European Business News (EBN), 97-04-02

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

Page last updated April 2 1700 CET

CONTENTS

[01] Airbus secures $1 billion British Midland order

[02] BASF expects this year's earnings to be higher

[03] Norway's Storebrand insurer and Christiania bank to merge

[04] France's Lagardere's profits jump 65% on high-tech earnings

[05] GEC reported to have joined bid for Thomson-CSF

[06] U.K.'s Major proposes new tax break

[07] Lloyd's of London reports £1.01 billion profit for 1994

[08] Japan business optimism increases

[09] Dexia boosts 1996 profit by 10%

[10] German trade surplus unexpectedly narrows to $3.4 billion

[11] Saudi Arabian prince buys a five percent stake in ailing Apple Computers Inc

[12] Factory goods orders rise moderately in the US, adding to evidence of strong economic activity

[13] Bre-X backed by Indonesia over call for new gold study

[14] International Monetary Fund head favours resumption of lending to Russia

[01] Airbus secures $1 billion British Midland order

Airbus, which has been vying with Boeing for dominance of the booming aviation market, regards the deal as a major coup.

'This order is a significant vote of confidence in the future of our business and the future of European aviation,' said chairman Michael Bishop.

And a separate newspaper report said that China plans to spend about $2 billion to buy up to 50 planes from Airbus. Airbus has not yet confimed the order.

British Midland, which currently operates a fleet of 35 jet aircraft, will take delivery of eight A321s, 196-seat aircraft and twelve A320s, 160-seat aircraft phased over the next five years with three A321s entering service in Spring 1998.

The company said last month that constraints on slots at various European airports meant that within a couple of years the company's 150-seater aircraft would not be big enough and that it would have to move into the 200-seater range.

[02] BASF expects this year's earnings to be higher

The chairman Juergen Strube also told reporters on that the company is in strong enough financial shape to make larger acquisitions in 1997, but it has no particular targets in its sights.

In March the company had said net profit rose 13% to 2.79 billion marks in 1996 on a 5.5% rise in sales to 48.8 billion marks.

At its regular annual earnings press conference, the company also said group operating profit rose to 4.30 billion marks in 1996, from 4.0 billion marks in 1995.

BASF also projected 1997 investments of around 3.8 billion marks.

BASF is one of Germany's three largest chemical groups with operations in commodity chemicals, plastics, dyes and paints, and agricultural products. It also operates the large Wintershall oil and gas subsidiary, which has built a major natural gas network across Germany.

[03] Norway's Storebrand insurer and Christiania bank to merge

The merged group will have a market capitalisation of more than 26 billion crowns ($3.9 billion), based on share values at the close of trade on March 26.

The merger of Norway's second-largest commercial bank and biggest insurer will create the country's largest financial concern, which will be called Christiania.

The proposed exchange rate for the merger will be two Christiania Bank shares for one Storebrand share, the statement said.

In Tuesday's trading on the Oslo Stock Exchange, Christiania Bank's stock closed at 23.10 kroner per share, while Storebrand's shares ended at 44.70 kroner per share.

The merger requires approval by Norwegian regulators, the statement said.

[04] France's Lagardere's profits jump 65% on high-tech earnings

The company also said that it was aware of General Electric's interest in Thomson-CSF, but saw nothing unfriendly or hostile in a GEC offer for Thomson-CSF.

Lagardere noted it reached its previously announced goal of reporting FF1 billion in net profit. The company also said it expects an improvement in profits in 1997 due to continued strength in its high-technology division, the positive market reception of the Renault Espace, built by Lagardere, and better profitability at its Grolier Multimedia unit.

Lagardere Managing Director Noel Forgeard added that the company was aware of General Electric's interest in Thomson-CSF. 'We knew about their interest, we did not learn about it in the press,' Forgeard said. Forgeard also said the company saw nothing unfriendly or hostile in a GEC offer for Thomson-CSF.

French newspapers reported Monday that GEC had filed a bid with the finance ministry, placing it in competition with telecommunications giant Alcatel Alsthom and Lagardere.

[05] GEC reported to have joined bid for Thomson-CSF

The La Tribune newspaper said that the government would decide on Friday which of the bids are valid and will be taken into further consideration.

The paper said it had 'good sources' for saying GEC had bid but it added the Ministry of Finance and Economy had declined comment. In Le Figaro, 'sources close to the deal' said GEC made its bid on Friday and said the company and the government declined comment.

Both papers said the move by GEC was aimed at drawing a clear decision from the government on the participation of foreign companies in the privatisation of Thomson-CSF.

[06] U.K.'s Major proposes new tax break

The Prime Minister spoke as the ruling Conservative party lunched its manifesto - a document that outlines the party's policies for the forthcoming election..

