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Monday, 19 August 2024
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European Business News (EBN), 97-07-31European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Thu, July 31 6:33 PM CETCONTENTS
[01] US economic growth slows as second quarter GDP rises 2.2%The US economy expanded at an annualized 2.2% in the second quarter, slowing from 4.9% growth in the previous quarter, the Commerce Department said in an initial estimate.The implicit price deflator, which is an inflationary guide, reflective of pressure on prices, came to 1.4%, falling from the previous quarter's 2.4% to register the smallest gain in 33 years, since a 0.9% in the second quarter of 1964. The April-June growth in real gross domestic product - the nation's domestic output of goods and services with inflation adjusted on a chain- weighted basis - was better than a widely held forecast of 2.0%. The department attributed the second-quarter deceleration to lower growth in consumer spending and inventory investment. Overall personal consumption expenditures, which account for some 70% of the nation's economy, rose a scant 0.8%, slowing from the previous quarter's strong 5.3% rise. Personal spending on durable goods fell 5.7%, faltering from a 14.1% rise, and that on nondurable goods dropped 2.1% compared with a 4.7% increase in the previous quarter. Growth in nonresidential fixed investment came to 15.1%, up from 4.1%, and residential fixed investment gained 5.6% compared with 3.3% in the previous quarter. The real change in business inventories added 0.2 percentage point to the second-quarter change in real GDP, after adding 1.8 percentage point to the first-quarter change. Businesses saw an increase of $66.8 billion in inventories following an increase of $63.7 billion in the previous quarter and $32.9 billion in the fourth quarter of last year. Net exports of goods and services fell $21.6 billion, compared with a $20.7 billion decline in the previous quarter. Exports rose $31.4 billion, or 14.4%, and imports increased $53.1 billion, or 21.8%. In the previous month, exports rose 9.9% and imports gained 17.9%. [02] Daimler Benz more than doubles first half operating profitDaimler Benz, Europe's largest industrial group, said operating profit for the first half to June 30 more than doubled, helped by the success of new products and cost-cutting measures.'In addition, exchange rates favouring Daimler-Benz have helped increase net earnings,' the company said at a press conference held in London. Daimler is headquartered in Stuttgart, Germany. Daimler said that in view of the high level of orders, new product launches, productivity increases and favourable foreign exchange rates, the group expects a further improvement in operating profit for the second half of 1997 compared with the first six months. Daimler said it expected to make significant advances in the second half and improve group profit on the back of rising orders, better productivity and improved currency exchange rates. Germany's largest company said it expected group sales to exceed 115 billion Deutsche marks ($62.7 billion) in 1997, driven by all divisions, and the return on capital to 'clearly' exceed the 5.2% figure reached at the end of 1996. Group sales totalled 106.4 billion marks last year. 'The growth should be carried by all divisions,' Daimler said, noting that the primary momentum will come from its new passenger car models, van business in western Europe, services, the civil aircraft and aero-engines units and from space systems. Daimler said it expects its passenger car business to develop 'substantially more favourably than the industry.' The company forecast that in 1997 its production and sales of passenger cars and off-road vehicles will rise over 700,000 units for the first time. [03] Rexrodt angry at blocking of German tax plansGerman Economics Minister Guenter Rexrodt said he regrets the decision of the opposition Social Democratic Party to block the German government's tax reform proposal, and said the move will put jobs and investment at risk.Early Thursday, a German parliamentary mediation committee said it had failed to hammer out a compromise between the opposition-dominated upper house and the lower house of parliament on the controversial tax reform bill. 'I regret even more that the tax reform, one of the most important reform proposals of the past years, has now failed due to the blocking tactics of the SPD,' Rexrodt said in a press release. 