European Business News (EBN), 97-02-27

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

Page last updated February 27 1830 CET

CONTENTS

[01] Akzo income hit by pill scare

[02] Foreign-exchange rates are reflecting European and American economies, Tietmeyer says

[03] U.S. jobless data climbs 3.6%

[04] U.S. durable goods surge to biggest figure since September

[05] ABN AMRO posts 26% gain in 1996 net profit

[06] Abbey National shows 20% rise in pre-tax profit

[07] Paribas swings to profit, partly because of gains on asset sales

[08] British Gas swings to a loss in final year before it demerged

[09] RTZ-CRA shows 24% slump in 1996 earnings to $1.1 billion

[10] Lasmo's earnings nearly doubled and oil production hit a record in 1996

[11] Renault expects hevay losses for 1996

[12] GAN posts net losses, but expects government bail-out

[01] Akzo income hit by pill scare

The Dutch chemicals group posted a modest rise in 1996 net profits which climbed to 1.318bn guilders (694.2m dollars), but raised the annual dividend and forecast higher net income in 1997, Akzo Chairman Cornelis van Lede told a results news conference.

'We stuck our necks out with our 1996 forecast but we have been able to achieve (that) projection despite slower than expected economic growth and a significant loss of operating revenue due to the pill controversy,' van Lede said.

The group has been shifting into high-margin pharmaceuticals and coatings, reducing its chemicals and fibres exposure. The figures came towards the lower end of analysts' forecasts which had ranged from 1.3bn guilders to 1.35bn guilders.

Van Lede said quarterly results for the group tracked the economy, which picked up more slowly than initially anticipated. 'Fourth-quarter profits were better across the board, except that fibres remained under pressure,' he said.

Based on expectations of continued moderate and stable growth in its most important markets, the company foresaw a higher net income over 1997.

Sales levels would remain roughly the same, despite the deconsolidation of activities generating around one billion guilders in turnover, he said.

[02] Foreign-exchange rates are reflecting European and American economies, Tietmeyer says

Repeating the recent statement by finance ministers and central bankers from the Group of Seven industrialised countries, Hans Tietmeyer said 'up to now, there has been a correction of the exaggerations in recent years.'

He added that 'the current exchange rate relationships undoubtedly better reflect the fundamental economic data on both sides of the Atlantic than they did earlier.'

The German central bank president went on to say that Germany wants the Deutsche mark to remain a 'stable currency,' and that the future European single currency, the euro, should be both stable and strong.

Regarding Europe's currency union, scheduled for launch Jan. 1, 1999, Tietmeyer stressed again that countries must fulfil the entry criteria sustainably.

The Maastricht Treaty for European economic and monetary union requires countries to fulfil five criteria pertaining to public debt, budget deficit, long-term interest rates, exchange rates and inflation.

'A weak euro could burden the currency union in the long term,' Tietmeyer said. 'No concerted effort at discipline can be expected later from those who close their eyes at the beginning.'

Tietmeyer noted that while inflation rates and interest rates are at very low levels and exchange rates are more stable than before, the public budget situation is less than satisfactory.

Noting that much has been done to reduce deficits in most European countries ahead of the currency union, countries still need to make 'considerable efforts' in both the area of public debt and deficit levels.

[03] U.S. jobless data climbs 3.6%

The Labour Department said jobless claims climbed by 11,000 to 316,000 in the week ended Feb. 22, compared with a revised 305,000 in the previous week. Economists had forecast initial jobless claims of 310,000 for the week.

But another key yardstick - the four-week moving average, which smooths out the more volatile weekly figures - fell last week to its lowest level in more than six months.

The four-week moving average for jobless claims declined 4,000 in the Feb. 22 week to 313,250 from a revised 317,250 the previous week. Labor said that figure was the lowest since the week ended Aug. 10, 1996, when the four-week moving average stood at 312,750.

The latest week's claims data differed sharply from many economists' expectations. Analysts polled by Dow Jones Newswires this week generally thought the number of applications would fall 4,000 from the previous week's revised level of 305,000. That level had originally been reported as 309,000. Continuing claims rose 4,000 in the week ended Feb. 15 to a new evel of 2,412,000, after climbing a revised 5,000 in the prior week. The previous week's figure had originally been reported as rising 27,000 to 2, 430,000.

The four-week moving average for continuing claims fell 11,000 in the week to 2,416,750, from the previous week's revised figure of 2,427,750.

Forty-seven U.S. states and territories reported decreases in applications for unemployment insurance in the Feb. 15 week, while four reported an increase. Two had no change in initial claims.

California reported the largest decrease in the week ended Feb. 15, with claims falling 21,946 due to a workweek shortened by President Lincoln's birthday holiday, as well as fewer layoffs in the construction and food industries, and agriculture.

North Carolina posted a decline of 3,803 new claims due to fewer layoffs in the textile, furniture and rubber industries. Illinois reported 2,661 fewer claims for the week, which state officials attributed to fewer layoffs in the trade industry and manufacturing.

Labor said no states or territories reported an increase of more than 1,000 new claims.

