European Business News (EBN), 97-03-20

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Page last updated March 20 1815 CET

CONTENTS

[01] Renault swings to deep loss on restructuring charges and market slump

[02] Mixed outlook for the UK economy as macro-economic data raises inflation concerns

[03] Credit Lyonnais 1996 earnings rise in line with analysts' expectations

[04] French Luxury goods company profit falls after Guinness stake sale costs

[05] Guinness pretax profits jump 11%, to $1.5 billion

[06] Greenspan satisfied with the US economy, will stifle signs of inflation

[07] Bayerische Vereinsbank reports a rise in profit and says that this year's prospects are good

[08] Nedlloyd profit slides 53% in 1996

[09] German finance minister is reported as saying that EMU delay is possible, while commission says it is illegal

[10] BMW profit figures show steady climb

[11] Two German industrialists agree to moderate merger talks between Thyssen and Krupp

[12] EU clears digital accord

[13] Corporate and Economic Briefs

[14] CeBIT '97: What's happening at the world's biggest computer and telecoms fair

[01] Renault swings to deep loss on restructuring charges and market slump

The car division was particularly hard hit as Renault found itself in the middle of a price war that shows no sign of abating. Looking to 1997 results, Chairman Louis Schweitzer said that, excluding one-time charges, Renault should swing back to an operating profit. He would not comment explicitly on his expectations for 1997 net profit, saying that it depends on the level of restructuring charges.

Analyst estimates that Renault will post a loss of between 400 million francs and 600 million francs for the current year. The French car and truck maker took restructuring charges of 3.91 billion francs, most as provisions for the writedown of assets related to its closure of a Belgian plant. Another 940 million francs is related to the elimination of 2,764 jobs in France this year. Schweitzer said that the plant closure in Vilvoorde, Belgium, was approved 'by a very large majority' of the board. The plan has come under attack by workers and politicians and sparked yet another demonstration outside of Renault headquarters Thursday morning.

Renault's car division's operating loss widened in 1996 to 6.55 billion francs from 991 million francs the year earlier. Excluding restructuring charges, car division operating losses totalled 2.45 billion francs, compared with 1.31 billion francs in 1995. Schweitzer attributed the downturn to a price war that started in the second half and shows no sign of easing.

To combat those price drops, Renault said it launched a cost-reduction programmed in March 1996. While acknowledging success in lowering costs, Schweitzer said 'We will need to amplify those cost savings in 1998, 1999 and 2000.' Schweitzer added that he didn't expect car pricing to get better over the next three years in Europe. He added that the company's goal was for its car division to have a break-even year on an operating level.

The truck division's operating losses expanded to 705 million francs from 978 million the year before. Schweitzer said that given the downturn in the truck market in both Europe and the U.S., the truck division would also post operating losses in 1997.

The one bright spot for Renault in 1996 was its financial branch's continued profitability. In 1996, the financial branch posted an operating profit of 1.26 billion francs compared with 1.27 billion in 1995.

[02] Mixed outlook for the UK economy as macro-economic data raises inflation concerns

Investor concerns were partly offset by separate data showing that the annual rate of retail-price inflation fell more steeply than expected last month, thanks to a sharp drop in food prices.

But after a rash of statistics suggesting that the labour market is tightening sharply as spending in shops remains buoyant, investors believe that whichever party wins the general election set for May 1 will have to raise base lending rates promptly in order to stay ahead of the inflation curve.

On the London International Financial Futures & Options Exchange, December short sterling interest-rate futures were off 0.05 point at 92.79 around 1220 GMT after plunging 0.22 point, implying increased expectations that base rates will stand above 7.0% by year end, compared with 6.0% now. Earlier this month, the implied forecast was for lending rates of 6.5% at year end.

Meanwhile, sterling extended its losses after the data. The pound traded at DM2.6686 and $1.5948 around 1220 GMT, compared with DM2.6813 and $1.5966 before the data were released and with DM2.6895 and $1.5976 late Wednesday in London. Government bonds and shares also lost ground after the data.