'Through this irresponsible behavior, the SPD is preventing urgently needed tax relief for companies and citizens - relief that Germany needs so that more will be invested, existing jobs secured, and new ones created,' the economics minister said. In addition, he said, the tax reform would have made Germany more attractive for international investors. But Finance Minister Theo Waigel held out continued hope for the tax reforms. He said the government's plans to reform Germany's taxation system have failed for now, but 'they're by no means dead.' The finance minister said the government coalition will strive to implement the tax reform program by January 1, 1999, if not parts of it already in 1998. Waigel said the government will call in a second intermediary committee in September for another shot at reaching a compromise on the reform package. If a solution isn't reached after that, the government will present the bill again to the lower house of parliament and start over the procedure, he said. The bill had been approved by the German cabinet and the lower house over a month ago, but was later rejected by the upper house. The mediation committee was then called in to try to find a compromise between the two. [04] Renault says it has no plans to sell its Volvo stakeFrench car and truck maker Renault said that it had no immediate plans to sell its 3% stake in Swedish automotive group Volvo.Earlier, Volvo sold its 11% stake in Renault to Union Bank of Switzerland for 5.9 billion kronor ($754 million), at a per-share price of 171 French francs ($27.8). A Renault spokeswoman said, 'Since we unwound our alliance in late 1993, both companies have said that they would treat our cross-shareholdings just like any other financial shareholding...We knew that one day or another they would sell their shares.' She added that Volvo did not inform Renault of the sale before it took place. When asked if Volvo's decision could prompt a similar response from Renault, the spokeswoman said, 'we have no near-term plans to sell our Volvo shares.' In a comment on its stake sale, Volvo's Chief Executive Leif Johansson said, 'we are selling our stake now because we want to capitalize on the gain in the Renault share during 1997 and which has been accentuated during the past week.' Volvo and Renault began to dismantle their cross-shareholding pact in 1994 after a merger between the two companies was rejected by Volvo's shareholders in December 1993. [05] US Senate votes to approve 5 year balanced budget planLawmakers in the House and Senate voted to approve a five-year federal spending plan and will now turn to a net $95 billion five-year tax cut package.The House is expected to act while the Senate's final vote may not occur until tomorrow morning. President Clinton supports both bills and will sign them in early August. 'What we have achieved is a balance - a carefully- crafted compromise,' Senate Finance Chairman William Roth, R-Del., said. The spending bill passed by the Senate is identical to the House version. No changes are allowed to final 'conference' agreements between the two chambers. The bill would cut a net $136 billion in spending on federal programmes over five years. These savings, lawmakers hope, will help bring the federal budget into balance. Further reductions will be enacted over the next decade. The bulk of deficit reduction comes from cutting $115 billion in future spending for Medicare and $13.6 billion from Medicaid - the federal health insurance programs for the elderly and poor. The proposal would also help extend the life of Medicare, Medicaid and other social programmes although further legislative action is needed permanently fix federal medical- benefits programme. Separately, the bill also contains a provision to increase the federal debt limit from the current $5.5 trillion to $5.95 trillion, which is expected to last through December 1999. A tobacco tax increase of 15 cents, which would be phased-in between the years 2000 and 2002, was included in the spending bill rather than the separate tax bill to allow tobacco state lawmakers to vote for the tax cut package without casting a vote for a tobacco increase. [06] BT says MCI review to be completed by end of AugustRobert Brace, finance director of British Telecommunications said that the review of prospects at proposed merger partner MCI Communications is expected to be completed by the end of August. The review of MCI's prospects followed a profit warning by the company that plans to expand into U.S. local loop service would incur losses some $800 million more-than- expected in the second-half of 1997.Echoing comments made yesterday by Douglas Maine, MCI's chief financial officer, Brace said the review of the U.S. operator's financial plans to enter local loop markets is expected to take 'weeks rather than months.' Brace added that there is a 'heavy probability' that the review would be complete before the end of August. Brace spoke to Dow Jones Newswires following the release of first quarter results. For the first quarter, BT posted a 1.4% rise in pre-tax profit to £881 million ($1.4 billion) despite rising competition. Turnover advanced 4.3% to £3.798 