European Business News (EBN), 97-02-20

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

Page last updated February 20 1900 CET

CONTENTS

[01] German M3 money-supply growth outpaces expectations

[02] CBI forecasts continued low inflation and economic growth in UK

[03] Shares in Rank rise 6.5% as the market shrugs off earnings

[04] Investor posts massive jump in profits

[05] The U.S. is 'disappointed' with E.U. stand over US Cuba law

[06] Credit Lyonnais reportedly expects to show profits for `96 and `97

[07] Mannesmann says '96 net profit fell 14% but operating earnings gained 10%

[08] Siemens says its chip sales will triple over next five years

[09] Railtrack plans $25.6 billion, 10-year investment

[10] Asian leaders praise Deng's achievments and hope his reform efforts will be carried on

[11] Hugo Boss posts 30% jump in 1996 net profit

[01] German M3 money-supply growth outpaces expectations

The Bundesbank said January M3 money supply grew at a seasonally-adjusted, annualised rate of 11.7% in January. On a longer-term comparison, it grew at an annualised rate of 8.6% from its fourth-quarter level in 1995.

The data is well above the 1997 official target range of 3.5% to 6.5% and outpaced analysts' expectations of 10% growth in the month and 5.5% on the fourth quarter.

Though the data suggest some inflationary pressure, the central bank said the unexpected growth was strongly distorted by a quirk, a statistical overhand from November.

The central bank also said Germany's economy contracted fractionally in the fourth quarter of 1996.

The Bundesbank's figures are rounded to the nearest half-percentage point. For the fourth quarter, it reports a figure of -0.0%, indicating a decline of up to 0.25% in gross domestic product from the previous quarter.

In the third quarter, the economy grew 1% from the second quarter. The Federal Statistics Office estimates that the economy grew by 1.4% over the whole of 1996.

After the release of the GDP figures, Economics Minister Guenter Rexrodt quickly moved to allay fears of an economic slowdown.

Rexrodt forecast that in 1997 Germany's gross domestic product will grow a real, seasonally-adjusted 2.5%. Germany's economy is on course for growth that will continue throughout 1997, Rexrodt said in a parliamentary debate on the government's annual economic report.

German businesses appeared to share Bonn's enthusiasm.

The Ifo institute said businesses are continuing to show confidene in their economic prospects.

The Munich based institute said its so-called climate index, that tracks sentiment and prospects in the manufacturing, construction and wholesaling sectors rose to 93.3 from a downwardly revised 90.0 in December. A month ago, Ifo had reported the December index at 91.0. The January index is higher than the 91.1 widely expected by economists.

[02] CBI forecasts continued low inflation and economic growth in UK

'While the overall economic outlook remains healthy, there is a less robust projection for the manufacturing sector as export and profits growth come under pressure,' said Kate Barker, the CBI's chief economic adviser.

The CBI, in its economic forecast report for 1997, said it expects gross domestic product to rise 2.8% this year. That prediction is down 0.3 percentage points from the previous forecast, largely because of the strength of sterling.

The CBI also said sterling's strength will help keep inflation down and interest rates steady. The CBI expects Britain's base lending rate, now at 6.0%, to rise to 6.5% in the third quarter of this year and then to 7.0% in 1998.

The report added, however, that its interest rate predictions are based on the assumption that sterling weakens in coming months.

Retail price inflation, the CBI reported, is forecast to fall to an annual 2.2% by the end of 1997. The government has targeted underlying retail price inflation, excluding mortgage interest payments, to hit 2.5% this year.

The CBI forecast that in 1998 underlying inflation will rise again, to 2.7% by the year end.

Separately the CBI said the strength of the pound is continuing to hit British exporters. Export demand for manufactured goods weakened in February after a small improvement the previous month.

The CBI said a balance of 6% of British manufacturers in February reported below normal total order books, a view unchanged from January.

[03] Shares in Rank rise 6.5% as the market shrugs off earnings

Market players chose to focus on signs that the U.K. leisure and entertainment company will keep streamlining operations and may buy back up to 10% of its stock. One analyst said the results marked a turning point for investor sentiment toward Rank, which underperformed the overall U.K. equity market by 20% last year.

Rank posted underlying pretax profit of 297 million GBP in 1996, compared with estimates above 300 million GBP. After 232 million GBP in well-flagged exceptional charges related to property valuations, restructuring and disposals, pretax profit fell to 65 million GBP. That compares with 1995's 515 million GBP, which was restated to reflect a net gain of 236 million GBP due to changes in accounting for Rank Xerox, which manufactures and rents photocopiers.