[04] U.S. durable goods surge to biggest figure since September

Each of the major categories shared in the gain, including a double-digit increase in electronic and other electrical equipment such as circuit boards and communications gear. The Commerce Department said orders totalled a seasonally adjusted $174.8 billion, up from $168.8 billion in December.

The initial response to the figures was muted on Wall Street. Yields on 30- year Treasury bonds, a barometer for long-term borrowing costs, were barely changed this morning from yesterday's late level of 6.78%.

Many analysts had expected a much smaller 1.4% advance in durable goods orders after December's revised 1.8% drop. The December decline earlier was estimated to be 1.9% and followed a 1.7% drop in November.

Bookings for electronic and other electrical equipment surged 14.9%, wiping out a 14.1% drop in December. The gain was led by orders for communications equipment and electronic components.

After jumping 4.5% in September, orders began to slow, rising just 0.6% the following month. Orders for durable goods - items expected to last more than three years - are a key gauge of the nation's manufacturing sector. Continued growth could lead to increased production and more jobs.

While most analysts do not expect any credit tightening at the next meeting of Fed policy-makers on March 25, many expect a modest increase later in the year.

[05] ABN AMRO posts 26% gain in 1996 net profit

But the Dutch bank declined to make a forecast for 1997, saying that 'in light of the uncertainties surrounding the financial markets, the Board finds it too early to make a profit forecast for 1997.'

It said, however, that it 'looks forward to the future development of the bank with confidence.'

The results were on the high end of the range of expectations. Analysts surveyed by AP-Dow Jones had forecast net profit of 3.26 billion to 3.31 billion guilders and net profit attributable to ordinary shareholders of 3.26 to 3.31 billion guilders.

Revenues rose 17.8% to 19.06 billion guilders with both interest and commission income showing double digit growth.

The bank also said it will split its shares 4-for-1 in mid May, pending approval of its shareholders, and that it hopes to list on the New York Stock Exchange also in May.

ABN AMRO said its provision for general contingencies was 4.02 billion guilders at the end of 1996. Of this amount, just over half was transferred to the banks' general reserve on January 1. The remaining 2 billion guilders was put into a fund to cover general banking risks and will form a part of group capital with movement in the fund revealed as a separate item in the profit and loss account. The fund and the balance are now included in ABN AMRO's tier 1 capital.

ABN AMRO and other Dutch financial institutions, including bank-insurer ING Groep had decided to pre-empt changes in Dutch and European Union regulations by providing fuller accounting, an idea which follows similar moves by some German banks. ABN AMRO was estimated to have some 3 billion to 4 billion guilders in its reserves.

ABN AMRO said interest revenues rose by 8.9% in the Netherlands and by 16.9% overseas. Severe competition and increased lending volumes pressured domestic guilder margins. Interest margins overseas narrowed but the bank said this was 'more than compensated by strong volume growth, especially in the U.S.'

As expected, the securities business boosted commission income particularly in light of last year's stock market rally as well as the growth in asset management fees.

[06] Abbey National shows 20% rise in pre-tax profit

Chief Executive Peter Birch told Dow Jones Newswires the bank is more than a year ahead of schedule in its effort to derive at least 50% of profit from non-traditional lines of business - such as life insurance, consumer credit and Treasury - by 2000.

As of Dec. 31, Abbey garnered 40% of profit from non-traditional activities, a level it had targeted for the end of 1997. When Abbey converted to bank status from a building society in 1989, profit came entirely from mortgages and savings.

Abbey shares closed Thursday at 768 pence, up 4.5 pence, or 0.6%, after trading as high as 779 pence.

'We have achieved our diversification targets both by organic growth and by acquisition,' Chairman Lord Tugendhat said at a London press conference. '(That gives) us a head start on those building societies converting this year, who will also seek to diversify streams of income away from the more mature and highly competitive mortgage and savings businesses.'

Birch said that while the acquisition of mutually owned life insurer Scottish Amicable Life Assurance Society would certainly help Abbey toward its 50% goal, it's not dependent on a purchase.

'The acquisition of Scottish Amicable would be a part of closing that gap, but so will continued growth in consumer lending, and our joint venture with Norwich Union has years and years of growth ahead of it,' Birch said.

[07] Paribas swings to profit, partly because of gains on asset sales

But Chairman Andre Levy-Lang declined to predict 1997 results, noting only that the first two months of the year 'had started off well and that 1996 had significant recurring elements.'

Paribas also said its estimated net asset value at the end of 1996 rose to 483 francs a share from 438 francs at the end of 1995.

The French financial services company said it would propose raising its dividend to 13 francs from 12 francs.

The group's Banque Paribas unit swung to a 1996 net profit of 1.8 billion francs from a loss of 2.9 billion francs in 1995. The company's earnings were helped by 3.2 billion francs in gains on the sale of some equity holdings, notably Cie. Francaise de Sucrerie.

Levy-Lang reiterated that Paribas Affaires Industrielles should generate at least 2 billion francs a year in net income for the group and that it expects 1 billion francs in the second half of 1997 from the continuing sale of diversified construction materiels company Poliet.