billion even after an estimated £200 million adverse impact caused by price reductions. Inland call volume was called 'virtually static' at £1.234 billion with 8% volume growth offset by regulated price reductions. Turnover growth came mainly from mobile operations, advanced services, exchange line rentals and interconnect receipts from other U.K. telecoms network operators, BT said. [07] Glaxo first-half profit sapped by strong poundThe effects of sterling's strength were well demonstrated in Glaxo Wellcome almost static first-half earnings figures.However, the company said that the underlying picture was a healthy one, with the company on course to hit its two-year target of restoring double- digit earnings growth. When stripping out exchange-rate effects, sales were up 8%, while excluding ulcer-drug Zantac, which came off U.S. patent over the weekend, the rise was 14%. Analysts likely will be pleased with the firm's portfolio of new drugs, or those that have been developed in the last five years. Sales in this portfolio increased by 50% at constant exchange rates to £1.3 billion. New drugs now account for 31% of overall sales, with treatments for HIV and respiratory ailments filling some of the void left by the loss of the Zantac patents. [08] French unemployment rate rose to 12.6% in June; higher than economists predictedThe French unemployment rate rose to 12.6% in June, the government said, surprising economists and increasing political pressure on the new premier, Lionel Jospin.The number of jobseekers rose by 17,600 from May to 3,130,900 in June, the Labour Ministry said, raising the jobless rate from 12.5% to 12.6%. The May jobless rate last month had been revised down from 12.8% under a new accounting system. Markets barely reacted to the higher figure, focusing instead on the strength of the dollar. Jospin's leftist coalition was elected in a June 1 parliamentary election runoff, primarily by promising to make the fight against unemployment its highest priority. Jospin has said he will introduce new anti-unemployment measures this fall, including the creation of 350,000 new jobs for young people. Polls have shown the French consider unemployment the nation's most important domestic problem. Most Economists had expected the unemployment rate to remain at 12.5%, and Finance Minister Dominique Strauss-Kahn said last week he expected the unemployment rate to be steady until late 1998 and then begin to decline. France's unemployment rate has risen almost continuously since 1990, when it stood at 8.9%. [09] EU exports for the first quarter grow 10%First-quarter exports from the 15-nation European Union rose 9.9% from the year-ago period, the EU's statistical agency Eurostat said.The strength of the dollar in the first quarter was 'a large contributing factor' to the jump in exports, said Eurostat official Joaquim Ayuso. 'The strength of the dollar is very important,' he said. 'I have no doubt that it's influenced this growth, but I can't say that that's the only factor.' Eurostat said the EU's trade surplus expanded to 3.5 billion European currency units ($3.3 billion) from 1.2 billion ECU in the first quarter last year. 'This is in line with the 1995 and 1996 trend of remarkable extra-EU surpluses and is the 12th positive quarter in a row,' Eurostat said. Imports into the union, meanwhile, jumped 8.43% in the first three months of the year compared with a 6.3% jump a year ago. The EU agency noted that the dramatic jump in exports showed the 'dynamic momentum' in the first quarter compared with a year ago. Export growth in the first quarter was led by increases in Ireland where exports rose by 17.5% compared with a year ago, in the UK exports rose by 26.2% and in the Belgium-Luxembourg trade area exports increased by 16.5%. On the down side, exports fell 3.8% in Denmark, 1.8% in Spain and 2.9% in Portugal. First quarter trade within the 15-nation bloc was slower however, representing 64% of EU countries' total trade, unchanged from the first quarter last year. Denmark, Ireland, the UK, the Netherlands and Finland saw their intra-EU trade grow, while Belgium-Luxembourg, Italy, Portugal and Sweden saw their's drop back. The largest intra-EU trade surplus was in the Netherlands with 11 billion ECU, followed by Germany, which had a surplus of 6 billion ECU in the first quarter. [10] German government says it will sell final Lufthansa stakeGermany's transport ministry and finance ministry said that the German government's remaining stake in airline Deutsche Lufthansa will be sold.Bonn placed its 35.68% stake in Lufthansa with the state-owned financing agency KfW last year. It will be placed on the German Stock Exchange in the autumn. In addition, KfW will float its separate 1.77% stake in the airline which it bought before the purchase of the government shareholding. The placement volume