Although the earnings numbers weren't impressive, analysts said Rank is taking the pain now for future gains. ''The decks are sort of now effectively cleared. I reckon now is probably the time the shares will turn, '' said Scott Penrose, analyst at Natwest Stockbrokers Ltd. ''(Rank Chief Executive Andrew Teare) gave a very encouraging performance at the analysts' meeting. He made all the right noises.''

Penrose said Natwest Stockbrokers will likely upgrade the stock to buy from hold.

Rank shares settled at 442 pence, up 27 pence on the day.

[04] Investor posts massive jump in profits

On Feb. 17, Investor's net asset value per share was 426 kronor, up from 394 kronor Dec. 31 1996. The board proposes to a pay an ordinary dividend of 10.00 kronor per share, up from 9.00 kronor for 1995.

Investor's total net asset value increased by 28.81 billion kronor in 1996 to 78.88 billion kronor and the interest bearing debt was reduced with 8.95 billion kronor to a net debt of 9.06 billion kronor by the end of 1996.

Investor's largest shareholding is Astra, which was worth 20.88 billion kronor Dec. 31 1996, up from 16.30 billion kronor at the end of 1995.

Saab, the company's wholly-owned aerospace and defence group, deepened its operating losses to 1.40 billion crowns compared to a loss of 354 a year earlier. The military aircraft division improved its profit while civil aircraft continued to show a loss.

In a comment, Investor president Claes Dahlbaeck said that Investor will make new investments within health care, information technology, media, services and the financial sector but that those new investment's won't represent more than 10% of Investor's total shareholdings. 'The new investments should be seen as a complement to the traditional holdings in Sweden-based multinationals,' he said

[05] The U.S. is 'disappointed' with E.U. stand over US Cuba law

''We would not show up,'' a U.S. official said at a press conference at the Commerce Department on the issue. U.S. officials defended their decision to boycott a WTO panel on Helms-Burton by arguing the WTO is not ''competent'' to judge U.S. foreign policy and national security issues.

In the meantime, the U.S. said it will make every effort to settle the matter with the E.U. in order to avoid a panel meeting. U.S. Undersecretary of Commerce Stuart Eizenstat said discussions between the U.S. and the E.U. over the last 48 hours made ''good progress.''

The U.S.'s reaction comes after Renato Ruggiero, director general of the World Trade Organization, named the three members to a panel to study a complaint by the European Union against the Cuba-related Helms-Burton legislation in the US.

The three panelists are: Arthur Dunkel, a former director-general of the General Agreement on Tariffs and Trade, the WTO's predecessor; Tommy Koh, a senior Singapore diplomat currently that country's ambassador at large; and Edward Woodfield, a senior New Zealand official who in the past has been involved in trade matters.

Ruggiero noted that the establishment of the panel in no way precluded negotiations between the EU and the US Indeed, Ruggiero expressed the hope that the two could settle the matter amicably outside the WTO's dispute settlement system. But if the system continues to be needed to adjudicate and resolve the dispute, Thursday's naming of the panel is the next step. The panel now has some six months to come to a decision.

The EU's complaint concerns the extra-territorial aspect of the legislation, which seeks to penalise those doing business with Cuba, particularly where confiscated property is concerned. Cuba is a member of the WTO.

Similar US actions are related to Iran and Libya, home to significant oil industry investments. But neither of these countries is a member of the WTO.

European Union Trade Commissioner Sir Leon Brittan said Brussels still aimed to negotiate a bilateral accord with the US on the dispute.

He also said the two powers had 'made good progress' in recent weeks in discussion on the extra-territorial aspects of the US Helms-Burton law.

'During intensive discussion with the US administration over the last few weeks, I believe we have made good progress regarding the dispute over the extra-territorial aspects of US legislation,' Britain's statement said.

[06] Credit Lyonnais reportedly expects to show profits for `96 and `97

According to the newspaper, these figures were presented to the banks board of directors at a meeting in December 1996. A spokesman for Credit Lyonnais said the bank had no comment on the report. ''We are a quoted company and we can't speculate haphazardly on our earnings,'' the spokesman said.

The newspaper report comes just one day before French Finance Minister Jean Arthuis is to send the government's latest bailout package for the bank to be reviewed by the E.U. Commission. An E.U. source earlier in the week said Credit Lyonnais will need ''at least'' 30 billion francs in new aid restore it to viability, possibly more.

The newspaper report said the high expectations for this year's earnings stems from good income from market operations, good earnings by the bank's American and Asian units and a rebound in profitability in its branch network in France.

Credit Lyonnais has long been in line for further state aid. The bank was originally thought to require an additional 8 billion francs to 12 billion francs to restore it to profitability and pave the way for privatization, though it has long been widely reported that that amount would be insufficient.