'The markets are now thinking that whoever is in power will be putting up rates fairly quickly after the election,' said Jonathan Loynes, U.K. economist at HSBC James Capel in London.

[03] Credit Lyonnais 1996 earnings rise in line with analysts' expectations

France's troubled state-owned bank said net banking income - the best measure of a bank's activity - rose by 2.7% to FF44.51 billion, and that the increase was 5.9% on a constant structure basis thanks to good international and capital markets activity.

The 1996 net profit of FF202 million comes after a special payment of FF107 million to the state, compared with FF6 million in 1995, and is in line with analysts' forecasts.

Gross operating income jumped by 42% to FF9.5 billion and rose 35% on a constant structure basis, thanks to the rise in net banking income and stable costs.

The 1996 net profit, for a bank with FF1.62 trillion in assets, remains far below levels attained by similar-sized international banks, and reflects Credit Lyonnais' need for a recapitalization before the state's expected sale of the bank late in 1998, analysts said.

Credit Lyonnais' French commercial banking income before taxes rose to FF1.8 billion from FF700 million in 1995, while its domestic gross operating income rose 6% to FF4 billion.

Chairman Jean Peyrelevade has said that French operations should begin to improve significantly in 1997 after being hurt for several years by all the bad publicity from the bank's financial troubles.

[04] French Luxury goods company profit falls after Guinness stake sale costs

Earnings were below analyst projections. Jacques Chahine Finance, a Paris- based outfit that does earnings projections had a consensus for a net profit of FF4.35 billion.

LVMH said for 1997 it expects an improvement in earnings and sales due in part to new product launches, a more favorable exchange rate for the dollar and the pound, and growth in the Asia-Pacific region due to its 61.25% stake in DFS Group.

LVMH also announced that its board has decided to drop negotiations with DFS shareholder Robert Miller for the purchase of his 38.75% interest in the company.

LVMH's move caps a months of acrimonious negotiations over the sale of one of the world's most profitable retail franchises. LVMH, the maker of Hennessy cognac and Dom Perignon champagne, said its board voted in Paris to follow the recommendation of LVMH management and drop negotiations to buy Mr. Miller's 38.75% stake in DFS.

[05] Guinness pretax profits jump 11%, to $1.5 billion

Analysts had predicted the profit would be in a range of £960 to 965 million. Guinness said its profit was helped by record sales of its two main brands: Johnnie Walker Red Label scotch whisky sales rose 4% to 8 million cases, while Guinness Stout sales rose 4% to 8.6 million hectolitres. These results come directly from the investments made in the last three years, particularly the increase in marketing expenditure, Guinness said.

'We are now seeing encouraging signs in our largest spirits market, the United States. The U.S economy, being strong, is very helpful although in Europe...we do not expect a big consumer bounceback,' Chairman Tony Greener added.

Greener said marketing expenditure at the company's United Distillers unit was up 10% to £332 million, while expenditure at Guinness Brewing was up 8% at £205 million.

The Anglo-Irish brewer's dividend of 16.1 pence per share was narrowly firmer than the average analyst prediction of 16.0.

[06] Greenspan satisfied with the US economy, will stifle signs of inflation

Greenspan's made his comments as the news came in that the U.S. trade gap soared for a second consecutive month in January, hitting its highest level in more than nine years on record imports and shrinking exports.

The January deficit shot up 21.1 percent to $12.71 billion after a revised 31.6 percent jump in December -- the widest monthly shortfall since the fourth quarter of 1987, when deficits were running at an average $12.9 billion a month.

But Greenspan, testifying before Congress, said inflation is well-behaved. But he noted that the economy has been expanding at a rapid clip in recent months and Fed policy-makers must be constantly wary to ward off inflation before it takes hold.

