European Business News (EBN), 97-02-11

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

Page last updated February 11 1830 CET

CONTENTS

[01] Germany denies budget trouble

[02] Unilever posts huge profit

[03] Reuters reports 17% rise in pretax profit

[04] Ericsson rings up the profits

[05] Stet holds alliance talks with GTE and Teleglobe

[06] Schering profits surge 46%

[07] French consumers more confident in Janurary

[08] Corporate and Economic Briefs

[01] Germany denies budget trouble

'There is absolutely no cause for this speculation, there is no basis to doubt the 2.9% deficit-to-GDP ratio contained in the annual economic report, ' a spokeswoman for the finance ministry said.

London-based media had reported Germany's deficit-to-GDP ratio could rise as high as 3.5% in 1997 on worse-than-expected unemployment. Fresh calculations, taking higher unemployment into account, were already included in Germany's annual economic report released by the government at the end of January, the spokeswoman said.

Meanwhile, Germany's tabloid Bild Zeitung reported that a new gap in the 1997 budget will appear as a result of Germany's record jobless levels, according to politicians.

'I expect a financing gap of 5 billion Deutsche marks that must be compensated for due to high unemployment,' Dietrich Austermann, budget expert of the German Chancellor Helmut Kohl's Christian Democratic Union, said in the newspaper article.

The government spokeswoman, however, said there are no grounds for speculation that the government will have to exceed its net credit target. She noted the government's budget will be examined in May following the tax commission's twice annual assessment of tax revenue intakes.

But Juergen Koppelin, budget expert of the coalition partner Free Democratic Party, said he expects spending constraints to be imposed on the budget next week as a result of the costs related to Germany's high unemployment, according to the Bild Zeitung.

'But that won't be enough,' he said, adding that German Finance Minister Theo Waigel will need a supplementary budget to make up for ballooning unemployment insurance costs.

German unemployment grew to 12.2% in January from 10.8% in December.

[02] Unilever posts huge profit

Pre-tax profit rose to 2.66 billion pounds ($4.35 billion) on a 6% rise in turnover to 33.52 billion. On the outlook, chairman Niall FitzGerald said the overall economic situation in 1997 was likely to be generally favourable, as in 1996, but he added: 'We see little reason, however, to believe that conditions in Europe, particularly in France and Germany, will improve.'

The forecast reflects the firm's experience in 1996, where results in Europe were held back by low consumer confidence in Germany and France, while steady progress in North American economic conditions provided a basis for better results. In emerging markets, Unilever said growth momentum continued.

'We are confident that the accelerated restructuring programme we have put in place, together with sharper category focus, better innovation and the new organisation, will enable us to improve profitability further in 1997,' FitzGerald said in the results statement. The planned sale of Unilever's speciality chemicals businesses, he thought, would enable Unilever to concentrate on achieving growth in its consumer goods operations, particularly in developing and emerging markets.

The results include an extraordinary restructuring charge of 888 million guilders, which was partly funded by exceptional credits of 280 million NLG from business disposals. Unilever said currency exchange rate changes, including the stronger dollar late in the year, had a net positive effect of 2.5% on its earnings in 1996.

'The figures were excellent,' a trader in Amsterdam said, 'it looks like their fourth quarter was a lot better than analysts were expecting. And their prospects remain good too.' In fact, the Amsterdam Stock Exchange liked the results so much that Unilever shares opened with a surge of 20.60 guilders, or 6.57%, higher to 334.00 guilders.

[03] Reuters reports 17% rise in pretax profit

Revenue growth declined to 7.8% during 1996 compared with the 17% revenue growth racked up in the previous year.

Reuters also warned that had year-end 1996 exchange rates been in effect throughout the year, revenue would have fallen by 230 million pounds, and operating profit before hedging by about 100 million pounds.

Reuters lost a 12 pence advance prior to the results and is trading down 34 pence at 608 pence by 1128 GMT on volume of 11.6 million shares - the heaviest traded issue on the LSE.

Reuters shares were lower after the news.

[04] Ericsson rings up the profits

Public Telecommunications business area orders booked jumped 56% but half of the sharp rise was due to the consolidation of Brazilian unit Ericsson Telecommunicacoes S.A. The business area's net sale were up 7%. Ericsson digital exchange AXE continues to sell well in Brazil and Ericsson president Lars Ramqvist said in a comment that orders for AXE exchanges grew 18% in 1996.

The Public Telecommunications business area's profitability was still weak but improved, Ericsson said adding that 'The process of change, designed to shorten lead times and reduce costs, is continuing.'

