European Business News (EBN), 97-05-06

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CONTENTS

[01] UK's new Chancellor moves Bank of England closer to independence

[02] German growth on course despite weak job market

[03] French socialists oppose privatisation of public services

[04] Italian inflation hits 28-year low

[05] Rinascente and Auchan to pool Italian retail operations

[06] Ericsson will move subsidiary out of Sweden

[07] US factory orders show steepest decline since August 1996

[08] BP posts 19% rise in first quarter profit

[09] France shows slight producer-price decline as industry leaders project growth in manufacturing demand

[10] Former Alcatel chairman convicted of embezzlement, given suspended sentence

[11] Veba posts 7% rise in first-quarter net profit

[12] Ahold goes back on expansion trail, seeks US firm with sales exceeding $1 billion

[13] Nestle announces 19% rise in first-quarter sales

[14] Adidas first quarter earnings jump 33%

[15] Hochtief says it expects to show flat profit for the year

[16] Trygg-Hansa reports rise in first quarter profit

[17] Corporate and Economic Briefs

[01] UK's new Chancellor moves Bank of England closer to independence

From now on, the Bank of England governor will lead a nine-member monetary policy committee charged with meeting the government's 2.5% target for underlying inflation, which excludes mortgage interest payments. The inflation target will continue to be set by the government.

Brown raised interest rates to 6.25% from 6% after his first meeting with Bank of England Governor Eddie George since the Labour party's landslide general election victory last week.

Bank of England Governor Eddie George has been pressing for a quarter-point rise for some time, and Brown said the central banker is in 'positive agreement' with the decision.

The meeting was originally pencilled in for Wednesday, but Brown caught market participants and even some at the Bank of England by surprise in calling the meeting for first thing Tuesday.

Then, in his first major strategic move, Brown surrendered the control chancellors have long held over interest rates.

Economists said the announcement sent a strong signal that Brown is serious about keeping a tight rein on inflation and helped send government bonds, company shares and sterling soaring.

'Brown has established himself as a reforming chancellor in record time and has brought the U.K. into line with the institutional arrangements in other countries,' said John Shepperd, U.K. economist at Yamaichi International in London.

'This is a fundamental change to the monetary policy environment in the U.K. and increases expectations that the inflation target will be met over the medium term,' he said.

'This has reinforced the authorities' credibility in terms of keeping inflation low in a bold and pretty impressive move and shows that Brown is quite prepared to do things that are fairly radical,' said Jonathan Loynes, U.K. economist at HSBC James Capel in London.

Analysts are divided, however, over the implications these changes will have for interest rates.

Richard Iley, U.K. economist at ABN-AMRO Hoare Govett in London, said ceding independence to the Bank of England over interest rates almost certainly means that base rates will rise to 7% by the end of this year, in line with money market expectations, rather than the 6.5% he was previously forecasting.

'We had previously anticipated that the Labour administration would exhibit a similar degree of 'inflation tolerance' as the Tories and allow underlying inflation to run in a 3% to 4% corridor once the beneficial effects of the strong pound began to wash out towards year end.

'An independent central bank however, will prove less tolerant with the immediate implication that base rates will be higher,' he said.

However, other economists said the latest rate rise may have been enough to pacify the Bank, for the time being at least.

Loynes at HSBC said the strength of sterling will continue to depress inflation this year by hitting exports and making import prices cheaper, and with the Chancellor expected to tighten fiscal policy in his summer budget there is little reason for the Bank of England to raise interest rates aggressively. Loynes expects rates to rise a further quarter point to 6.5% before the end of the year.

Gilt markets surged and the British pound rallied on the news, reaching a 57-month high at around 12 GMT. The pound hit $1.6290 from $1.6212 just before Brown spoke, and 2.8138 Deutsche marks, up from 2.8002 marks.

Stock prices rallied, as well, with the benchmark Financial Times-Stock Exchange 100-share index piling on another 40 points in less than an hour after the announcement. The 'footsie,' as the index is known, was up 63.4 points, or 1.4%, at 4519.0 shortly before midday as its surged into record territory.