will total around 5 billion Deutsche marks ($2.8 billion) at the current share price, the government said. The ministries involved also confirmed that Dresdner Bank's London-based investment unit Dresdner Kleinwort Benson has been chosen as lead-manager and bookrunner for the issue. Dresdner Bank made the announcement at its earnings press conference earlier this week. The issue price will be determined with a so-called book-building process. SBC Warburg was also designated joint lead and bookrunner, while Deutsche Morgan Grenfell was named senior co-lead manager. DG Bank and Merrill Lynch were named co-leads, the ministry said. Among other things, the consortium is to make sure that at least 50% of the new tranche of shares will remain in the hands of German investors, the ministry said. [11] Sony posts stunning first quarter earningsSony surprised even the most bullish analysts with its earnings results for the first quarter, posting a 104% gain in consolidated net profit to 34.82 billion yen ($294.7 million) on the back of double-digit sales growth for most of its core products.Although the yen's depreciation from year-ago levels helped support results, the benefits of the weaker yen were slightly smaller than most analysts had forecast. Sony's group sales surged 22% higher in the latest period to 1.430 trillion yen. Consolidated pretax profit soared by 110% to 91.88 billion yen and operating profit jumped by 76% to 97.28 yen billion. The yen's depreciation from a year ago by about 10% versus the dollar and 16% against the pound added 90 billion yen to the sales figure and 20 billion yen to the operating profit, said Masayoshi Morimoto, corporate senior vice president at Sony. The company cited the strong first quarter results in revising its earnings forecasts higher across the board for the year ending March 31, 1998; even so, analysts said the new forecasts are still too low. On a consolidated basis, Sony expects to earn net profit of 168 billion yen, pretax profit of 356 billion yen and operating profit of 426 billion yen on sales of 6.180 trillion yen. Those forecasts exceed previous forecasts for net profit of 160 billion yen, pretax profit of 340 billion yen and operating profit of 410 billion yen on sales of 6.100 trillion yen. On an unconsolidated basis, Sony now forecasts pretax profit of 110 billion yen, operating profit of 100 billion yen and net profit of 70 billion yen on sales of 2.200 trillion yen. Previous forecasts were for pretax profit of 100 billion yen, operating profit of 90 billion yen and net profit of 65 billion yen on sales of 2.17 trillion yen. 'The new figures are still very conservative,' said Hitoshi Kuriyama, analyst at Goldman Sachs (Japan). Analysts surveyed all said they would revise their forecasts higher for the current year. Most of their forecasts were already higher than Sony's new forecasts. [12] Akzo Nobel profit rises 25% in second quarterDutch chemical company Akzo Nobel reported a 25% rise in second-quarter net profit to 459 million guilders.Analysts had forecast a rise in net profit of between 7% and 14% from 367 million guilders in the second quarter of 1996, implying a result between 393 million guilders and 418 million guilders. 'The most important thing about the earnings is that they had very good results in those sectors where they really want to grow, namely in the Pharma division and in Coatings,' the trader commented. At its Pharma division, which makes pharmaceutical products, Akzo said operating income rose to 233 million guilders in the second quarter, from 200 million guilders a year earlier. At the Coatings division, operating income rose even more substantially to 269 million guilders, from 193 million guilders in the second quarter of 1996. Akzo shares immediately rallied on the news. 'The results were basically very good,' a trader in Amsterdam said, 'so we're not surprised with the share price gain.' [13] TI Group posts first half profit up 8%U.K. engineering company TI Group said pretax profit for the first half of 1997 totalled £112.1 million ($190 million), up 8% from £103.7 million at the same stage a year ago.Sir Christopher Lewington, chairman of TI, said the company's exposure to sterling's strength during the period was limited to the translation of foreign earnings rather than any competitive problems, with the company having manufacturing facilities around the world. 