Paribas agreed to sell its 56.5%-stake in the company to Saint Gobain in May 1996. Saint Gobain at that time bought a 4.7%-stake in Poliet and took management control. It agreed to buy the rest of the Paribas stake in stages through 1999.

[08] British Gas swings to a loss in final year before it demerged

British Gas said it had a loss on a current cost basis of £237 million ($379 million) for the year compared with pretax profit of £607 million a year earlier.

Exceptional charges of £1.14 billion pushed British Gas's accounts into the red in the final report before its breakup earlier this month into Centrica, a supply and servicing company, and exploration and production company BG.

Some £635 million of the exceptional charges related to renegotiating gas contracts and anticipated losses on long-term sales contracts through the Interconnector pipeline and to Scottish Hydro-Electric.

A charge of £424 million was taken to complete the final phase of the restructuring program, provided for in 1993.

The remaining £79 million charge covered a profit on the sale of the Beryl field, property write-downs and break-up costs. Colder weather contributed an additional £300 million in sales. But the company's performance was hit by continued weak prices in the industrial and commercial markets and transitional costs during restructuring.

[09] RTZ-CRA shows 24% slump in 1996 earnings to $1.1 billion

In a statement, RTZ-CRA said its result was hit by lower metals prices, adverse exchange rates and difficulties in certain operations.

'The total reduction in 1996 earnings was equivalent to the adverse consequences of lower prices and exchange rate movements,' said Robert Wilson, chairman of RTZ.

'Gains elsewhere were offset by problems, predominantly of a temporary nature, in Comalco and at the Kennecott smelter. Remedial action has been taken and substantial improvement will become evident during 1997,' Wilson said. He added: 'I expect our growth to continue at a rate in advance of the market overall.'

Analysts surveyed earlier this week predicted on average that RTZ-CRA would report adjusted earnings, or profit after tax but before special items, of $1.10 billion.

Commenting on individual divisions, RTZ-CRA said its copper and gold division reported earnings dropped 40%, and copper and gold production each rose 19%.

RTZ-CRA said its aluminium division recorded a 7% lift in production in 1996 to 386,500 tons, while bauxite production rose 7% to 6.4 million tons. However, earnings in this division slumped 72% to $56 million.

'The downturn in the aluminium price coincided with the strengthening of the Australian dollar and the temporary impact on Comalco's production costs of the extensive Australian and New Zealand smelter upgrade programs, ' the company said. But prices have picked up in recent months and Wilson said he expected conditions in the copper market to remain tight in the short term.

'We do expect the tightness is going to ease, maybe not this year, but perhaps as we go into 1998,' Wilson said.

But prices have picked up in recent months and Wilson said he expected conditions in the copper market to remain tight in the short term.

'We do expect the tightness is going to ease, maybe not this year, but perhaps as we go into 1998,' Wilson said.

[10] Lasmo's earnings nearly doubled and oil production hit a record in 1996

The company said in a statement that peak production from Indonesia and initial contributions from new UK fields led to a record level of production in the year.

'Successful appraisal of fields in the UK, Italy and Algeria meant that we more than replaced our 1996 production and are confident we shall do so again in 1997,' Lasmo said.

The company said its key production regions have been strengthened by new exploration licenses, and will be bolstered further by an extensive exploration program in 1997.

Joe Darby, Lasmo's chief executive, said while profits were helped by the strength of oil prices, the company also benefited from the tight control of costs.

'Our unit operating costs of £2.87 per barrel oil equivalent are the lowest ever recorded by Lasmo,' he said.

Production levels in 1996 averaged 175 million barrels oil equivalent per day compared with 164 million a year ago.

'The increase over 1995 levels was mainly due to the commencement of production from the Liverpool Bay and Andrew fields and a full-year contribution from the Bitch field in the UK', Darby said.

He said Lasmo's exploration program for the coming year will focus on the key regions of the UK, Indonesia, North Africa, Italy and Pakistan.

Lasmo said development efforts in 1997 will concentrate on increasing production to a peak at Liverpool Bay in the UK and furthering its discoveries in Algeria and the Temp Ross field in Italy.

The company said in the UK evaluation work carried out west of the Shetland islands has shown good development prospects, while the North Africa/Mediterranean region is also seen as a new area for development.

[11] Renault expects hevay losses for 1996

A Renault spokesman said the FF2.4 billion write-down covers severance pay and other costs associated with the closing.

The plant currently employs 3,100 people. Renault said that only 1,900 people would be needed to do the same amount of work when production of the Megane and Clio is transferred from Belgium to other plants.

The spokesman said production volume would remain the same with a cost savings of FF850 million annually starting in 1998.

[12] GAN posts net losses, but expects government bail-out

The state aid will include 11 billion francs in capital, broken down into 7.1 billion francs to recapitalize UIC, GAN's real-estate lending unit, and 3.9 billion francs to boost the equity of GAN's insurance operations.

Another 9 billion francs from the state will be used to cover losses at a defence company set up in 1994 which was originally to have sheltered GAN from further losses.

The rescue of GAN is the latest in a string of costly government bailouts to prepare publicly owned firms like Credit Lyonnais for privatisation and end a tradition of state domination of the economy.

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

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