Commercial banks, including Barclays, Citibank and Lloyds TSB - and Britain's biggest mortgage lender, the Halifax - responded by raising the interest rates they charge to homeowners and businesses.

Business leaders urged caution, saying that too many interest rate rises could hurt British exporters by pushing the value of the pound too high against other major currencies.

'There is no surprise over this rise,' said Ian Peters, deputy director general of the British Chambers of Commerce. 'But it must not be the first of many.'

Brown took office on Friday, after Labour leader Tony Blair became prime minister in a landslide election victory. Since Monday was a holiday, the Bank of England came during the first business day of the new Labour government.

Britain's current inflation target is 2.5% annually - but it was at 2.7% in February and 2.6% in March.

[02] German growth on course despite weak job market

'We're very optimistic about the economy, which currently finds itself in a phase of activity,' said Thomas Kull, an economist with Westdeutsche Landesbank in Duesseldorf. 'The recent numbers confirm that. But we do have a split picture' when it comes to employment and private consumption.

Germany's manufacturing sector remains the pillar of the economy, fuelled by foreign orders. However, unemployment remains stubbornly high, swelling social costs and damping consumer confidence and household spending.

The Economics Ministry says that preliminary data shows a price- and seasonally adjusted 1.1% rise in new orders to the manufacturing sector in March from February. In unadjusted terms, orders were down 0.9% year-on- year, the ministry says.

The monthly rise was well above the 0.2% gain forecast last week in a survey of economists by Dow Jones Newswires. Meanwhile, February's new- orders data were revised to show a 0.2% decline from January, rather than the 0.2% rise originally reported.

The ministry says new orders to western German manufacturers rose a price- and seasonally adjusted 0.7% on the month in March following February's revised 0.6% decline. Eastern German manufacturers' new orders rose an adjusted 7.4% after February's revised 6.5% monthly gain.

However, today also saw the release of German unemployment data for April, and economists were taken aback by the rise in joblessness that those figures showed.

The Federal Labour Office said the number of unemployed rose a seasonally adjusted 8,000 in April, whereas economists had expected a decline of 21, 300.

On an unadjusted basis, the overall number of unemployed fell to 4.35 million in April from 4.48 million in March. The jobless rate stood at 11.3% in April, down from 11.7% in March, before adjustment but was flat at 11.2% after adjustment.

Today's figures follow data released yesterday by the Economics Ministry which indicated a 0.5% preliminary rise in industrial output in March from February, down from 2.0% a month earlier. Those numbers were in line with economists' expectations.

'Basically, I would say the recent numbers were on balance slightly better than expected,' said Juergen Pfister, head of economic research at Commerzbank in Frankfurt.

'The growth outlook is somewhat better than it was two months ago, largely driven by strong external factors,' he added, noting that manufacturing orders are still being led by foreign orders. 'We're waiting for the external factors to spill into the rest of the economy.'

That may be happening, other market-watchers say, pointing to signs of a pickup in domestic orders. Domestic manufacturing orders rose for the second consecutive month in March, though they still lag foreign orders.

'This suggests that the domestic economy is finally starting to benefit from the strength of the export sector,' said Julian Jessop, chief European economist at Nikko Europe in London.

[03] French socialists oppose privatisation of public services

The news comes the day after France's industry and telecommunications minister, Franck Borotra, said 300 million to 350 million shares of France Telecom will be floated on the market in June.

The government postponed the public offer by one month because of a conflict with legislative elections that were recently called for May 25 and June 1, about the same time as the planned offer.

The government has said it plans to raise between 30 billion French francs and 50 billion francs ($5.15 billion and $8.58 billion) through the sale. The shares represent 30% to 35% of France Telecom. Analysts estimate the telecommunications company's value at between 150 billion francs and 226 billion francs.

Mr. Borotra said the government had postponed the offer because it didn't want the election campaign to overshadow the share placement. The offer is being directed toward minority shareholders, he said.

Analysts said they expected the sale to go ahead even if the Socialist Party wins. But they said that if the opposition won the May 25 and June 1 election, the flotation could be postponed for several months.

