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Sunday, 18 August 2024
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European Business News (EBN), 97-08-07European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Thu, August 07 7:07 PM CETCONTENTS
[01] FCC adopts plan to cut international phone ratesThe Federal Communications Commission adopted a plan it hopes will push foreign telephone companies to reduce the rates they charge to connect international calls.The FCC's action, which was expected, aims to sharply cut calling prices and help bolster global telecommunications competition. As a result, U.S. callers could see international long-distance rates fall from an average of 88 cents a minute now to about 20 cents a minute in five years, said FCC Chairman Reed Hundt. Moreover, by pushing for lower 'settlement rates,' the FCC is hoping to create a more level playing field as the U.S. and other countries prepare to open their markets to competition next year under the recent World Trade Organization telecommunications accord. 'In the context of the market opening commitments that will soon take effect under the WTO agreement, the current inflated settlement rate structure has even greater potential for market distortion and anticompetitive effects,' said Commissioner Susan Ness. Settlement rates - the billions of dollars in negotiated fees carriers pay each other annually to complete calls - are typically far above the actual cost of handling calls. The inflated charges translate to higher prices for U.S. consumers. Since more international calls originate from the U.S. than anywhere else, foreign telephone companies - many of them state-owned - collect far more in settlement fees than do U.S. carriers. In 1996, the difference totaled $5.4 billion, and the imbalance is growing. The FCC estimates that at least 70% of settlement payments made by U.S. carriers amount to a subsidy paid by U.S. consumers to foreign phone companies. The plan calls for lower target 'benchmarks' to bring settlement rates closer to actual costs, and gives developing countries as many as five years to meet the targets. Specifically, the benchmark rate for high-income countries would be 15 cents a minute, and carriers in those countries would have until Jan. 1, 1999 to reach the target. Upper middle income countries would have two years to reduce rates to 19 cents a minute, while lower middle income countries would get three years to reduce rates to that level. Low income countries would have four years to meet a benchmark rate of 23 cents a minute. Very poor countries, those that have fewer than one telephone line per 100 inhabitants, would have five years to reduce rates to 23 cents. Settlement rates vary widely from country to country, with some as high a $3 a minute. The FCC figures the actual cost of handling the calls is closer to between six cents and nine cents a minute. By Scott Ritter[02] Zeneca on course to meet 15% earnings target despite sterling's strengthZeneca Group Chief Executive David Barnes said despite the strength of sterling and the cost of new drug roll-outs, the firm was on course to hit its 1997 target of 15% earnings growth.The news came as the company posted interim figures which surpassed analysts' expectations. Zeneca unveiled an underlying 22% growth in pretax profit, which rose to £669 million ($1 billion) from £610 million a year earlier. Sales fell 6% to £2.75 billion from £2.94 billion as the pharmaceutical giant became the latest in a long list of victims to fall prey to currency factors. Yet with the disposal of 'peripheral' businesses and stripping out the effect of the pound, Zeneca said sales in the first half actually rose 10%. Barnes said: 'Although these are very strong first half results, the current level of sterling will continue to have an adverse impact on reported profit. We also expect higher fixed costs from further new product launches in the second half of the year.' Nevertheless, he said underlying profit growth for the year 'should be broadly in line with our aspirational target of 15% per annum.' One of the key facets analysts were looking out for was the performance of cardiovascular drug Zestril. Because of destocking in the U.S., sales of the product there were flat, though overall they rose 5% thanks to a strong contribution from European markets. A review of the new lines showed that Zoladex revenues grew by 21%, benefiting from the continued roll-out of the three month depot. Casodex continued to grow strongly with sales of 51 million. In the U.S., it has 49% share of the total anti-androgen market. [03] Royal Dutch/Shell post a 4% drop in second quarter profitAnglo-Dutch oil giant Royal Dutch Shell group said its current cost net profit for the second quarter was £1.14 billion ($1.86 billion) against £1.187 billion a year earlier, excluding special creditsThe company said the downturn in profits from its chemicals operations was due to a number of 'special factors'. Speaking at a press conference in London, Shell's Chairman Mark Moody- Stewart said that sterling's strength in the period offset the benefits of production increases, while start-up costs of new plants dragged down chemicals earnings. However, he said these problems should be 'unique' to the second quarter and expects the chemicals division to show an upturn in profits and margin in the second half of the year. In the first half of the year, net profit was £2.685 billion, compared with a year-earlier figure of £2.722 billion. The company said in a statement the downturn in the quarter resulted from the strength of sterling. 