European Business News (EBN), 96-12-02

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

Page last updated December 2 1740 CET

CONTENTS

[01] RWE may buy Thyssen's stake in E-Plus mobile phone network

[02] Racal stock under seige after firm issues profit warning

[03] Olivetti sees industrial plan by end of 1996

[04] US manufacturing sector's growth sharply higher in November

[05] French unemployment remains at record 12.6%

[06] French car sales skid in November

[07] U.K. manufacturing continues to expand in November

[08] Scottish & Newcastle earnings gain 26% in first six months

[09] U.S. and Japan settle dispute over military bases

[10] NTT appears headed for break-up in 1988

[01] RWE may buy Thyssen's stake in E-Plus mobile phone network

However, a spokesman for RWE wouldn't disclose the amount of money being discussed. He said only that the 3.5-billion Deutsche mark ($2.28 billion) price cited in today's edition of Germany's Focus weekly business magazine isn't correct. He declined to disclose the sum RWE and steel group Thyssen are discussing.

In October, RWE announced a strategic alliance in the telecom field with Cable & Wireless of the U.K. and German utility Veba, which holds a 30% stake of E-Plus.

That was a switch in allegiance for RWE, which had earlier dropped out of a consortium with British Telecom and Viag. That group had been planning to invest about 6 billion marks in Germany's fourth mobile network, E2.

[02] Racal stock under seige after firm issues profit warning

Around midday, the stock price had dropped 20%, or 54 pence, to 220 pence a share. Volume was a provisional 7.27 million shares.

'I would have thought it's justified,' said an analyst at Credit Lyonnais Laing. He said he's lowered his profit estimates for the first half and full year by £20 million ($33.6 million). Analysts had been expecting the company to show a 23% gain in the period to about £86 million.

However, Racal said 'a significant reduction in order intake' for its Radio Group subsidiary will result in an operating loss for Radio Communications.

Also, Racal said it will make a first-half provision of £10 million for the restructuring of its Data Group.

The group also brought its first-half results forward to Tuesday from Thursday. It said the figures are expected to show a 30% drop in pretax profit to £21 million pounds.

[03] Olivetti sees industrial plan by end of 1996

'It will be an industrial plan with some rather substantial elements and its premise will be to reinstate equilibrium in the accounts of the company without having an effect on the labor force,' he said.

Colaninno was speaking at a conference on the budget and privatizations organized by Banca Agricola Mantovana in Mantua.

[04] US manufacturing sector's growth sharply higher in November

The National Association of Purchasing Management's index rose to 52.7 percent in November from 50.2 percent in October. A reading above 50 percent is a sign of an expanding industrial economy.

The widely followed NAPM figures come as other economic reports in recent months have shown the slowing economic growth without the threat of inflation. But analysts said the figures pointed toward a healthy economy that isn't slowing too much.

'This is good news for the economy,' said Gary Thayer, a senior economist at A.G. Edwards and Sons Inc. in St. Louis. 'They show that the slowdown in the economy in the second half is not snowballing into a major problem.'

The figures were well above economists estimates, who had expected the index at around 50.8, not nearly at the level reported Monday.

That sent stock and bond prices down this morning, further extending early losses on concerns that strong Christmas retail sales could accelerate the economy's steady growth.

The NAPM figures are closely watched on Wall Street because its survey is one of the first key indicators of November economic performance.

In an indication that inflation pressures are easing, the NAPM reported Monday morning that prices paid by manufacturers fell from 47.1 percent in October to 45.9 percent in November.

In addition to its read on the manufacturing sector, the NAPM index indicated the overall economy had expanded for the tenth-straight month. An index reading above 44.5 percent suggests overall growth.

Other components of the NAPM report, based on the responses to survey questions of purchasing executives at more than 300 industrial companies: The production index rose to 58.6 percent from 56.6 percent in October and the new orders index rose to 55.4 percent from 51.6 percent in October.

[05] French unemployment remains at record 12.6%

The jobless total fell by 12,000 or 0.4% to 3,100,800 according to the Labour Ministry.

But the jobless rate according to International Labour Organisation criteria was unchanged at a record 12.6%.

The fall was welcome news for the deeply unpopular conservative government of Prime Minister Alain Juppe which has been striving to cut unemployment and at the same time sell its economic austerity programme aimed at qualifying for European monetary union.

But economists said that the latest data did not likely herald a reversal of an overall upward trend in unemployment, especially with fourth-quarter economic growth expected to be weak.

The decline surprised economists, most of whom had predicted an increase of 10,000 to 25,000.

The labour ministry said greatest improvement came in the category for men under 25, where the number of jobseekers declined to 290,900 from 294,800.

During the past 12 months, however, the number of young men seeking jobs has risen 7.5%.

The number of men aged 25 to 49 seeking jobs fell 0.3% in October to 1,041, 000, but is up 6.6% during the past year. The number of women in that age group seeking jobs also fell, 0.3% to 1,065,300, and is up 3% in the past year.

The number of private sector jobs, which excludes agricultural jobs, is unchanged from a year earlier at 13.35 million.

[06] French car sales skid in November

The number of sale days in November fell to 19 from 21 a year ago. When compared using the same number of sale days, vehicle sales fell 13.5%.

Car sales skidded to 135,294 registrations in November, with PSA Peugeot Citroen suffering the most damage, with a 27% drop. Renault sales fell 20.4%.

Other car makers also saw their sales fall sharply; Volkswagen sales fell 10.9%, Opel sales fell 18%, Ford sales fell 9%, Fiat sales fell 24.4% and BMW-Rover sales fell 37%.