With polls indicating that the Socialist party is cutting the lead of the ruling centre-right party in the run-up to the May/June parliamentary election, the issue of privatisation has assumed enormous importance.

Moreover, the socialists pledge to maintain public ownership across a range of services. 'For those public services - France Telecom, the Post Office, (power utility) EDF-GDF and of course (railway) SNCF - our position is to keep public ownership at 100%,' Hollande said.

However, Hollande also said the Socialists did not rule out privatising companies which did not have any public service mandate, saying that realism should be the ruling principle in government choices of which firms to sell.

[04] Italian inflation hits 28-year low

The announcement fuelled speculation in financial markets that the Bank of Italy may move to lower official interest rates soon.

Italian bonds and futures climbed after the news, perceiving the data as increasing chances the Bank of Italy could lower the official discount rate 50 to 75 basis points in the near future. The discount rate stands at 6.75 percent and was last lowered in January this year. 'The markets are buoyant because people are speculating on the possibility of a cut,' said Pio De Gregorio, economist at NatWest Markets in Milan.

Italy's March CPI harmonised to E.U. standards was up 0.2% on February and 2.2% on March 1996, Istat said.

These standardised CPI figures will be used as the basis of comparison when E.U. leaders meet in 1998 to list the member countries that meet Maastricht Treaty criteria.

Price growth has tailed off sharply in the last year, as shown by April 1996's rate of 4.5 percent. Economists say this is due to depressed domestic demand, the high cost of credit with a stronger lira and a favourable trend in international commodity prices.

Government ministers and industrialists have been calling for interest rates to be brought down but analysts expect rate-cut hopes to be disappointed near term.

However, Treasury Minister Carlo Azeglio Ciampi, quoted in a magazine interview recently, said recent inflation figures left room for interest rates to fall especially as he saw no motives for upward price pressure on the horizon.

'From the performance of wage inflation, the cost of raw materials, above all petrol, it is clear that the (inflationary) tendency is destined to last,' Ciampi said.

The centre-left government of Prime Minister Romano Prodi is due to present its three-year rolling plan of economic goals, known as the DPEF, by the end of May. This plan sets out the government's aims on inflation, monetary union, and budget deficit levels.

[05] Rinascente and Auchan to pool Italian retail operations

The Italian group which owns the Rinascente chain, UPIM stores, Citta Mercato hypermarkets and Bricocentre home improvement outlets is joining together with Auchan's four Italian hypermarkets and its property and service operations.

In a complex deal, the Agnelli family holding IFIL, which currently controls Rinascente, said it is looking to create a long term partnership with one of Europe's leading retailers to capitalise on the Rinascente name.

IFIL said a new company will be created to control Rinascente. Auchan will own a 49% stake in this new company, while IFIL will hold the remaining 51%. Auchan will spend about 1 trillion lire ($600 million) to purchase the 49% stake in the Rinascente holding company through a capital increase reserved specifically for the French company.

Currently, Rinascente is controlled by a company called Eufin, which will transfer its stake into the new company ahead of the capital increase. IFIL possesses a 93% stake in Eufin, which in turn holds 41% of Rinascente.

Given the long term nature of the agreement, IFIL said that Rinascente will have the option beginning Jan. 1, 2007, to acquire a further 1% stake in the company being formed to control Rinascente. At that point, both IFIL and Auchan would each control 50% of this company.

After the 15th year of the agreement, IFIL will have the option of selling part or all of its stake in the new company to Auchan. IFIL could be paid with Auchan shares for the eventual sale of its stake, IFIL said.

At the same time, Rinascente said that it would acquire Auchan's activities in Italy for about 530 billion lire.

Rinascente said that Auchan's Italian activities are expected to turn in revenue of 'more than' 900 billion lire in 1997 compared with 800 billion lire in 1996.

With the agreement, Rinascente's own revenue is expected to exceed 8 trillion lire, Rinascente said. In 1996, Rinascente reported revenue of 7.169 trillion lire.