The party outlined a proposal to allow married women who aren't employed to transfer their £3,765 tax allowance to their working husbands.

Major also said the Conservative government aims to reduce the standard rate of income tax to 20%.

At a press conference shortly afterwards, the Labour Party's Shadow Chancellor of the Exchequer Gordon Brown said its figures indicate the Conservative Party tax plan would cost at least £3.4 billion a year and could be as much as £5.2 billion if fully implemented.

Brown added that tax rises since the Tories won the last election in 1992 marked 'the largest peacetime increases in taxes we have ever seen. That is why Britain cannot ever again trust the Tories on tax.'

Labour Party officials said that they have documents showing the Conservatives have broken tax promises 22 times since the last election.

Brown challenged the prime minister to confirm that his current tax proposals will cost at least £13 billion in a full year.

In general the Conservative Party cultivated an air of fiscal rectitude in its May 1 election manifesto rather than trying to bribe voters with flamboyant promises of extravagant tax cuts.

Prime Minister John Major said the party, which is trailing the opposition Labour Party in the opinion polls by up to 30 points, remained tax cutters by instinct but were not going to give unrealistic guarantees.

A standard 20 percent income tax rate remains an 'aspiration' not a commitment and is in any case going to take a back seat to a new pledge which is to give tax breaks to carers for the sick or children.

The pledge would allow a married person, not working in order to look after a sick relative or to bring up children, to transfer his or her tax allowance to a working spouse.

Major said the commitment had been carefully costed and would cost around 1.2 billion stg per year.

[07] Lloyd's of London reports £1.01 billion profit for 1994

Lloyd's had reported profits of £1.08 billion in 1993, and said the decline in earnings for 1994 was based largely on foreign exchange fluctuations.

The back-to-back profits show a dramatic turnaround at Lloyd's, famous for insuring everything from movie stars to oil tankers and jumbo jets.

During a turbulent period from 1988-92, Lloyd's lost £8 billion ($12.4 billion) amid a string of bad luck it blamed on hurricanes, earthquakes and pollution lawsuits.

Many of the investors in Lloyd's, who had to put up their entire personal fortunes to back insurance policies, went broke and the market was thrown into a crisis. Some of the investors say unscrupulous insiders at Lloyd's were to blame.

Lloyd's completed a restructuring plan last year and said it is on the road to recovery. Lloyd's always releases its annual results three years after the fact because it takes time for all its insurance claims to be finalized.

[08] Japan business optimism increases

Japan's quarterly survey of business sentiment, called the 'tankan', showed managers divided in March, with major manufacturers becoming optimistic but their non-manufacturing cousins more wary. Economists saw no immediate rise in the nation's record low interest rates.

'The message of the tankan is...the external sector is doing very well but everything else is still doing very badly,' said Richard Jerram, an economist at ING Barings.

The key index was at plus 2 among major manufacturers, in positive territory for the first time since November 1991.

Matsushima attributed the turnaround to increases in exports, machinery investment and the strong performance in the automotive sector.

The Tankan showed a similar index for major non-manufacturers slipping further into the negative column to minus 6 in March from zero in the previous report for November. The fall was due to lower public works investment and a slowdown in housing investment, Matsushima said.

He said, 'Overall, however, the base of the economic recovery is strengthening and spreading.'

It is apparently gaining momentum from the weakness of the yen against the U.S. dollar, which spurs exports, but recovery in the private sector is also accelerating, he said.

However, firms across the board were pessimistic in their outlook for June, when the next survey will be done, which analysts attributed to uncertainty created by tax increases this month. The bank's quarterly business confidence survey in March underscored continued recovery in the Japanese economy, a senior Bank of Japan official said.

[09] Dexia boosts 1996 profit by 10%

The group, created by last year's merger of Credit Local de France and Credit Communal de Belgique, said 1996 net profit rose to 3.2 billion French francs ($567.4 million), up 10% from the previous year on a pro forma basis.

'We feel capable of becoming a world leader in public-sector financing,' said Pierre Richard, Dexia's chief executive officer, at a news conference in Paris. At present the group is mostly focused on Europe, in its two home markets, Belgium and France, and also in Germany, the U.K. and Italy, where it recently acquired a 40% stake in a local government-financing bank, Crediop.

Now, however, the bank is looking to build a presence in emerging markets, where it will concentrate on project financing, he said. 'Building on our know-how, we intend to develop beyond the European Union, into Eastern Europe, the Americas and Asia,' he said.

Reflecting the extent of his ambitions for the group, Mr. Richard also said that Dexia was eager to match the success of two Dutch financial-services giants, ING Group and Fortis, by building up its insurance and asset- management capacity in Belgium and in Luxembourg, where it has a controlling interest in Banque Internationale a Luxembourg.