The French car makers association warned that sales in December could be affected by the 12-day trucker's strike which ended this past weekend.

Car sales have been slipping in France since the government ended a subsidy programme in September that had been aimed at boosting demand for new models.

In the first 11 months of 1996, car sales rose 11.2% to 1.99 million. French carmakers took 55% of the domestic market in November and 56.1% in the 11-month period.

[07] U.K. manufacturing continues to expand in November

The latest survey from the Chartered Institute of Purchasing & Supply showed that overall demand rose in November for the sixth consecutive month, despite the strong pound's impact on some U.K. exports. Strong domestic demand for consumer goods was again the driving force.

The pound has gained about 10% against a basket of other currencies since August, making British goods more expensive and hence less competitive in overseas markets.

But sterling's rise also makes imported goods cheaper, reducing pressure on U.K. manufacturers to raise prices of their goods. The survey found that fuel and raw-materials costs fell in November for the 13th consecutive month.

Economists said the continued weakness of price pressures in industry made it easier for Chancellor of the Exchequer Kenneth Clarke to resist Bank of England pressure for another rise in interest rates this month, which could hit the key Christmas trading period and prompt a fresh round of mortgage- rate rises. Most think base rates will remain at 6.0% until January or February.

U.K. factory output expanded at a slightly slower rate in November for the second month in a row, despite a pick-up in production of consumer goods. Companies also hired fewer people over the month amid uncertainty over future business conditions, possibly caused by the strong pound.

The overall purchasing-managers' index - which measures general economic activity by collating data on output, orders, employment, stocks and delivery times - stood at a seasonally adjusted 54.4 in October, down a fraction from 54.5 in October and the first decline since May. A reading above 50 denotes that manufacturing activity is expanding.

Meanwhile, the new-orders index rose to 59.3 in November from 58.6 in October, its sixth consecutive increase and the highest reading in more than two years.

''The survey found evidence that the recent rise of sterling has had an impact on new orders from overseas,'' said Peter Thomson, director general of the institute. ''However, any fall in overseas demand was easily outweighed by the healthy state of orders from domestic markets, with consumer-goods firms still very much at the forefront of growth,'' Thomson said.

''On balance, it makes Clarke's task of holding off further rate rises a little easier,'' said Paul Turnbull, U.K. economist at Merrill Lynch International in London.

However, Adam Cole, U.K. economist at HSBC James Capel in London, felt that given the rise in sterling, the survey suggested that domestic consumption is growing too quickly for comfort. He therefore shared the Bank of England's view that ''the rise in exchange rate isn't enough to slow the economy and that Clarke will need to see another rise in base rates as early as January.''

[08] Scottish & Newcastle earnings gain 26% in first six months

Britain's largest brewer also raised its dividend 10% to 7.21 pence a share.

Scottish & Newcastle said its acquisition of Courage from Australian brewer Fosters last year helped the company show a 67% jump in trading profit to £89.9 million.

But earnings from its Center Parcs holiday resorts slid 11% to £44 million due to weak consumer spending in Benelux countries.

[09] U.S. and Japan settle dispute over military bases

The agreement, which ends a year of intense negotiations, approves a cut of about 21% in the area of land occupied by U.S. military bases in the southernmost island prefecture.

The report was approved at a meeting in Tokyo attended by Foreign Minister Yukihiko Ikeda and Defence Agency chief Fumio Kyuma on the Japanese side and U.S. Secretary of Defence William Perry and Ambassador to Japan Walter Mondale.

About 75% of all land used by the U.S. military in Japan is concentrated in Okinawa, although the island prefecture makes up only 0.6% of the nation's total land area.

The U.S. military will return a fifth of the 58,000 acres (23,500 hectares) it now uses on the island and close part or all of 11 facilities there. It will also reduce aircraft noise, but keep all of the 28,000 American troops now on Okinawa, 1,000 km (650 miles) southeast of Tokyo.

The two countries also agreed to make plans to build a 1,500-metre-long floating helicopter at an expected cost of more than $2 billion to Japan.

[10] NTT appears headed for break-up in 1988

The economic daily Nippon Keizai Shimbun reported that the Posts Ministry and the company have come up with a plan to split the company in the year starting April 1988.

According to the paper, NTT will be broken up into one company handling long-distance services and two regional telephone companies.

The long-distance company would also handle international business, which NTT is expected to be allowed to enter under planned deregulation.

The break-up would depend on economic deregulation allowing the creation of holding companies, which are currently banned in Japan.

A holding company would own stakes in all three of the companies created by the break up of NTT.

A spokesman for NTT, however, said `there has been no agreement.' He said that neither the timing nor the details of any break-up had been finalised, and he said there was still considerable opposition within the company against breaking it up.

A spokeswoman for the Posts Ministry said 'discussions are still ongoing' on the break-up. 'There still remain major points to settle.'

'The article is partly based on supposition,' she added.

NTT and the Posts Ministry have been battling for over a decade on whether to split the giant company into a long-distance provider and regional carriers, along the lines of the break-up of AT&T Corp. in the U.S.

Earlier this year, a government advisory panel recommended breaking up NTT in order to promote competition in Japan's telecommunications market.

But Japan's government at the time, led by Socialist Prime Minister Tomiichi Murayama, postponed a final decision on the matter under heavy pressure from NTT and its powerful labour union.

As the former government-run monopoly, NTT's continued domination of the local phone network has been indicated as a barrier to competition.

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

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