European Business News (EBN), 97-01-24

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

Page last updated January 24 1800 CET

CONTENTS

[01] Sony considers role in Murdoch's JSkyB venture in Japan

[02] Daimler projects 23% jump in sales by 2000

[03] Sainsbury warns fiscal 1997 earnings may drop 10%

[04] Nutricia withdraws babymilk from U.K. market

[05] Electrolux profit drops 19% on weak European demand

[06] France Telecom flotation expected in May

[07] German CPI data add to evidence of increasing inflationary pressures

[08] Sweden's Nordbanken could merge with S-E Banken next week

[09] French bank's employees extend occuoation of headquarters until Monday

[10] Graf convicted of tax evasion in Germany

[11] France suffers transport strike

[12] Boeing and McDonnell Douglas post strong earnings

[13] GE tops list of world's firms based on capitalisation

[01] Sony considers role in Murdoch's JSkyB venture in Japan

''We are looking at ways of collaborating with JSkyB, including the provision of hardware,'' a Sony spokesman said. The spokesman declined to say whether Sony might take a stake in the venture, and said nothing had been finalised.

However, a spokesman for Japanese software distributor Softbank said ''negotiations are continuing'' with Sony on the consumer electronics maker taking a stake in JSkyB.

''Naturally, those talks include (capital participation) as well as content (creation),'' the Softbank spokesman added. According to a report in leading business daily Nihon Keizai Shimbun, Sony will take more than a 30% stake in JSkyB.

However, the Sony spokesman denied that figure has been decided.

Analysts see the plans by Sony in the broadcast area as positive for the company, noting that digital satellite television broadcasting is an 'exploding growth area.'

'It's a very important distribution mechanism for software and related hardware business and Sony is deeply involved in both,' said Alan Bell, a senior analyst at Schroder Securities Japan Ltd. 'It would seem logical that they would have some position in the delivery systems and related kinds of business.'

'Digital broadcasting television will allow Sony to realise the value of its software library,' which includes many films, said Bell.

David Benda, a senior analyst at BZW Securities (Japan) Ltd., also sees Sony's interest in broadcast-related businesses as 'strategically very important' for the company because over the next 10 years or so, the switch from the current terrestrial broadcasting to satellite broadcasting will be very pronounced and Sony has lacked exposure to new delivery systems.

'The JSkyB participation should vastly enhance Sony's stake in this segment, ' he says.

Benda points out that Sony's software library, via Sony Pictures Entertainment, consists of 3400 film titles, 35,000 TV episodes, 270 TV series and 40,000 game show episodes.

'The films alone could run 24 hours a day over 280 days,' he says.

Sony is also talking with companies unrelated to the JSkyB venture, the Sony spokesman said, without mentioning which ones or exactly what type of business.

[02] Daimler projects 23% jump in sales by 2000

In an interview, Gentz said the company also planned fixed asset investments of more than six billion marks this year.

Gentz said he did not expect to raise more capital this year. 'We have no plans for a classic capital increase this year and probably not in 1998.'

The Daimler CFO also added that the stronger dollar should help the company's profits. He said that from a theoretical standpoint, an increase in the dollar of 10 pfennigs should boost operating profit by around 800 million marks.

Gentz said that figure, however, was not hard and fast because of the impact of price pressures abroad and foreign exchange hedging.

Over the long term, Gentz said Daimler based its business projections on a dollar/mark level of 1.40. In morning trade in Frankfurt on Friday, the dollar stood at 1.63 marks.

[03] Sainsbury warns fiscal 1997 earnings may drop 10%

The British supermarket retailer said net profit this year would be around £640 million to £650 million ($1.04 billion to $1.05 billion), before a £50 million charge related to the integration of its Texas do-it-yourself stores. The earnings drop would follow a 12% decline in fiscal 1996 to £712 million. That was the first time the company has shown a profit drop in 20 years as a publicly traded firm.