[07] Mannesmann says '96 net profit fell 14% but operating earnings gained 10%

The German industrial group didn't provide specific figures, but it said profits in its telecommunications businesses more than doubled from 464 million Deutsche marks ($274.1 million) the year earlier.

The main driver of growth in the telecoms business was the digital cellular phone unit Mannesmann Mobilfunk.

The company said after releasing detailed group results for 1996 that turnover in telecoms rose 55% to 4.2 billion marks, accounting for 12% of group turnover.

The company said it will raise its dividend 12.5% to 9 marks a share.

[08] Siemens says its chip sales will triple over next five years

The company said its semiconductor unit is predicting 26% annual sales growth over the next five years. That would outpace the expected 15% annual growth for the industry as a whole, according to Ulrich Schumacher, chairman of the unit.

However, he warned that growth in fiscal 1997 would be hindered by sharp declines in chip prices. He said Siemens was counting on the market reviving over the medium term.

Most of the growth would come in Asia and the US, where Siemens, the world's 12th-largest chip maker, forecast annual semiconductor market growth of 15% and 16%, respectively, between now and 2001.

[09] Railtrack plans $25.6 billion, 10-year investment

The announcement comes after Railtrack was criticised by the UK Rail Regulator for delays in meeting investment targets. Railtrack is submitting details of its spending plans to the regulator on Friday.

Of the total 10-year spending plan, £8.3 billion will be earmarked for renewal investment, £5.7 billion on day-to-day maintenance, and £1.9 billion on network enhancements.

Railtrack admitted, however, that it had fallen short of its internal target of £760 million for expenditures on stations and depots. In setting the fees Railtrack can charge train operating companies for access to its tracks, the UK rail regulator is demanding that Railtrack spend £3.5 billion on network renewal by 2001. The company said it plans to spend at least £1 billion above that target.

[10] Asian leaders praise Deng's achievments and hope his reform efforts will be carried on

There was no question an era had come to an end with the death of the last of the Communist revolutionaries, who successfully turned China toward modern capitalist-style development.

In Hong Kong, where fears run high about repression threatening democratic freedoms after the British colony returns to Chinese rule in July, Governor Chris Patten set aside his dispute with China.

'Deng Xiaoping has been the principal architect in recent years of China's modernisation and opening to the outside world,' Patten said. 'He will be regarded by future generations as an historic figure.'

Singapore Prime Minister Goh Chok Tong extolled Deng as 'one of the great leaders of the world.'

'He was certainly one of China's greats. He saw events in historical sweep and thought in terms of generations,' Goh said. 'Deng's legacy will be a strong and prosperous China in the 21st century.'

Japanese Prime Minister Ryutaro Hashimoto expressed 'deep sorrow' and praised Deng's role in working toward friendly Japan-China relations.

Although human-rights groups acknowledged that Deng's legacy included an abandoning of Maoist class struggle policy to work toward prosperity, they also criticized his role in quashing dissent.

'Deng will be remembered for beginning the overhaul of China's economic system,' said Rory Mungoven, Asia director for Amnesty International. 'But his legacy also includes a well-oiled machinery for repression, where the law is used as a weapon against dissent.'

Amid speculation about factional divisions in the Chinese leadership that may surface with Deng's death, Asian neighbors were hopeful that his achievements in directing China toward reform would not be lost.

In a condolence message sent to Chinese President Jiang Zemin, South Korean President Kim Young-sam wished that 'China, overcoming the sorrow over leader Deng's death, keeps marching on along the path of stability and prosperity.'

In Taiwan, which China views as a renegade province, leaders reaffirmed a desire to pursue talks on reuniting with the mainland.

'We hope their new leaders may take the opportunity to review their relations with us and come up with something in conformity with the reality and with the international trend,' Foreign Minister John Chang said.

Yuri Kageyama, AP-Dow Jones-Tokyo

EBN's Toby Low assesses Deng Xiaping's contribution to China's modernising reforms

of Guiness Flight Asia discusses whether China's new leaders will be as committed to reform</h3>

[11] Hugo Boss posts 30% jump in 1996 net profit

Net profit rose to 75.2 million Deutsche marks ($44 million) on an 11% gain in sales.

A spokeswoman said the clothing manufacturer also had extraordinary income in 1996 from the sale of brands in the US She declined to specify the amount ahead of the company's earnings news conference scheduled for April 7.

Boss said it will boost its dividend by 4 marks a share to 45 marks a share and pay a hefty 57 mark special dividend to take advantage of tax breaks. The dividend payouts, which must be approved by Boss's supervisory board, will total 65.8 million marks compared with 26.7 million marks in 1995.

Expanding on the tax benefits accruing from the bonus payment, Boss said that without the distribution, the company's net profit would have risen just 12% to 64.8 million marks rather than the 75.2 million marks booked.

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