European Business News (EBN), 96-11-14

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

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

Page last updated November 14 CET

CONTENTS

[01] BT posts flat earnings for second quarter and half

[02] Sanofi's new drug could add $1 billion in annual sales

[03] France cancels privatisation of CIC

[04] GUS buys U.S. firm for $1.7 billion

[05] Sweden goes into deflation in October

[06] Powergen posts 4% profit gain

[07] Evidence found of a huge cache of copper hidden in Rotterdam

[08] Italy's parliament approves privatisation of Banco di Napoli

[01] BT posts flat earnings for second quarter and half

Second quarter profit totalled £730 million, at the top end of expectations, while pretax profit for the half totalled £1.6 billion. The company raised its dividend 6% to 7.9 pence a share

BT, which plans to merge with MCI of the U.S. to create a global company, Concert, attributed its flat earnings to redundancy charges and the repurchase of some government bonds.

'The results for the half year show an encouraging position with sustained high growth in demand for our telephony services and significant sales increases in our new markets and advanced products,' said Chairman Iain Vallance. 'This, allied with continued control of costs, demonstrates the health of the business in the face of strengthening competition and the tough regulatory environment.'

He said the figures, which included a 4.5% rise in six-month turnover to £7.37 billion, demonstrated that BT's business was well-positioned commercially and financially as it prepared to create Concert.

[02] Sanofi's new drug could add $1 billion in annual sales

Perhaps more important, patients receiving the drug, called clopidogrel, showed no evidence that it causes them to lose disease-fighting white blood cells - a severe side effect that limits the use of Ticlid, currently Sanofi's biggest-selling medicine. Although the results of the trials weren't quite as positive as some researchers - and investors - had hoped, analysts nonetheless predict that the drug could become a blockbuster, with annual sales topping $1 billion within five years.

And with two other promising new drugs in the pipeline, one for hypertension and another for osteoporosis, the French pharmaceuticals company may be poised for sizzling growth, they add. 'Sanofi remains the most exciting new-product leverage play in the pharmaceutical sector,' says Mark Tracey, a London-based analyst with Goldman, Sachs & Co.

Sanofi will file the drug with the U.S. regulatory agency and expects about one year of examination under the fast-filing category. It could be commercialised three to six months afterwards, Briner said.

The clinical trial for Plavix - the brand name under which clopidogrel will be sold - was one of the biggest ever in the industry, involving 19,185 patients, lasting three years and costing more than $100 million.

But the giant gamble was shared by Bristol-Myers Squibb Co. of the U.S., Sanofi's development and marketing partner, which picked up part of the tab. (Bristol-Myers Squibb also is helping Sanofi to develop its promising hypertension treatment called irbesartan, which is awaiting approval in the U.S. and Europe.)

The companies plan to submit regulatory applications early next year to sell Plavix, in the U.S. and Europe, and industry analysts expect the drug to reach pharmacy shelves in both places in 1998.

While Plavix undoubtedly would cannibalise Ticlid's sales, Sanofi isn't worried. That's because a more favourable marketing agreement for Plavix than for Ticlid will mean higher profits for Sanofi. Moreover, the lack of side effects could expand the market considerably, boosting sales.

Such arrangements mean sharing potential profits as well as risks, of course. Last year, licensees' sales of drugs discovered by Sanofi reached 10.4 billion francs, compared with revenue of 16.9 billion francs by Sanofi's pharmaceutical division during the same period.

But over the years, such licensing arrangements helped underwrite Sanofi, allowing it to make dozens of acquisitions and pour 20 billion francs into research.

[03] France cancels privatisation of CIC

He said the government would attempt to sell the bank in the future, but that more time was needed to review the procedure. Arthuis said the French privatization commission found that the only offer to meet the government's requirements was from Banque Nationale de Paris.

Government officials declined to say how much BNP had bid for two-thirds of GAN's 92% stake in CIC, or around 62% of the regional bank network.

Cancellation of the sale in the short term saves the cash-strapped government money. Without a sale, the state is spared the necessity of immediately pouring at least 4.5 billion francs ($900 million) to Groupement des Assurances Nationales. That money would be necessary because the bids are likely to value 100% of CIC at around 10 billion francs ($2 billion), while CIC's book value in GAN's accounts is 14.6 billion francs.

Because there was only one solid offer and because of strong opposition by local authorities and bank officials to the sale, Arthuis said he would review the process.

The only other preliminary bid, from Societe Generale, didn't meet the sale provisos of the government, Arthuis said. Societe Generale's bid sought a two-step purchase, so that the offer was 'neither firm nor definitive', he noted.

The sale process now will begin from scratch, the finance minister said, once the government reviews the process. 'It's important that we have time to reflect,' Arthuis said during a press briefing. 'We'll take the time necessary to do it, but there is no doubt that there will be a privatisation.'

The government officially sought bids for 67% of GAN's stake in CIC early last August, even though few bids were expected because CIC is not large enough to give foreign banks a sizeable market share and because domestic banks are virtually all in need of shrinking.