'In dollar terms, these results were 3.0% higher than the previous year's level,' said Shell. Analysts had been looking for a quarterly figure of between £1.22 billion and £1.48 billion. Shares are 4.0% lower on the Amsterdam Stock Exchange on news of the disappointing first-half earnings. [04] UK raises its interest rate a quarter point to 7.00%For the fourth time in four months, Britain's central bank gave the official lending rate a quarter percentage-point shove higher. In a statement, it justified the move as needed to meet the country's long-term inflation goal of 2.5% a year.The same statement also included another message to market watchers: sterling shouldn't get stronger. Over the last several months, investors have been lured to the pound largely on prospects of higher yields, taking it to levels not seen since September 1989. 'Although the present strength of sterling reflects in large part factors outside the influence of UK monetary policy, upward pressures on the exchange rate should be reduced by the perception that interest rates have reached a level consistent with the inflation target,' the bank said. Traders quickly got the hint. Sterling crumbled near five pfennigs to below 2.97 marks and over two cents to near 10-month lows after the Bank of England hiked rates by 1/4 point to 7.0% and signalled they have reached levels consistent with inflation targets. 'It's a bloodbath. Sterling's collapse reflects a plunge in UK interest rate rise expectations,' said Adam Cole, analyst at HSBC James Capel. 'They're basically saying rates are on hold here for a time,' said Ian Amstad, senior U.K. economist at Bankers Trust International in London. 'They're also giving a hint that the upward pressure on sterling should abate. The market's sniffed that out quite well.' British business organizations said the Bank of England was wrong to raise interest rates again, arguing that the decision threatens to push sterling higher and deepen the plight faced by exporters. Kate Barker, chief economic advisor at the Confederation of British Industry, or CBI, said the group was 'unhappy' about the move. 'While robust consumer spending points to strong growth in the short term, there is increasing evidence that the weakness in the export sector will slow the pace of U.K. economic growth significantly during 1998. [05] Veba's first half profits rise 12.7%German industrial group Veba 's net profit rose 12.7% to 1.01 billion marks ($543 million) in the first half of 1997, compared with 896 million marks in the year-earlier period. Veba attributed first-half growth largely to gains in its oil, trade, and services sectorsEarnings growth for the full year will 'at least' match gains made in the first quarter, Veba said. 'From the present perspective, we are confident that for the full year we will achieve earnings growth along the magnitude of that seen in the first half of the year,' Veba said in a statement. [06] Barclays reports a 7.6% fall in first-half profitBarclays bank has up to £700 million ($1.14billion dollars) for share buybacks, the bank said when it reported pretax profits after exceptional items of £1.271 billion for the six months ended June 30.Tax changes in the July 2 Budget led the bank to book charges of £77 million on its finance leases and £28 million to the life fund. Consequently, pretax profit fell from £1.376 billion, to £1.271 billion, compared with £1.270 billion a year ago. In early February, Barclays said it expected to return some £500 million of capital to shareholders, which was followed by a £290 million buyback program in late February and March. Today the bank said its capital position has strengthened, 'And in the absence of compelling alternative uses for the money, we now believe the scope for share buybacks in 1997 as a whole may be closer to £700 million,' said Chief Executive Martin Taylor. At BZW, Barclays' investment banking arm, pretax profit was £124 million for the first half of the year, down 16% from the same period last year, but up 195% from £42 million in the second half of 1996. 'BZW's performance was the result of a significant recovery within the markets business, particularly in fixed income and foreign exchange, which offset lower profits in equities,' said Taylor. As Taylor warned in February, costs remained relatively high at BZW in the first half of 1997, hitting £561 million compared with £489 million a year ago and £570 million in the second half of 1996. In addition, costs aren't seen reducing in the second half due to continued information technology and staffing costs. 