European Business News (EBN), 97-04-10

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

Page last updated April 10 1730 CET

CONTENTS

[01] Germany racked by EMU doubts

[02] RMC Group pretax profit drops 9.1%

[03] Renault workers vote to end strike

[04] Dresdner Bank profit surges 30%

[05] Volkswagen doubles 1996 earnings

[06] Berlin court convicts Lebanese for murdering Kurds

[07] Fiat chiefs found guilty of corruption

[08] Economic and Corporate Briefs

[01] Germany racked by EMU doubts

Bundesbank official Reimut Jochimsen said it is 'ever clearer' that it will be 'extraordinarily difficult' for Germany to fulfill the Maastricht Treaty deficit and debt requirements in 1997.

Jochimsen noted that the structural and fiscal policy consequences of German unification, rising costs of joblessness and lagging economic investment are sapping Germany's effort to meet qualify for the planned 1999 currency union.

And Economics Minister Guenter Rexrodt warned that although the German economy probably grew in the first quarter, there was no improvement on the labour market. He said growth must accelerate to meet Bonn's 1997 forecast of 2.5%.

Meanwhile new data from regional states showed that tax revenues so far this year have come in well below expectations.

The combination of slower than expected growth, a poor jobs market and lower than expected tax receipts could endanger Germany's bid to qualify for Europe's planned single currency by pushing its budget deficit above the target levels.

Doubts about Bonn's ability to keep its budget deficit from exceeding 3%, as required by the Maastricht treaty, has fuelled speculation that European economic and monetary union would be delayed if Bonn failed to qualify.

[02] RMC Group pretax profit drops 9.1%

Instead, the company said it calculated 1996 earnings using verage exchange rates throughout the year. This meant its 1996 pretax profit before exceptional items fell only 9.1% to £295.3 million ($479.13 million) on the year. Total group sales for the group in 1996 were £4.55 billion versus £4.54 billion in 1995.

If RMC had used its previous policy, sterling's strength at the end of the year would've resulted in a 16% year-on-year drop in pretax profit to £275.8 million, the company said.

Explaining the change in its accounting, the group said in a statement it had decided to make the switch so that results were not distorted.

It described 1996 as a 'difficult year'. But it added, 'the policy of cautious international growth, supported by financial strength and stability, should enable the group to progress in 1997.'

Peter Young, chief executive, said this year the UK had seen improved confidence thanks to stronger demand for private housing and in the commercial sector. He said the gorup should reflect this in its 1997 results.

On the key German market it said, 'The group expects that profitability in its German businesses should show some recovery in the coming year, as the restructuring and cost reduciton programme takes effect.'

But sluggish activity in many continental European countries is seen continuing through 1997. Israeli operations may be hit by the political uncertainty but the U.S. is seen continuing to show 'excellent progress'.'

[03] Renault workers vote to end strike

The workers have been occupying the factory ever since they were told it would be closed down with the loss of 3100 jobs in July. In the process they have been holding billions of francs in finished cars to ransom. The workers have also staged sporadic protests in Belgium and France with colleagues from France and Spain.

On April 4th French courts ruled that Renault had broken the law on prior consultation with workers and therefore had to restart the closure process from scratch. Renault, which last year lost 5.2 billion francs says it will appeal.

[04] Dresdner Bank profit surges 30%

Disposals of stakes under 10% in a number of German companies, coupled with realized profits on its portfolio of fixed-income securities, doubled revenues from its liquid reserves to 791 million Deutsche marks.

Under German accounting law, such revenues are used to offset provisions against possible loan losses. Gross provisions stayed more or less unchanged at 1.10 billion marks in 1996, the bank reported.

Stripped of the inclusion of Kleinwort Benson, costs rose 5.8% in 1996, Sarrazin said. On the same basis, operating profit would have risen 'just under 40%,' he added.

Sarrazin said expenses continued to rise in the first two months of 1997 and that increases were inevitable in view of Dresdner's wish to expand its investment banking division.

'We are in a period of high investment that will provide the basis of future growth,' Sarrazin said.

Dresdner's investment banking division made an important breakthrough last year in lead-managing the initial public offering of Deutsche Telekom shares in November. However, Sarrazin suggested that its revenues from that source were only 'appropriate' and 'could have been higher.' He didn't elaborate.

[05] Volkswagen doubles 1996 earnings

In Germany, the car sector is trading higher than the average, continuing a trend seen of late. Volkswagen was up 5.8 percent after the car maker forecast that its 1997 profits would outpace sales growth.