'We go forward with strong order books, are well positioned to make further bolt-on acquisitions, and have confidence in our ability to generate continued growth,' said Lewington. TI said its John Crane industrial seals unit saw 'challenging market conditions' in the first half but was able to capture some market share from its competitors. The company's piping unit Bundy achieved organic sales growth of 8.0%, as it increased sales content per vehicle fitted. The Dowty aerospace unit achieved organic sales growth of 23% over the period. TI said overall it saw good profit growth in North America, which more than compensated for a decline in profitability in continental Europe. TI said it also made progress in the Asia Pacific and Latin America regions. The company said its interim dividend of 5.10 pence will be paid as a foreign income dividend, so that the company can reclaim advance corporation tax by setting it against overseas earnings. [14] Corporate and Economic BriefsGermany's capital account swung to a preliminary surplus of 13.4 billion Deutsche marks ($7.4 billion) in May, up from a revised deficit of 2 billion marks in April, according to data published by the Deutsche Bundesbank. The April deficit was revised to a larger deficit of 2 billion marks from the 1.2 billion marks deficit originally reported on July 2.Norway's July unemployment rate fell to 3.6% of the work force from 4.7% the same month a year ago, the Labour Directorate said. However, the jobless rate rose from 3.4% in June this year, because of normal seasonal variations in employment, the Directorate said. Also the number of people in state-supported labour market training programmes fell in July to 8,300 from 14,700 in June. The Finnish telecommunications group Nokia has signed a $85 million agreement to expand a digital cellular network in China's Zheijang province, the company said. The contract, between Nokia and the Zheijang Post and Telecommunications Administration, will expand Nokia's network in the area to 1 million subscribers. Nokia will deliver GSM base stations, controllers and other equipment under the agreement. Nokia views China as one if its most promising mobile phone markets. Last year, it announced deals worth nearly $300 million to supply GSM networks and equipment to Chinese customers. Germany's Bayerische Vereinsbank confirmed the details of its offer to shareholders of Bayerische Hypotheken- und Wechselbank as a first step on the way to the planned merger of the two banks. Hypobank shareholders will be eligible to exchange six Hypobank shares for one Allianz share between Aug. 4 and Sept. 10, 1700 GMT. The exchange will be free of charges for Hypobank shareholders and will be conducted by the Hamburg-based Bayerische Vereinsbank unit, Vereins- und Westbank. Fujitsu announced an $850 million deal to take over Amdahl, ending the company's 27-year history as an independent US maker of mainframe computers. The Tokyo-based company, which already owned 42% of Amdahl's shares, said it plans to buy the rest in a tender offer at $12 a share, a scant premium over Amdahl's closing price on Tuesday but about 18% higher than its price in recent days. If completed, the deal will mean that both suppliers of mainframe computers compatible with those sold by International Business Machine are owned by Japanese firms. French nickel producer Eramet said its sales for the first six months of 1997 declined 4.7% to 2.02 billion French francs ($327.9 million) from 2.12 billion francs a year earlier. The company said production at its Doniambo plant in New Caledonia increased 6% in the first half of 1997 to 27,836 metric tons, but deliveries only rose 0.5% due to labour action at Noumea harbour at the end of June. [15] World News BriefsIsrael's response to yesterday's double suicide bombing that killed 15 people was swift and decisive: suspending peace talks, ordering the arrest of the Palestinian police chief and asking the United States and other foreign donors to suspend aid to the Palestinian Authority. Israel arrested 28 Palestinians overnight and threatened to send security forces into Palestinian autonomy zones to arrest militants if Yasser Arafat failed to rein in Palestinian militants.Six people sentenced to death in a 1993 slaughter of Tutsis and Hutus were hanged - the first executions in Burundi in more than 30 years. The three Hutus, two Tutsis and one Twa were convicted on charges of murder and genocide for crimes during the aftermath of a 1993 assassination of Burundi's first democratically elected president, Melchior Ndadaye. The executions were carried out by hanging early in the morning, after a criminal court in Bujumbura rejected appeals, the Ministry of Justice said. The six were convicted and sentenced in February, March and April. A Lebanese court sentenced five Japanese Red Army guerrillas to three years each in jail for a variety of charges relating to their illegal stay in the country. The four men and one woman, who had been arrested in Beirut in February, were not brought to the court to hear the verdicts and sentences announced. From the European Business News (EBN) Server at http://www.ebn.co.uk/European Business News (EBN) Directory - Previous Article - Next Article |
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