European Business News (EBN), 97-04-09

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

Page last updated April 9 1615 CET

CONTENTS

[01] German unions warn against any delay in implementing EMU

[02] Procter to buy Tambrands for $1.85 billion

[03] U.K. Feb. manufacturing output rises 0.2%

[04] Australia ushers in financial reforms

[05] Creditanstalt posts 35% surge in net profit for 1996

[06] U.K. think-tank predicts a balanced budget by the year 2000

[07] Volvo Car Corp. plans joint engine venture with Mitsubishi

[08] Economic and Corporate Briefs

[01] German unions warn against any delay in implementing EMU

'Since a softening of the convergence criteria cannot be considered, and rightly so, EMU must be delayed by one to two years,' Peffekoven said.

Zwickel noted there are 18 million jobless in the European Union, costing the E.U. at least 1.5 trillion Deutsche marks ($800 billion), and called for an common employment programme along with currency union, which is slated to go into effect on Jan. 1, 1999.

The IG Metall chief also noted that the risks of pursuing the wrong kind of stability policy ahead of currency union are being underestimated.

However, German Foreign Minister Klaus Kinkel reiterated Germany's dedication in meeting both deadline and criteria.

'The realization of (EMU) within the set dates and conditions of the Maastricht Treaty is an absolute priority for Germany and for Europe,' Kinkel said. 'Flexibility of the calendar and the criteria is out of the question.'

French Finance Minister Jean Arthuis, like Kinkel, is also at pains to staunch any suggestion of a softening of criteria or deadline.

Following last weekend's meeting of European finance ministers in the Netherlands, some doubts have arisen over whether countries wishing to join the single currency will be held to the 3% criteria.

Speaking after a cabinet meeting, Arthuis said that he believes the 3% deficit-to-GDP ratio required by the Maastricht Treaty on EMU is needed to create a credible single currency, calling the figure 'absolutely mandatory.'

Peffekoven said he believed German unemployment would average 4.2 million this year, meaning that no real improvement could be expected in the labour market.

'Since it will not be possible to make the January 1, 1999 start date with as many countries as possible and strict adherence to the criteria, concessions will have to be made on one of these goals,' he said.

[02] Procter to buy Tambrands for $1.85 billion

Tambrands stock closed Tuesday at $46.125, up 62.5 cents, on the New York Stock Exchange. Procter & Gamble closed at $115.875, down $1.50, also on the NYSE. Procter & Gamble said it plans to fund the acquisition with cash and short-term borrowings. The transaction is subject to certain conditions, including approval by Tambrands' shareholders and regulatory clearance. Procter & Gamble said it plans boost the Tampax business through broader retail distribution, new marketing programs and geographic expansion.

Procter & Gamble said it will begin to assess the best way to integrate Tambrands, but in the interim, Tambrands' employees will continue to operate the business.

Procter & Gamble had sales of more than $35 billion in the fiscal year ending June 30, 1996. In 1996, Tambrands had sales of $662 million.

'This acquisition provides a unique opportunity for P&G to enter the tampon category with an established brand,' Procter & Gamble Chairman John Pepper said.

He said the acquisition would allow the company to apply expertise it gained in the feminine protection business with its Always and Whisper pad brands, and apply it to a new market with Tampax.

Tambrands Chairman Edward Fogarty said, 'Becoming part of P&G - a world- class company with global marketing and distribution capabilities - will accelerate the global growth of Tampax and enable the brand to achieve its full potential.'

Procter said it did not foresee any regulatory hurdles facing the acquisition.

'We will work with Tambrands to ensure an expedient regulatory review both here and internationally,' Stewart said. 'It really is a new market for us.'

[03] U.K. Feb. manufacturing output rises 0.2%

The ONS said just more than half of all manufacturing sectors stepped up output in February compared with January. The fall in overall industrial production, the sharpest monthly decline since June 1996, was due to a 2.4% drop in oil and gas extraction mainly caused by lower gas production.

The seasonally adjusted figures from the Office for National Statistics show that manufacturing output was 1.8% higher than the same month a year earlier while industrial production was up 1.5%. The consensus among economists was for manufacturing output to rise 0.2% on the month and 1.6% on the year, with total industrial production seen rising 0.2% on the month and 2.2% on the year.

The ONS regards three-monthly data as a better guide to underlying trends than the monthly figures. Manufacturing output was 0.6% higher in the three months through February than in the three months through November and 1.6% higher than the year before. Industrial output rose 0.8% on the quarter and 1.9% on the year.

Durable goods rose 2.7% in the latest three months compared with the previous three, while non-durable goods rose 0.5%. Production of investment goods rose by 1.4%, while intermediate goods rose by 0.5%.

Transport industries increased output by 2.4% and production of basic metals and metal products rose 2.0%. There were decreases of 1.3% in production of textiles, leather and clothing and 1.0% in rubber and plastics.

Between December and February, oil and gas extraction rose 2.3% compared with the September to November period and was 6.1% higher than in the same three months a year earlier.

[04] Australia ushers in financial reforms

Federal Treasurer Peter Costello made the announcement in response to a nine-month investigation by the so-called Wallis Inquiry, which was charged with finding ways to boost the financial sector's competitiveness. The five- member panel, chaired by businessman Stan Wallis, issued a 745-page report of recommendations.