As previously reported, the company's net profit doubled to 678 million marks in 1996 on sales of 100.1 billion marks. Pretax return on sales was 2.0% in 1996, up from 1.3% in 1995, but aftertax, VW's return on sales was a razor-thin 0.7%, up from 0.4% from a year earlier.

VW previously said it will raise its regular annual dividend for 1996 to 9 marks a common share from 6 marks a year ago, and to 10 marks per preferred share from 7 marks in 1995. The earnings per share are calculated according to German financial analysts' DVFA formula.

[06] Berlin court convicts Lebanese for murdering Kurds

The finding came as judges convicted two men of murder and two of accessory to murder in the September 17, 1992, killing of Kurdish leader Sadiq Sarafkindi and three of his colleagues in the Mykonos restaurant in Berlin.

'The crime can be traced back to the highest state levels in Iran,' the judges said.

The case has taken on international significance because the prosecution has alleged the direct involvement of the Iranian government. The Iranians have in turn threatened to put 24 German companies on trial for supplying chemical weapons to Iraq, although they have vouchsafed the security of German nationals in Iran.

Iran's Foreign Minister Ali Akbar Velayati, quoted by the Iranian daily Kayhan, said yesterday the charges against the 5 men and the implication of Iranain leaders ' are nothing but baseless allegations...We support human values and German nationals will have full security.'

He was reacting to reports that pro-Iranian groups might attack German interests or that the lives of German nationals in Iran were under threat if the court on Thursday backed charges by German prosecutors that Tehran ordered the 1992 killings in the Mykonos restaurant in Berlin.

'But a negative verdict by the the Mykonos trial will have a negative impact on political and economic ties between Tehran and Bonn,' Velayati said.

Iran's ties with Germany, its main trade partner, have been strained over German charges that Iranian supreme leader Ayatollah Ali Khamenei and President Akbar Hashemi Rafsanjani ordered the murder of three Kurdish Iranian opposition leaders and their translator. Iran denies the charges.

The German Foreign Ministry has warned Germans not to travel to Iran unless absolutely necessary and to remain in constant contact with the embassy in Tehran.

The Berlin court that is trying Iranian Kazem Darabi and Lebanese Abbas Rhayel for the murders and three other Lebanese on charges of complicity has said it would announce its verdict today.

[07] Fiat chiefs found guilty of corruption

Financial Director, Francesco Paolo Mattioli, was also found guilty of the same charges and given a 16-month suspended sentence. Both men are planning an appeal.

In an interview, Mr. Chiusano criticized the ruling harshly. 'The sentence is wrong,' he said. 'It was a judgment on a group with 1,100 companies' and sales of 78 trillion lire ($46 billion), for alleged falsification that amounted to 20 billion or 30 billion lire. He said that such a relatively small amount could not have significantly affected Fiat's accounts.

Analysts said the sentences were not likely to damage Fiat's operations. Romiti is scheduled to leave Fiat when he turns 75 in June 1998.

'Even without Romiti and Mattioli, the company would still have its operational managers, who have all proved their worth,' said Lorenzo Colucci, director of the Milan branch of NatWest Securities. Romiti, a longtime chief executive officer at Fiat, replaced Giovanni Agnelli as chairman in February 1996, when Agnelli retired.

Romiti and Mattioli were charged with accounting fraud and making illegal payments to political parties, politicians and managers working overseas.

[08] Economic and Corporate Briefs

Germany's BfG Bank, a unit of ailing French bank Credit Lyonnais, announced that its management board chairman Paul Wieandt had retired a year ahead of schedule. 'The supervisory board of BfG Bank has agreed to Dr Paul Wieandt's request that he be allowed to retire with effect from March 31, 1997,' the bank said in a brief statement. The 62-year-old Wieandt, who has headed BfG for seven years, had a contract running until March 1988. He is to be replaced by his former deputy Karl-Heinz Huelsmann, aged 57.

German sports equipment manufacturer Adidas said its main shareholder, Sogedim SA, will offer for sale its 26.1% stake in Adidas probably 'on or before April 16.' Adidas management board chairman Robert Louis-Dreyfus and board member Christian Tourres, will both buy 2.950 million shares, giving each of them a 6.5% stake. The remaining 5.938 million shares will be offered publicly. It expects pretax profit of 'not less than 235 million Deutsche marks' in the first quarter of 1997, on group sales that rose 43% from a year earlier to 1.7 billion marks.

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

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