Dexia's return on equity in 1996 was 11.5%, and Mr. Richard said this would rise to 13% in the next few years.

[10] German trade surplus unexpectedly narrows to $3.4 billion

Analysts surveyed by Dow Jones had expected the trade surplus to widen slightly to about 7.3bn. Meanwhile, the January current account deficit widened substantially to 9.3bn marks from a revised 900m in December, also confounding expectations it would widen to only about 3.5bn marks.

The Statistics Office said the large increase in the current account deficit was, as usual, due mostly to deficits in services, financial transfers and investment flows.

[11] Saudi Arabian prince buys a five percent stake in ailing Apple Computers Inc

And exactly a week later, the billionaire nephew of King Fahd of Saudi Arabia announced he was buying a five percent stake in the Norwegian Cruise Lines for $20 million.

Also in March, he said he was building a $500 million complex in his hometown Riyadh, to house a Four Seasons Hotel, dubbed the largest commercial building in the region.

In a press release, the prince said he purchased the Apple shares on the open market during the last several weeks.

The prince said 'I have been following the technology industry closely for some time, and Apple in particular for a number of months. I believe there is serious potential for Apple to provide large returns to its stockholders once again, as it did in the past.'

The prince, noting reports last week that Larry Ellison may try to acquire control of Apple, said he 'will monitor events closely.' Prince Alwaleed is a private entrepreneur and international investor.

[12] Factory goods orders rise moderately in the US, adding to evidence of strong economic activity

Factory orders climbed 0.8% in February to a seasonally adjusted $325.91 billion, led by a solid 1.5% increase in orders for durable goods, such as computers and automobiles.

The February increase in factory orders followed an unrevised 2.5% rise in January. The increase in durable goods orders was unrevised since the Commerce Department published its advance estimate last week.

The back-to-back increases in factory orders provide further evidence that the manufacturing remains a solid contributor to the current economic expansion.

The report also suggested that capital spending should help boost economic growth in the months ahead. Spending on on defense capital goods rose 3.5% in February after a 4.4% increase in January.

There are abundant recent signs of robust manufacturing activity that some analysts say may presage an acceleration in overall economic growth this spring.

On Tuesday, the National Association of Purchasing Management said its index of activity rose to 55.0 in March -- its highest level in two years -- from 53.1 in February as hiring, production and new orders strengthened.

[13] Bre-X backed by Indonesia over call for new gold study

Bre-X is engulfed in a scandal over the development of Busang, which Bre-X executives claimed could contain one of the largest reserves in the world. Bre-X's joint-venture partner in the project, Freeport-McMoRan Copper & Gold Inc., however, reported last week that it found 'insignificant' amounts of gold at the deposit site. Analysts have also suggested the mine might not be economically feasible.

The announcement caused Bre-X shares in Canada and the U.S. to fall over 80% last week.

'We will see if they (Bre-X) violated the law, and then we will bring the case before the law,' Sudjana said. 'But until now, they haven't violated anything because the investigation from the independent team is still going forward.'

Meanwhile, trading in shares of Bre-X Minerals Ltd. resumed briefly Tuesday despite company pleas that it remain halted until further tests resolve the furore over its gold claims.

Trading in Bre-X shares had been halted on the Toronto Stock Exchange and Bre-X asked that the suspension be extended until Freeport McMoRan finishes its tests and an independent mining consultant completes an audit. That could take four weeks or more.

[14] International Monetary Fund head favours resumption of lending to Russia

The IMF has delayed several monthly loan disbursements to Russia, and IMF Managing Director Michel Camdessus has been in Moscow this week to negotiate the terms of renewed lending on an existing dlrs 10 billion loan.

'By resuming our financing and by risking our resources once again, the IMF is showing its support for Russia's reform efforts,' Camdessus told the Moscow Institute of International Affairs.

Russia's economy has been shrinking since the Soviet collapse in 1991. The government has been unable to break a cycle of uncollected taxes and unpaid wages, with many workers going months without their regular salaries.

Camdessus stressed that the crucial part of Russia's reform effort 'remains in the hands of the Russian people, beginning with the key role to be played by the State Duma,' the lower house of parliament.

He called on the Russian parliament to pass laws that will support a market economy and will 'ensure that the government's budget is realistic and ambitious.'

Camdessus said 'it remains surprising that not a single bankruptcy has yet occurred among major tax offenders, as would have been the case in a properly working market economy.'

'Exceptional as bankruptcy should be, this ultimate sanction must be an option if taxpayers' behavior is to be changed,' he said.

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

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