Lastly, Rinascente said that Auchan and Rinascente had agreed to begin a joint development project for home repair stores, noting that the two groups are present in Italy with Bricocentre and Leroy Merlin stores.

[06] Ericsson will move subsidiary out of Sweden

The mobile phone giant's decision, bound to infuriate the centre-left government, was announced after Prime Minister Goran Persson took on Ericsson, accusing chief executive Lars Ramqvist of playing politics by criticising the business climate in Sweden.

But the government did suggest there may be tax relief for key foreign employees.

Hours later, Ericsson released a one-page statement announcing its Transport and Cable Networks unit's headquarters was moving to Britain from Sweden.

'The reason for the move...is to create a new improved business climate to strengthen Ericsson's position. In addition the change will lower the unit's cost levels in the longer term and facilitate the process of finding. With the move we want to create a new winning business climate within this part of Ericsson's business. The conditions to achieve this will be much better in a new environment,' said Rory Buckley, head of the subsidiary.

'For tax reasons it is almost hopeless to get a foreigner to move here,' Ramqvist told a radio interviewer. Highly paid employees routinely pay 60% of their salaries in tax.

Ericsson joined a growing chorus of companies at the weekend who say a poor business climate and crushing taxation may force them to move operations overseas. In a radio interview, Ramqvist said the company board had decided to look into a possible move of the Stockholm head office.

Persson, head of a centre-left Social Democratic government which has for years had a prickly relationship with the country's powerful business leaders, accused them of playing politics. He said some of the companies threatening to quit Sweden had been regularly posting record profits. But Persson hinted at a compromise by saying he was looking at tax relief for key foreign employees working in Sweden.

Junior Finance Minister Thomas Ostros, who deals with taxation issues, rejected Ericsson's complaints in a newspaper article on Tuesday, saying the corporate climate in Sweden was exceptionally good.

'Where else can they find a country with the kind of labour force we have, with labour market stability, with little bureaucracy and in addition get low mortgages,' Ostros said. Neighbouring Finland and other European countries have special tax rules for foreigners.

[07] US factory orders show steepest decline since August 1996

This report fits with economists' belief that economic growth was poised to slow to a moderate but still healthy pace in the second quarter after racing ahead at a torrid 5.6% annual rate in the first quarter. Nevertheless the new data added to speculation that the Federal Reserve will raise rates at their next meeting.

This report fits with economists' belief that economic growth was poised to slow to a moderate but still healthy pace in the second quarter after racing ahead at a torrid 5.6% annual rate in the first quarter.

The Commerce Department said factory orders slid to $319.21 billion from February. The decline was the first in three months.

Economists had forecast a 1.5% decline.

The department also said the February increase in factory orders was not as strong as originally reported. February orders were revised to up 0.4% from up 0.8%.

The March decline outpaced the drop of 1.2% last August.

Orders for transportation equipment fell 4.6% to $37.41 billion, due mostly to declines in orders for aeroplanes and autos, Commerce said. It followed a 7.2% decline in February and was the third drop in four months.

Excluding the transportation sector, factory orders fell 1.2%.

Orders for electronic and other electrical equipment dropped 4.9% to $29.13 billion, after increases of 7.8% in February and 17.8% in December.

Factory orders are not adjusted for inflation.

[08] BP posts 19% rise in first quarter profit

Net earnings before exceptional items rose to £755 million ($1.2 billion) from 633 million a year ago and were sharply higher than analysts' expectations.

On an historical cost basis, net income was £602 million compared with £723 million a year ago.

The oil giant added that the recent weakening of crude oil prices may lead to some further improvement in downstream margins.

But oil prices were still higher than a year ago, making them the main motor behind the first-quarter profit rise, BP said.

BP said in a statement it expects oil production in the second quarter to be seasonally lower than in the first quarter, although total production in the year is seen higher than in 1996, due to full year contributions from oil fields commissioned last year.

'Also in 1997, it is expected that several new developments, key to the objective of building further production in the medium term, will commence, ' said BP.

The company said oil price prospects are likely to be influenced by the scale of increases in production in the next few months.