Analysts say they are surprised by both the magnitude of the slide in underlying profits and the 50 million GBP the group said it will charge to step up the integration of the do-it-yourself group Texas, which it acquired in 1995, with its Homebase home improvement stores. A Charterhouse Tilney Securities Ltd. analyst called the warning, 'Disappointing today, but not in the longer term. They're beginning to turn the core chain around.'

The analyst who cut his full-year estimate for the group to 640 million GBP from 710 million said the 60 million GBP downgrade reflects 20 million GBP needed to boost volume, with the rest going toward the cost of labor during a choppy holiday period and better-than-expected performance of Sainsbury's Reward Card.

Sainsbury's full-year forecast is likely to disappoint the market. A consensus estimate of London brokerages, taken in mid-December, called for the group to post full-year pretax profits of £715 million. 'Overall we are disappointed that the costs of building sales across the businesses have impacted group profit,' said Chairman David Sainsbury. 'The new management team is now focused on turning increased sales into profit.'

The group said continued investment in marketing, customer service and stock availability has cut into operating margins in the current year.

In the 16 weeks to Jan. 11, Sainsbury supermarkets same-store sales increased 4% compared with sales inflation of around 3%. Total sales at the U.K. supermarkets during this period rose 7%. These figures compare with the year-ago period.

In the group's U.S. operations, Shaw's same-store sales growth averaged 1.4% with virtually no sales inflation. Although Shaw's will incur a loss in 1996-97, Sainsbury sees the chain as 'a strong base for future potential growth.'

Sales at Giant Foods, the U.S. group in which Sainsbury holds a 20% stake, were hurt by a labour dispute with distribution staff which has been resolved, said Sainsbury.

[04] Nutricia withdraws babymilk from U.K. market

Some 12 cases of Salmonella anatum had been identified as of October 1996, but Nutricia said there 'is no conclusive' proof that Milumil was the cause. It noted, however, that the UK Department of Health hasn't tested any of Nutricia's products and that its factory shows no signs of contamination.

Nutricia said its Milumil baby milk powder, which it is recalling, is made exclusively for the British market and is not sold in any other country.

'The product...represents only a small part of our total sales in this market,' Nutricia said in a statement. 'There is no direct, incontrovertible proof that (the cause) is Milumil. It is a statistical association but we have to take every precaution,' a spokeswoman added.

Shares in Nutricia were suspended for around an hour in Amsterdam after falling sharply. However they later recovered some of their losses, trading down 9.70 guilders at 267, above a low of 260.50 guilders.

[05] Electrolux profit drops 19% on weak European demand

The Swedish domestic appliance maker said pretax profit slid to 3.25 billion kronor ($448 million) from 4.02 billion kronor the year before.

The results came well below analysts expectations of 3.49 billion kronor.

'Geographically the operating result has improved in North America but deteriorated in Europe,' Electrolux said.

New markets, such as Asia and Eastern Europe, has contributed to profits despite heavy marketing costs in Asia and especially China.

The strengthening of the Swedish krona and Italian lira, two countries where Electrolux has extensive production, together had a 300-million to 350-million-krona negative impact on pretax profits, Electrolux said.

The Granges unit showed a sharp drop in operating income from the year before, the company noted. 'The decline is traceable mainly to the Granges Metall and Strip & Foil areas, and resulted from lower metal prices and lower sales volumes,' it said.

The European whitegoods market weakened in 1996 compared to the year before, but the market improved in North America, Electrolux said.

'Operating income for the group's whitegoods in Europe declined as a result of lower sales and a less favourable product mix,' it said.

[06] France Telecom flotation expected in May

Bon, in an interview published Friday in Le Figaro, also said he hoped FT would raise more than 25 billion francs, the figure targeted by the government when it announced the IPO of 20% of FT's capital last December. He didn't rule out the company's quotation on Wall Street, but said only 'we'll see.'

Bon said that there was no need for a large industrial partner to take a stake, but pledged greater international development.