The central bank's rate setting panel, the Federal Open Market Committee, meets Tuesday. Many economists believe the central bank will decide at that time to raise interest rates.

Analysts are expecting only a small tap on the monetary brakes in the form of an increase in the federal funds rate from 5.25 percent up to 5.5 percent. Any increase in the funds rate, the interest that banks charge each other, would be reflected immediately in higher bank prime lending rates, the benchmark rate for millions of consumer and business loans.

[07] Bayerische Vereinsbank reports a rise in profit and says that this year's prospects are good

And in a speech chairman Albrecht Schmidt scotched rumours of a round of consolidation in the German banking world by insisting that a hostile take- over of the bank was impossible.

Group net profit rose to DM869 million from 1995's DM657 million, resulting in a rise in per-share earnings to DM2.83, from DM2.52 a year earlier.

The company also expects a substantial rise in operating profits in 1997 amid modest global economic growth.

In a speech prepared for delivery at a news conference, Schmidt said: 'With four percent growth in the global economy and a slight economic recovery in Germany ... I am viewing Vereinsbank's future with optimism.'

The chairman added that he believed an unfriendly takeover of a German bank was impossible. Vereinsbank has been at the centre of takeover speculation since market leader Deutsche Bank last year said it had build up a 5.2 percent stake in its Bavarian rival.

[08] Nedlloyd profit slides 53% in 1996

The bottom line was held back by a massive 273 million guilders in extraordinary charge related to the merger of its container shipping activities with those of Peninsular & Oriental steam Navigation of the UK. Revenues were barely higher at 6.83 billion guilders, from 1995's 6.77 billion. The company's dividend remained unchanged at 1.25 guilders.

The results were on the higher end of analysts expectations although they were uncertain as to whether Nedlloyd would take the earlier announced charge in 1997 or 1998.

Looking ahead, the company said it expects pressure on shipping rates, further improvement in its European transport and distribution activities and a 'better' result from its holdings in Martinair. However, the company said it was too early to provide a forecast for the full year.

Last year's fourth-quarter charge included 214 million guilders to cover the write-down of some of its vessels and the transfer of assets to P&O Nedlloyd as well as 87 million guilders to help cover reorganisation costs at P&O Nedlloyd, which are expected to amount to $100 million.

Nedlloyd said the merger's advantages will 'steadily become visible in the course of the year, but are not yet visible in the first quarter, traditionally a weak (volume) period.'

[09] German finance minister is reported as saying that EMU delay is possible, while commission says it is illegal

Meanwhile in France European Commissioner Yves-Thibault de Silguy warned that any delay to EMU would be illegal.

The German official who made the comments is in Washington - he can't be reached' for confirmation.

At a conference on the planned European currency union in Washington earlier this week, Klaus Regling, a senior German Finance Ministry, said 'the most likely outcome is that we will start on time but we can't exclude the other possibility,' according to Thursday's edition of Deutsche Morgan Grenfell Daily Briefing, a Frankfurt-based newsletter.

Commissioner De Silguy made his speech to French farmers in Toulouse, southern France. In his speech he said that the move towards launching a single currency in 1999 was now irreversible and no politician was seriously considering a delay.

[10] BMW profit figures show steady climb

BMW said in a statement it expected to pay a dividend of 15 marks per ordinary share in 1996, up from 13.50 marks the year before. Holders of preference shares were to be paid 16 marks a share compared with 14.50 in 1995.

The company also said group profit from ordinary activities climbed to 1.66 billion marks from 1.367 million marks a year ago.

Parent net profit climbed to 554.4 million marks from 534.6 million marks.

The company had reported on January 30 that group sales last year climbed 13.3 percent to 52.27 million marks - a record high.

It said that the time that new models such as the 5-Series executive class saloon and the Z3 cabriolet sports car boosted demand for BMW branded cars.

Production at BMW's British unit Rover Group climbed only slightly to 504, 125 units from 503,526.