'Together with the expenditure associated with the completion of the move to Canary Wharf, (these factors are) expected to lead to a small overall increase in costs in the second half of the year,' Taylor said. At UK Banking Services, which includes personal banking, business banking and cross-border services, pretax profit was £919 million compared with £788 million a year ago. In personal banking, Barclays said new business volumes in home finance rose 29% over last year, while sales of life and pension products grew 30%. [07] Reed Elsevier post flat first half net profitsAnglo/Dutch publisher Reed Elsevier said group net profit over the first six months of 1997 reached £312 million ($511.7 million), slightly up from £311million in the first half of 1996.The group noted that at constant exchange rate currencies, net profit would have risen 9% to £339 million. The first half of the year showed 'good underlying growth,' Reed Elsevier said. However, the significant strengthening of the British pound had a 'major translation impact' on the results of the Reed Elsevier combined businesses and the two parent companies. The group said profit before tax rose 10% in the first half at constant exchange rates. But it said the stronger pound had caused a rise in pretax profit of only 1% to £419 million. It stressed that the currency movements had an impact on the translation of non-sterling results into sterling and hadn't affected underlying performances. For the shareholders of Elsevier, who receive their returns in guilders, the currency movements have had a sharply positive effect, Reed Elsevier said. The group said it doesn't expect market conditions in the second half to change much. 'We remain positive about Reed Elsevier's prospects for the rest of 1997 and for the longer term,' the group said. It added that the strong financial situation of Reed Elsevier enables the group to pursue acquisition opportunities that match its strategic and financial criteria. [08] Schering's first half profit rises 20% to $163 millionGermany pharmaceuticals group Schering's net profit rose in the first half of 1997 to 294 million marks ($163 million), up from 244 million marks a year ago.Pretax profit rose to 498 million marks, up from 416 million marks a year ago. The group says that on its first-half results, it expects a 'positive sales development also in the second half of 1997.' Group sales in the first half of 1997 rose to 3.1 billion marks, up from 2.6 billion marks a year ago, Schering said. The continuing gains of 'Schering-important' currencies against the Deutsche mark, 'should provide additional support for sales development in the second half of the year, which should improve the full-year results,' the company said in a statement. Those currencies include the dollar, sterling and yen, a Schering spokesman specified. [09] Royal & Sun profit rises 11%Royal & Sun Alliance Insurance Group said that operating profit rose 11% to £501 million for the first six months of the year from £450 million a year ago, and said cost savings from its merger are well on target.The UK insurer's Chief Executive Roger Taylor said about £95 million cumulative annualized savings being has been achieved as of June 30. Royal & Sun Alliance was formed in August 1996 following the merger of Royal Insurance Holdings and Sun Alliance Group. The two companies said the merger would produce cost savings of £175 million by 1998. Executives failed to give further details on how much more money it plans to spend on buying back shares. To date, the insurer has purchased 32.1 million shares at a cost of 152 million. In the UK, general insurance profit fell slightly to £165 million from £172 million a year ago. The company said it is prepared to 'let go' inadquately priced business to maintain margin requirements. Royal & Sun saw much improved results in the US, where lower weather and catastrophe claims helped profits rise 92% to £92 million from 48 million a year ago. However, general insurance operations in the international division shrunk to £59 million from £78 million last year due to exchange rate movements. Overall, sterling's strength is believed to have cut profits by about 6%, considering that at June 30, exchange rates, Royal & Sun stated 1996's operating profit of £450 million would have been reduced by 25 million. [10] French consumers gaining confidenceFrance's household confidence index continued to strengthen in July rising to a negative 21 compared with negative 23 in June and negative 33 in May, the national statistics institute Insee said.The survey found that consumers opinions of their standards of living improved somewhat in the latest month. However, compared with the previous month, their opinions of their future living conditions fell slightly while their expectations for unemployment deteriorated significantly. Their opinions of their current financial situation were stable. Households also reported that prices rises have slowed and believe that this trend will continue in the upcoming months. Confidence that the households will be able to save in upcoming months also improved slightly. [11] ABB reports 2% profit increase to $567 millionSwiss-Swedish international engineering company Asea Brown Boveri's first- half 1997 net profit rose to $567 million, up 2.0% from the $556 million reported in the first six months of 1996.ABB also said net profit growth was 12% if measured in local currencies. ABB reported a a drop in sales to $15.19 billion in the first semester of 1997, down from $15.6 billion in the corresponding 1996 period. Despite lower sales, ABB's operating profit increased - by 11% in local currency terms - to $1.09 billion, up from $1.05 billion in the corresponding 1996 period. [12] CBI survey shows UK July retail sales growth slowingGrowth in annual retail sales volumes in the U.K. eased slightly in July, according to the Confederation of British Industry's distributive trades survey.The growth rate fell just below retailers' expectations and is expected to continue at a broadly similar rate in August, the CBI said. Sudhir Junankar, associate director of economic analysis at the CBI, said 'the growth in retail trade eased a little in July, but underlying sales growth continues to be relatively stable. 