. Pending EU approval, KLM plans to buy the remaining 55% stake in Air UK Holdings from British Air Transport Holdings for an undisclosed sum, boosting its ownership to 100%. The Dutch carrier says the purchase will reinforce 'KLM's commercial strategy to secure the strongest possible market position in Europe.'

    Paper and plastics maker Bunzl beat analysts' forecasts with a 12% rise in profit in the first half of 1997, despite the strength of sterling and price deflation, the company said. Good organic growth supplemented by acquisitions caused pretax profit to rise to £62.4 million ($101 million) from year-earlier levels of £55.8 million, above analysts' forecasts of profit around £58 million. Acquisition and disposal activity in 1997 will strengthen existing businesses and improve the quality of earnings, Bunzl said.

    French new car sales fell 29% to 121,595 in August from 171,317 in the year-ago period, the French car manufacturers association said. Sales for the first eight months of the year fell to 1,117,673 from 1,433,982 in the year-earlier period, a decline of 22%. Sales this year don't benefit from government incentives offered to car buyers last year. Those incentives ended at the end of September 1996, although car makers have continued offering large rebates of their own.

    The Danish purchasing managers' index for August rose to 65.1% from 52.1% the month before, the Copenhagen-based Purchasing and Logistics Forum said. The index isn't seasonally-adjusted. The August pickup was widely expected by market players since July is the month when Danes usually go on summer holidays, with many medium to small-sized companies scaling down production, or sometimes even closing completely.

    Sweden's Sparbanken's purchasing managers' index rose to 63.5 in August from 51.4 in July, showing continued growth in the manufacturing industry as well as steady economic growth, the bank said. The 2-month average for the July-August period was six points above the same period last year, Sparbanken said. The August index is the strongest thus far in 1997 and Sparbanken attributes the rise to strong figures for production and order intake. The production index climbed to 68.6 from 45.2 in July, while the index for planned production in the coming six months rose to 74.1 from 67.7 a month earlier.

    Bekaert plans to subcontract the transport and distribution of its commercial steel wire products in a further bid to cut costs, spokesman Willy Snaet said. The Belgian steel wire and cord maker said the move is aimed at cutting salary costs at its Zwevegem plant in the Flemish-speaking region of Belgium - costs that are seen as some 15% higher than those of other companies in the area. Snaet said the plan would lead to 'substantial cost reductions' for Bekaert.

    All SAS flights are smoke-free as of September 1, the Scandinavian carrier said. Scandinavian Airlines System said 'we have chosen to introduce non-smoking in stages and our customer surveys show that an overwhelming majority prefer a totally smoke-free environment on board.' Nicotine-craving passengers who fly SAS will be offered nicotine chewing gum during a transition period, SAS said, and on long-haul flights to Japan tobacco-dependent travelers will also be given nicotine inhalers.

    Volvo Bus, a subsidiary of Swedish automotive group AB Volvo, confirmed that it may bid in the privatization of Hungarian bus maker Ikarus. But Volvo Bus spokesman Lennart Alveren told Dow Jones that Volvo has only decided to purchase the tender documents and that it's not certain Volvo will bid. The Hungarian government is offering 53.9% of Ikarus in a one- round, open tender. The deadline for bids is Oct. 29.

    Kerry Group said pretax profit in the first half rose to 31.9 million punts from a restated 25.7 million punts the year before. Kerry, Ireland's largest quoted maker of food ingredients and consumer food products, said the restatement was due to the company changing its accounting policy to write off goodwill charges to reserves. The year-earlier profit was originally reported at 20 million punts.

    Tele Danmark said 1,683 workers will willingly accept to take part in a redundancy plan announced in January to lay off 2,500 workers by 1998. The total, which was derived from a preliminary count, includes 1,093 workers who are 57 years old or more and will voluntarily agree to early retirement. There are 305 employees 55 or 56 years old who will also accept the offer. The Danish telecommunications company said it will resume negotiations with labor unions at the beginning of October to discuss further layoffs. The exact timing of the redundancies is still unknown, the company said.


    From the European Business News (EBN) Server at http://www.ebn.co.uk/


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