Ericsson operating profit was 10.76 billion kronor, up from 8.16 billion kronor in 1995 and the Ericsson board proposes to raise the dividend to 2.50 kronor per share for 1996 from 1.75 kronor for 1995. But despite the healthy news, profit-taking dragged the share price down. Ericsson closed down four crowns at 248. The share had fallen 2.5 crowns ahead of the result and was seen remaining volatile.

[05] Stet holds alliance talks with GTE and Teleglobe

Il Sole gave no source for the report but said: 'The object is to create a new US-Italy-Canada axis to compete with global alliances which have been set up already.'

A Stet spokesman in Rome confirmed there was contact with GTE but said: 'We confirm we are talking with everyone and therefore with GTE as well.'

Asked whether there were talks with the Canadian firm, the spokesman replied: 'There are a series of contacts.' Il Sole said GTE neither confirmed nor denied negotiations for a strategic agreement were underway.

'We do not comment on market rumours,' the newspaper quoted a GTE spokeswoman as saying. 'But we cannot deny that we are extremely interested in Europe. And Italy in particular is an interesting market for our company.'

GTE is reported to be one of four groups interested in buying a stake in yellow pages publisher Seat <SEA.MI> when the Treasury sells a chunk later this year.

It is also one of several companies, including Italy's Mediaset and UK telecoms giant British Telecom, expected to bid for a third mobile phone service licence when the government offers it for tender.

[06] Schering profits surge 46%

The German drugs group, the world's largest manufacturer of oral contraceptives, saw provisional group sales increase 13% to 5.27 billion marks, of which 791 million marks came from its domestic market and 4.48 billion came from abroad. The group said that its operating profit figure was hurt by restructuring costs of 60 million marks.

'The main engine for growth was higher sales at our U.S. and European units. In Latin America we profited from better economic conditions in key markets,' the group said in a statement.

In January, Schering's chief financial officer said that he expected net profit of about 330 to 340 million marks for 1996, a rise of more than 35%.

The figures gave shares in Schering a boost in pre-bourse trade, and they were up 1.59% at 146.70 marks after the provisional figures for 1996 were released.

[07] French consumers more confident in Janurary

Economists called the figures good news but said they showed consumers were still extremely wary because of record 12.7% unemployment and predicted improvement in economic activity would be slow.

The national statistics institute INSEE reported that household opinion on people's future living situations improved from the previous month, though their views on their past living situations were slightly less well oriented than in previous surveys.

Household opinions of the employment outlook also weakened from December, reversing a positive trend in the employment outlook since September 1996.

[08] Corporate and Economic Briefs

Share prices fell on the news. Fourth quarter net income was £322 million, down from £612 million in the third quarter of the year. BP said in a statement that it has taken a one-off exceptional cost of £341million in connection with its European downstream joint venture with Mobil of the U.S. The company said it should see a benefit of $300m before tax from the merger.

Canal Plus plans to issue FF2bn of exchangeable bonds with a five-year maturity on the international market in connection with its recent acquisition of pay TV company Nethold. Canal Plus said the bonds will become exchangeable for Mediaset shares upon completion of the merger between Canal Plus and Nethold.

The proceeds of the issue will be used to refinance a portion of the Nethold debt assumed by Canal Plus as a result of the merger, the French company said in a communique.

Statoil, Norway's national oil company, has allocated 530 million kroner over the past two years to cover losses from U.K. gas investments, reports the Norwegian daily Aftenposten.

Alliance Gas, established by Statoil, British Petroleum and Norsk Hydro ASA when the British gas market was deregulated in 1992, reached a market share of 13%, challenging the former British monopoly British Gas; however, the investment soon led to losses.

Allied Irish Banks, Ireland's largest bank, said pretax profit rose 13% to 421 million punts for the 12-months ended Dec. 31, 1996 due to 'excellent' profit performances across all markets.

The profit total is slightly higher than the 415 million punts figure forecast by analysts. The total dividend payment of 15 pence for 1996 is in line with analysts' estimates.

AIB said the profit performance had been boosted by the strength of the Irish economy. The results include contributions from acquisitions made by the bank last year, including the U.K. fund management group John Govett.

The Woolwich Building Society, one of Britain's largest mutually owned home loans lenders, won an endorsement to convert to bank status and become listed on the London Stock Exchange.

A total of 70% of saver members eligible took part in the vote and 95% of them voted in favor at the Woolwich's special general meeting held in London Docklands earlier.

Among borrower members eligible to vote, 95% were in favor of conversion.

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

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