'However, the survey clearly points to further steady sales growth in August, suggesting that upward momentum in consumer demand remains firmly under control,' he said. The survey shows that 56% of retailers questioned said they sold more in July than the year earlier, while 21% said they sold less. The difference between the two figures, a net balance of 35 percentage points reporting higher sales, is down from 39 points in June and below the 37 points expected by retailers. A net balance of 32 points expect to sell more goods in August than a year ago, the survey found. [13] Corporate and Economic BriefsSwiss Reinsurance Company expects to pay around 150 million Swiss francs ($100 million) to cover damage from recent floods in Poland, the Czech Republic and Germany. The reinsurance company said in a press release the sum was based on preliminary information. Evaluation of losses is still taking place, with Swiss Re representatives now in affected areas in order to make detailed assessments, the company said. 'The floods in the affected areas may be regarded as a 'hundred-year event' and have grave consequences for the local populations,' the company said. However, for Swiss Re itself, the disaster represented 'a medium-sized event,' as might be expected very two years.French luxury goods company LVMH Moet Hennessy Louis Vuitton revealed that it further reduced its stake in Guinness, selling two million shares at 5.91 pence a share. Following the sale, LVMH holds an 11.99% stake in Guinness. LVMH has been reducing its stake in Guinness to fund its acquisition of Grand Metropolitan shares so it can block the merger of the two U.K. alcoholic drinks companies. The French company wants to join the deal and form a three-way merger of the group's spirits businesses, however the U.K. companyies have rejected the deal, saying that it erodes shareholder value. Denmark's second-biggest insurer Forsikringsselskabet Codan posted improved first half 1997 results, boosted by securities earnings and a solid Danish accident performance and forecast that full year profits would be similar to 1996. 'Our expectations for insurance operations the rest of the year are unchanged,' Codan said in a statement accompanying its interim results. European plane making consortium Airbus Industrie said a report in Germany's Die Welt newspaper saying Hartmut Mehdorn could become the new managing director was pure speculation.'That is pure speculation,' a company spokesman said from corporate headquarters in Toulouse. 'It is well known that Mr Pierson's mandate, at his request, will end in April. Airbus is not talking to any candidates for succession, that is a matter for the owners, the partner companies,' he added. Swire Pacific posted an 8.5% rise in interim net profit, fuelled by a sharp rise in property profits which the Hong Kong conglomerate said should strengthen during the second half. Swire Pacific reported net profit of HK$3.32 billion for the first six months of the year compared with HK$3.06 billion in the same 1996 period. U.K. notes in circulation totaled £22.1 billion in the week to August 6, up 5.8% from a year ago, the Bank of England said. [14] World News BriefsIsraelis living along the northern border with _Lebanon_ emerged from bomb shelters morning after a night of shelling by Lebanese guerrillas. About 40 mortar-bombs and katyusha rockets were fired by Lebanese guerrillas at three fortified Israeli positions in southern Lebanon. Two of the shells fell in Israel's western Galilee, said an Israeli official speaking on condition of anonymity. Under an agreement reached in 1996, the guerrillas are forbidden to fire into Israel, while Israel is barred from shelling the villages where the guerrillas are based.About 20,000 Sri Lankan government troops resumed their advance along a key northern highway, four days after Tamil rebels stopped them in a fierce weekend battle, military officials said. The battle for control of the highway is crucial in the campaign against Tamil separatists. Two columns of 10,000 soldiers each have linked up near a strategic road junction to fortify the area and advance further. Reporters are barred from the area of fighting, 235 kilometers (145 miles) north of the capital Colombo. The government advance was stalled after a fierce rebel counter attack on Saturday left at least 193 dead on both sides. Members of Pakistan's Sunni Muslim community mourned their dead after two attacks on mosques left 12 people dead and more than 40 injured. The mosque attacks the evening before were the latest round of religiously motivated violence between Sunni and Shiite Muslim extremist groups in Pakistan's eastern Punjab province, police said. In Multan, 350 kilometers (220 miles) south of Lahore, authorities said three people died and more than 20 were injured when unidentified assailants hurled a hand grenade into a Sunni mosque. More than 100 people became ill in a central Chinese city after two restaurants mistakenly used the preservative nitrite in their food instead of salt, a newspaper reported. At least 105 people suffered nausea, vomiting and fainting at the restaurants in Yichang in Hubei province, sending some to hospitals, the Xinmin Evening News said. It said the incidents were accidental, but didn't indicate how nitrite - a salt-like, acidic chemical used in food processing to preserve color - was substituted for salt. 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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