[07] German CPI data add to evidence of increasing inflationary pressures

In North Rhine-Westphalia, Germany's largest state, consumer inflation surged at the beginning of the year. Consumer prices in the western German state were up 0.4% in the month to mid-January, and up 2.0% on the year, the state statistics office in Duesseldorf reported.

North Rhine-Westphalia was the third of four major states to report its cost-of-living for January. A preliminary figure for all of western Germany will be published next week after a fourth state, Hesse, releases its data.

Consumer prices in the western German state of Baden-Wuerttemberg rose 0.5% in the month to mid-January, and 1.7% on the year. That exceeded economists expecations of a 0.3% monthly rise.

In Bavaria, prices gained 0.3% in the month and 1.6% on the year. The data add to a spate of inflation indicators recently that had taken the pressure off the Bundesbank to make a move on rates anytime soon.

Ernst Welteke, a member of the Bundesbank's policy-setting council and president of the regional central bank based in Frankfurt said that December M3 growth as well as the DM's current weakness argue against a lowering of short-term interest rates.

December M3 growth came in Thursday at an annualized, seasonally adjusted 7.9%, above analysts' expectations. And prices of imports into Germany were up 0.8% in December from November and were 2.0% higher than in December 1995, the Federal Statistics Office reported Friday, above analysts' forecasts of a 0.3% rise on the month and a 1.5% increase on the year.

[08] Sweden's Nordbanken could merge with S-E Banken next week

Referring to 'several sources,' Dagens Nyheter said investment plans and new recruitments have been frozen in both banks and there are indications that executives have been told not to travel.

S-E-Banken's investment bank unit Enskilda is expected to be given a more independent role in the merged bank while Nordbanken would control much of the future branch office network.

Rumors and speculation about a merger of the two banks have been in the market since late 1996 and heated up after Handelsbanken bid 23 billion kronor ($3.16 billion) for Stadshypotek.

The state has 59.5% in Nordbanken while the Wallenberg sphere is the largest shareholder in S-E-Banken with 17.4% of the shares.

[09] French bank's employees extend occuoation of headquarters until Monday

A union member announced said the sit-in would go on until the government abandoned a plan to wind down part of the bank. A second round of negotiations with mediator Philippe Rouvillois is planned for Monday.

'We'll spend the weekend at least,' he said over the phone from Paris head office. Although unions had originally been under the impression that the plan had been set aside, this morning's vote to maintain the protest seems to show a change of tune.

The Foncier headquarters are currently under occupation by several hundred staff, demanding the abandonment of government plans unveiled by Finance Minister Jean Arthuis in July to dismantle the home loans specialist.

'From Rouvillois's statement it is clear that the Arthuis plan is not totally cast aside,' the union representative said. Arthuis had told the National Assembly that his plan for a partial take-over by co-operatively- run property lender Credit Immobilier and a wind-down of the rest was drawn up because Foncier lacked both a future and a likely investor.

The Foncier protest, during which the bank's chairman Jerome Meyssonnier was held inside the bank for five days, has forced government officials as high as Prime Minister Alain Juppe to defend themselves in public and in parliament.

And keeping up the heat on the government, trade unions from 14 state and semi-state banking and finance groups agreed to hold a rally on Tuesday in protest at 'repeated and indescribable attacks on Credit Foncier' and job cuts across the sector.

[10] Graf convicted of tax evasion in Germany

The court in the southwestern city of Mannheim convicted Peter Graf, 58, on six counts of tax evasion.

It was not immediately clear how long he would have to spend in prison as he has already spent 15 months in investigative custody while the probe into the family tax affairs was taking place.

Prosecutors had demanded a jail term of six years and nine months for Graf.

They accused him and a family tax adviser of evading 19.2 million marks ($11.7 million at current exchange rates) in tax on Steffi's income between 1989 and 1993.

[11] France suffers transport strike

Commuters in about 30 French provincial cities have struggled to attend work and school today, as bus and subway workers strike for early retirement and a shorter work week.