But Costello stopped short of allowing mergers between Australia's big four banks - National Australia Bank, Westpac Banking Corp, Australia and New Zealand Banking Group and Commonwealth Bank of Australia.

Analysts said the government policy changes will boost competition and effectively hang a welcome sign for foreign players interested in buying a piece of the country's largest banks, something government policy previously forbade.

'(The announced policy changes) break the oligopoly of the four major banks, ' said Anna Borzi, a senior banking analyst with Prudential-Bache Securities Australia.

Analysts told Dow Jones the rulings will likely encourage the big banks to eye takeovers of regional banks such as St. George Bank, as well as insurance companies like GIO Australia Holdings and Colonial.

It will also doubtless resurrect perennial rumors of a multi-billion-dollar takeover bid for Australia & New Zealand Banking Group by HSBC Holdings.

The government is taking the Wallis panel's advice and removing a seven- year-old ban on mergers among the country's six largest banks and life insurance companies, the 'Six Pillars' policy.

But while the banks and insurers may now merge, the government will still block takeovers among the four biggest banks, Costello said.

[05] Creditanstalt posts 35% surge in net profit for 1996

The final results were revised upward from preliminary figures given in January, as chairman Guido Schmidt-Chiari has said they would be in a March magazine interview. Creditanstalt, a new subsidiary of Bank Austria, the country's largest bank, also said it would propose a dividend of 12 schillings, up from 10 schillings paid for 1995.

International business had contributed around one third of group operating profit in 1996 and more than one third of net profit, Creditanstalt said in a statement.

The bank said the positive trend continued in the first quarter of this year when group operating profit jumped to 2.2 billion schillings from 1.61 billion.

'The consolidated operating result in the first quarter recahed an all time high. In 1997, profit after taxes is likely to rise for the fifth year in succession,' Creditanstalt said.

It traced the improvement in the first three months to strong trading earnings. 1997 full-year net profit would benefit from cost-cutting and lower charges for credit provisions, the bank said.

[06] U.K. think-tank predicts a balanced budget by the year 2000

The influential think-tank, in an analysis of the fiscal policies of the three major political parties ahead of the May 1 general election, also concluded that fiscal policy will need to be tightened to meet the 'golden rule' for borrowing in 1997-98. This implies reducing public-sector borrowing to around 1% of gross domestic product. The government is forecasting a PSBR-to-GDP ratio of 2.5% for 1997-98, down from 3.5% in 1996- 97, and does not expect it to fall below 1% until the end of the decade.

The Office for National Statistics will publish PSBR data for the 1996-97 financial year, which ended in March, later this month. The IFS said that on current plans, the PSBR will continue to decline as the economy grows and backed the government's forecasts of a 19.2 billion-pound deficit in 1997-98 and a balanced budget by the end of the decade.

The IFS said a one-off windfall tax would fall largely on shareholders in the utility companies involved, rather than on its consumers. 'It is unlikely to be an equitable tax, in the sense that some of those who are intended to be caught by it have already sold their shares in the utilities and some who are not intended to pay the tax will bear some of the burden,' it said.

The IFS report also suggested that if the windfall tax changed perceptions about the stability of the tax and regulatory regimes, the cost of capital could increase which could lead to higher prices and discourage investment.

[07] Volvo Car Corp. plans joint engine venture with Mitsubishi

The development of engine component technology and a joint platform for future cars to be produced by the joint-venture NedCar in the Netherlands are potential new cooperation areas that will be considered, Volvo said.

According to a recently signed contract, Mitsubishi will supply Volvo with its gasoline direct injection engines and transmissions for Volvo's S40 and V40 models, which are produced at NedCar.

The GDI engine, which offers low fuel consumption along with high power output, will complement existing and planned engine programs for these cars.

GDI-powered S40 and V40 models are expected to be on the market in the first half of 1998, Volvo said. A second study is considering the possibility of incorporating the GDI technology within the Volvo engine family.

AB Volvo is the biggest industrial group in the Nordic region, producing cars, trucks and buses, as well as marine and aircraft engines.

[08] Economic and Corporate Briefs

Irish state-owned airline Aer Lingus reported 1996 pretax profits rose 130% to 41 million punts ($63.3 million) due to strong passenger growth and reduced debt interest payments. The airline said total sales from continuing operations, which increased 9% to 766 million punts in 1996 from 1995, were also boosted by code-sharing agreements with international airlines. The company reported operating profit rose 4% to 42 million punts in 1996.

U.K. insurer Prudential Corp said that as part of a deal by St. James's Place Capital to acquire the outstanding issued capital J. Rothschild Assurance Holdings it doesn't already own, Prudential will buy about 30.5 million shares of St. James's Place for £39.6 million. The tender offer by St. James's Place for J. Rothschild is at 130 pence a share. According to a statement from St. James's Place, the tender offer will be made on April 28.

And Winterthur Insurance , Europe's fourth biggest direct insurer, names 42-year-old McKinsey consultant Thomas Wellauer as new chief executive in a strategic step greeted warmly by stock market and analysts.

Dow Jones and Microsoft have agreed to work together to upgrade the Dow Jones Markets unit, formerly known as Telerate, a global provider of real- time financial information. 'By working closely with Microsoft, we will be staying ahead of the technology curve,' said Kenneth L. Burenga, chief executive officer of Dow Jones Markets and president of the parent company.

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

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