Sources told Dow Jones two weeks ago that the government was likely to cancel the privatization after Arthuis on Oct. 29 stated that no jobs at CIC be cut as a result of the sale and that the chairmen of the regional CIC banks come up with 'partnership proposals'.

[04] GUS buys U.S. firm for $1.7 billion

GUS has put in place an $800 million five-year term loan and the rest of the deal will be financed from its existing cash resources. GUS said the move was expected to enhance earnings in the first full year and to generate strong cash flow.

GUS Chairman Lord Wolfson told AP-Dow Jones that the deal is 'a perfect geographic fit' that should enhance GUS earnings in the first year. GUS said that its existing European information services business CCN will be merged with Experian.

Experian has three proprietary databases -- consumers, businesses and real estate -- with information on over 190 million people and 91 million households in the U.S.

Experian generated sales of $540 million in 1995 and pro forma profit of $109 million. 'Together, the two operations are very well placed to develop new business opportunities and, in particular, to provide global solutions to large multinational clients,' GUS chairman Lord Wolfson said.

[05] Sweden goes into deflation in October

The October data brought the Swedish annual inflation rate to a negative 0.1% in the month, down from a 0.2% increase in September. The figure was lower than both the government and economists had expected. The October inflation figure was even below the government's aim to keep inflation between one and two percent over the next two years.

Statistics Sweden said lower interest rate costs and lower value added tax on food were the main reasons behind the fall in prices. 'Food prices have fallen by 6.7%, which has reduced the overall price level by 1%,' Statistics Sweden said.

'Lower interest rate costs have contributed a further 1.1% to the fall. Other living costs have however risen, including rent, property tax and taxes on fuel. Living costs in total have therefore, lifted the price level by 0.4%.'

[06] Powergen posts 4% profit gain

The British electricity generator said first half pretax profit rose 4% to £138 million ($227.9 million) excluding an exceptional credit of £69 million and raised its dividend 20% to 7.8 pence a share.

'We are committed to deliver sustained shareholder value by balancing immediate returns through a share buy back programme with investments that will secure the long term growth of the business,' said Chairman Ed Wallis.

PowerGen has already spent £400 million buying back 10% of its shares earlier this year but had been expected to offer another benefit to shareholders after its bid for regional electricity company Midlands Electricity was blocked.

The exceptional credit of £69 million came from the sale of a 21% stake in Midlands which PowerGen had built up in anticipation of a takeover.

The company said that its Kinetica gas joint venture with Conoco traded at a loss and that it was 'actively addressing this problem and a long term resolution is still anticipated in the second half,' adding that this was not expected to exceed the first half exceptional credit.

[07] Evidence found of a huge cache of copper hidden in Rotterdam

According to the Financial Times, the copper cache is said to be about 500, 000 tons, roughly equivalent to 4% of annual copper production worldwide, the paper said, citing a study of copper flows through the Netherlands from 1990 to 1995 by the World Bureau of Metal Statistics.

Some market players believe the stockpile was built up by Hamanaka, the copper trader who Sumitomo claims amassed $2.6 billion in losses through unauthorized copper trading. However, there are other market analysts who say the stockpile could be stolen Russian material, the paper reported.

Officials at the metal statistics bureau are expressing caution about the size of the stockpile, the paper said.

Separately, industry sources said a listed Sumitomo group enterprise lost some 3 billion yen in aluminium futures transactions at the London Metal Exchange in 1987, but the conglomerate failed to tighten control over its traders, a move that could have prevented the copper trading scandal.

The sources said the aluminium futures loss, suffered by a Sumitomo company listed on the First Section of the Tokyo Stock Exchange, was never publicised but 'sounded a warning bell inside the Sumitomo group about market risks.' The company in question started to trade in aluminium futures on the London Metal Exchange around 1980 and did well for several years. But due to massive price fluctuations in 1986 and 1987, it eventually accumulated losses totalling 3 billion yen, the sources said.

The identity of the Sumitomo company in question was withheld.

[08] Italy's parliament approves privatisation of Banco di Napoli

The Italian Parliament passed a confidence vote on a measure that would enable the Italian Treasury to temporarily gain control of Banco di Napoli and then sell a 60% stake to private investors. The confidence vote was necessary to overcome filibustering by the opposition.

The privatisation of Banco di Napoli, expected to take place next month, with the start of the bidding process, comes after the bank fell into financial disgrace last year when it posted giant losses.

Meanwhile, Banca di Roma has stepped up its search for a buyer since the Treasury announced on Monday that it will push ahead with a plan to reduce the massive debt of state-owned holding company IRI by selling IRI's stake in Banca di Roma as well as other assets.

IRI, formally known as Istituto per la Ricostruzione Industriale, directly owns 13.89% of Banca di Roma and an indirect stake valued at about 22% of the bank through the holding company that controls Banca di Roma with a 64.5% stake. IRI has been looking to sell its stake in Banca di Roma for many months but after Monday's announcement the search for a buyer has become more urgent. Treasury Minister Carlo A. Ciampi and European Union Commissioner Karel Van Miert agreed on IRI's asset disposal as a way to reduce the company's debt in order to comply with competition rules.

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

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