In France's three largest provincial cities of Lyon, Bordeaux and Marseilles, service virtually ground to a halt, France Info radio reported. Other cities affected were Strasbourg, Clermont-Ferrand, Grenoble, Lille, Rouen, Nice, Toulouse, Montpellier, Brest and Nantes.

Heavy traffic was reported in a number of cities as most workers followed the strike call, building fires at their picket lines to stay warm.

Heartened by previous strikes in other sectors, five unions demanded its 34, 000 provincial transit workers be allowed to retire at 55 instead of 60 and work 35 hours a week instead of 39 but earn the same pay.

It was not immediately clear what further labour action was planned, though unions and management planned talks for Wednesday. Transportation faced more trouble with a nation-wide train strike planned for Thursday to protest a government plan to cut money-losing routes.

The strikers have been drawn to industrial action by the success of Paris transit workers, who won retirement at 55 with a crippling 3 1/2-week strike in November and December 1995, and truck drivers, who won the same with their own crippling walkout in November last year.

But the conservative government of Prime Minister Alain Juppe, struggling to cut the budget deficit to prepare for a single European currency, has said it will reject granting any further early retirement.

[12] Boeing and McDonnell Douglas post strong earnings

McDonnell Douglas, which agreed late last year to be acquired by Boeing for a price initially set at $13.3 billion, reported record quarterly net of $207 million, or 98 cents a share. That compares with a huge year-earlier loss related to the company's slow-selling MD-11 commercial jetliner.

The results were generally in line with analysts' expectations for the planemakers.

Boeing took an $84 million charge related to appreciation in a special stock fund set up for employees last July. Without it, fourth-quarter profit would been $338 million, or 96 cents a share.

Sales jumped 43% to $6.51 billion from $4.54 billion a year earlier, when the company was battling a 10-week strike by the machinists union..

For the year, Boeing earned $1.1 billion, or $3.19 a share. Without the charge, Boeing's 1996 net was about $1.18 billion.

Boeing, which completed its $3.1 billion acquisition of Rockwell International's defence and space holdings on Dec. 6., reported a 16% increase in 1996 sales. For the year, sales rose 16% to $22.68 billion, compared with $19.52 billion.

Boeing projects sales of $33 billion for 1997, including revenue from the former Rockwell units, but excluding any effect from the McDonnell acquisition. that purchase is expected to close in mid-1997.

McDonnell's sales for the latest quarter rose 11% to $4.09 billion from $3.73 billion.

For the year, the company earned $788 million, or $3.64 a share, compared with a $416 million loss, or $1.83 a share, the year earlier. Sales slipped 3.5% to about $13.83 billion from $14.33 billion. Analysts say McDonnell's margins have slipped on some key programs, but the erosion is temporary.

[13] GE tops list of world's firms based on capitalisation

The capital values were calculated by the number of issued shares multiplied by their market prices as of the end of last September.

NTT dropped to fourth place among the top 500 companies, with its capital calculated at 119.56 billion dollars.

GE, whose shares total some 150.26 billion dollars, advanced from second place last year.

The Royal Dutch/Shell group moved up to second place from third with shares worth 135.35 billion dollars, while Coca-Cola Co. took third from sixth, with shares worth 126.87 billion dollars, the paper said.

The Bank of Tokyo-Mitsubishi, formed by a merger in April, 1996, appeared in the ranking for the first time with sixth place, the highest among world financial institutions.

Toyota Motor Corp. advanced into seventh from ninth, with 97.93 billion dollars worth of shares.

NTT, the Bank of Tokyo-Mitsubishi and Toyota were the only Japanese companies to appear in the top 10.

The paper said, 'Displaying remarkable flexibility, many U.S. industries have regained their competitive edge, and this has helped power an extraordinary bull market in equities.'

By contrast, 'In Japan, the stock market stands at less than half the peak it reached in 1989, when the 'bubble economy' was pricked and the country entered a liquidity trap from which it has yet to escape.'

There were 203 U.S. corporates ranked in the top 500 companies, while 110 Japanese ones were listed.

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

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