[11] Two German industrialists agree to moderate merger talks between Thyssen and Krupp

Mercedes-Benz Chairman Helmut Werner and former Preussag Stahl chairman Kurt Staehler have selected to referee the difficult negotiations.

The talks offer a chance to reach a long-term viable plan for the steel industry in North Rhine-Westphalia, centre of both the German steel and coal industries, state economics minister Wolfgang Clement said, according to the prepared text of a speech.

Meanwhile, thousands of steel workers at Germany's two largest steel groups protested ahead of talks between Krupp and Thyssen about a landmark steel merger.

The talks, due to begin later in the day, follow a hostile takeover bid launched by Krupp against its larger rival Thyssen, sparking protest from workers, the press and politicians.

[12] EU clears digital accord

The Commission warned however, that the accord doesn't give the companies the right to abuse their dominant market positions.

The agreement, which aims at improving the quality of trans-European telecoms services, groups Deutsche Telecom, British Telecommunications, France Telecom, Telecom Italia and Telefonica de Espana.

[13] Corporate and Economic Briefs

BARCLAYS has repurchased about £3.9 million of its ordinary shares Wednesday for 1090.176 pence per share, completing a repurchase program. BZW Securities Ltd., the bank's investment-banking arm, acted as intermediary in the last move of the buyback program the bank announced Feb. 26. Under the program, Barclays has repurchased 26 million ordinary shares, or about 1.7% of its share capital, at an average price of 1112.55 pence per share, for a total cost of £290 million.

NORWICH UNIONInsurance Groupsaid it is likely to have a market capitalization of about £5 billion when it floats on the London Stock Exchange in June. The flotation comprises a free share offer worth £3 billion to policyholders, together with an additional share offer to policyholders and institutional investors worth £1.75 billion.

The cost of living in GERMANY rose by 0.4% in February from the previous month and was up 1.7% from a year earlier, according to final figures released by the Federal Statistics Office Thursday.

SPANISH industrial production rose 2.9% in January from the same month a year earlier, the national statistics institute said Thursday. The index rose 9.1% from December. Germany's struggling consumer electronics maker GRUNDIG AG expects to cut operating losses to less than 100 million marks ($59.3 million) this year. The company earlier reported an operating loss of 382 million marks for 1996, the last year for which its largest shareholder Philips must step in to offset losses.Moody's Investors Services confirmed its Aa3/Prime-1/B ratings of Denmark's largest commercial bank, DEN DANSKE BANK. The confirmation comes in the wake of Den Danske's Monday announcement that it has acquired a 77.2% stake in Oestgoeta Enskilda Bank of Sweden.

_TAKEOVER RULES French Finance Minister Jean Arthuis says the government would shortly change regulations to allow companies that are the target of a hostile takeover bid to have 35 business days, instead of 20 business days, to respond to the bid. MICROSOFT_ says that it has overtaken Netscape Communications as the leading provider of internet server software in Europe. Microsoft's Paris-based European headquarters said Microsoft Internet Information Server now has a market share of 11% in Europe, compared with 10.4% for Netscape's equivalent software.

[14] CeBIT '97: What's happening at the world's biggest computer and telecoms fair

Debis T&M, the Japan-based unit of Germany's Daimler-Benz Interservices, is planning a telematics, or transportation information technology, joint venture with the Tokyo police force and and Japan's largest telecommunications company Nippon Telegraph & Telephone Corp. The joint venture will offer 'dynamic' auto navigation systems and personal traffic information. 'All system participants will be directed to the quickest route through the greater Tokyo area based on the traffic situation at the time,' Debis said at the CeBit electronics trade fair in Hanover.

Nokia, the giant Finnish maker of telecommunications gear, has unveiled a 2.1-ounce 'cellular card phone' that essentially transforms a laptop computer into a traveling office. With it, a laptop-wielding user can make phone calls, zap faxes, check electronic mail or even download files stored in distant computers.

Siemens said it continued to post 'solid growth' in its telecommunications businesses in the first five months of its fiscal year ending Sept. 31, 1997. It attributed the projected growth to its broad range of telecommunications products offered in a market that is showing strong growth.

Siemens Nixdorf Informationssysteme, the computer division of Germany's Siemens, said its unadjusted sales rose 11% to DM5.7 billion in the first five months of the current fiscal year ending Sept. 31. Adjusted for changes in the company's consolidation, sales rose 13% in the first five months, the company said. Over the five months, new orders rose an unadjusted 13% to DM6.0 billion, the company said. On an adjusted basis, new orders were up 14%.

Mannesmann Mobilfunk said it signed an agreement with Omnipoint Communications that will allow its D2 mobile phone network customers to telephone from parts of the U.S. The Omnipoint network is in operation in the greater New York area, and will soon expand to cover New Jersey, Vermont, Connecticut and other states in its license area, the Mannesmann Mobilfunk mobile telecommunications unit of industrial company Mannesmann said at a press conference. Separately, Mannesmann Mobilfunk said it will introduce six-month tryout tariffs for first-time customers in April. First- time D2 users won't have to pay a connection or basic monthly fee for a six- month period, as long as the monthly telephone bill totals at least DM29.95.

Mannesmann management board member and Mannesmann Arcor Chairman Peter Mihatsch Wednesday called on the German government to speed up its appointment of a telecommunications market regulatory body for when the market is liberalized on Jan. 1, 1998. 'The names of those responsible for regulation have not yet been finally decided,' he said, adding that the body should acutally be up and running by now. 'We're active in the market, we have invested and will invest a lot more - we expect encouragement from the policy-makers not handicaps,' he said.

Thyssen Telecom said its corporate network unit PLUSNET has signed a cooperation agreement with Danish carrier Tele Danmark. The agreement is aimed at expanding the companies' international telephone operations, in preparation for the liberalization of the German telecommunications market on Jan. 1, 1998, said Stefan Baustert, a member of Thyssen Telecom management board. In addition, Baustert announced new measures for Thyssen Telecom's fixed network operations which will make the company less dependent on national carrier Deutsche Telekom.

Start-up losses at Viag's telecommunications operations last year weren't as high as market speculation, but will surge in coming years, a company official said. Viag management board member Maximilian Adelt said ''In response to rumors about our startup losses in the telecommunications business, Viag Interkom and Bayernwerk Netkom posted a start-up loss of just DM100 million in 1996.'' That was between 40% and 50% lower than planned, Adelt said, adding that the cost will ''jump considerably'' this year to above DM300 million.

Microsoft and Intel released the NetPC reference specification for broad industry review. Intel said the NetPC is a new class of personal computers for business designed to reduce ownership costs by delivering new manageability advances. NetPC product announcements from many personal- computer manufacturers are expected over the next 90 days, the company said. NetPC systems will offer the performance and flexibility of traditional personal computers and will be compatible with existing investments in hardware, software and training. Compaq Computer, Dell Computer Corp., and Hewlett-Packard Co. helped develop the reference specification for the NetPC.

Deutsche Telekom announced details of its strategic Internet cooperation with Microsoft. 'The two companies have agreed on common marketing strategies for T-Online and the Microsoft Network, as well as cooperation on security solutions for online banking and the marketing of Microsoft's Internet and Intranet solutions,' Telekom said. T-Online is Telekom's Internet access service.

Sales at Siemens' three communciations units will rise by about 10% in the fiscal year ending Sept. 31, and earnings will rise 'at about the same rate,' a member of the company's management board. Volker Jung, who is responsible for Public Network Communications Systems, Private Network Communications Systems, and Defense Electronics, said the divisions' sales rose by a total of 18% in the first five months of the fiscal year, which was a greater increase than planned.

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