In the chemicals sector, margins are benefiting from lower feedstock prices in the short-term, but BP warned this may be offset by any further weakening of the mark.

BP raised its first quarter dividend to 5.25 pence per share from 4.25 pence at the end of the same period a year ago.

[09] France shows slight producer-price decline as industry leaders project growth in manufacturing demand

Producer prices rose 0.1% during the first quarter, the national statistics institute said.

For the trailing 12 months ending in March, the producer price index was down 2.0%.

The survey also found expectations favour foreign demand for manufactured products again improving, despite a lack of interest in the auto sector.

None of the data suggest any divergence from the scenario most economists have forecast, which includes an investment and export-led recovery in the coming months.

INSEE said prices were mostly stable during the latest month, though glass product prices slipped 0.7% and wood and paper product prices slipped 0.4%. It said paper fibber prices fell 0.3% on the month.

Higher demand in the second quarter of 1997 will be particularly noticeable in the professional equipment sector, the industry leaders said.

During the first quarter of 1997, they said, demand was slightly higher than a year earlier and was at an average level. Demand in all manufacturing sectors except the auto sector improved on the year, the survey found.

[10] Former Alcatel chairman convicted of embezzlement, given suspended sentence

Pierre Suard, forced to resign in June 1995 after coming under judicial investigation, was convicted by a district court in the Paris suburb of Evry of abusing corporate funds and fined two million francs ($345,000).

The sentence was harsher than the 18-month suspended term demanded by the prosecution.

Suard, 62, reported to have been France's highest paid chief executive, was also ordered to repay 4.9 million francs to Alcatel Alsthom, the cost of extensive security systems installed in his three private homes.

The ex-chief of France's biggest private industrial group, which makes electronics and telecommunications equipment, made no comment on leaving court but his lawyer said he would appeal.

'This condemnation is unjust, we dispute the very principle and we are immediately going to submit an appeal to prove that every word of what we contend is exact,' defence counsel Maurice Guigui told reporters.

Suard had told the court he had taken the security measures on the advice of the government after the head of carmaker Renault was assassinated by hard-left urban guerrillas in 1986.

Pierre Guichet, former chairman of the Alcatel CIT telecommunications subsidiary, was acquitted of abuse of corporate funds but fined 100,000 francs for forgery.

Some 40 other executives were convicted in the case. Two Alcatel CIT managers who revealed the affair in 1993 after being fired, Jose Corral and Antonio Leal, received the harshest sentences, illustrating that there is no reward for whistle-blowing in France. The two men were jailed for three months and given longer suspended sentences.

[11] Veba posts 7% rise in first-quarter net profit

The Duesseldorf-based company said that, based on 'positive first quarter developments,' it is confident it can achieve a rise in profits in the full year but didn't provide more details.

In March, Veba said it expected earnings to rise at a slower pace in 1997 than in 1996. In 1996, group net profit was up 25% to 2.63 billion marks.

A rise in first quarter 1997 earnings in the company's oil division as well as its trade, transportation and services business more than compensated for lower earnings in chemical activities, Veba said.

Higher crude oil prices and the stronger dollar were the main reasons for the increase in the oil division's 1997 first quarter earnings, the company said.

The trade, transportation and services business earnings during the period were 'significantly better' than in the first quarter 1996, although earnings in construction-related areas didn't fulfil the company's expectations, Veba said.

Chemical earnings were down compared with the strong first quarter 1996 performance due to higher prices for raw materials, the company said.

Veba's telecommunications company, o.tel.o communications, finished as expected with a first quarter 1997 loss, the company said.

Veba didn't release first quarter 1997 earnings figures for its business divisions.

At the end of March 1997, the Veba group had 125,100 employees world-wide, 1,709 more than at the end of 1996 but 270 fewer than at the end of March 1996, the company said.

[12] Ahold goes back on expansion trail, seeks US firm with sales exceeding $1 billion

Ahold, which has seven supermarket chains on the east coast of the U.S., including the 1996 acquisition of supermarket chain Stop & Shop, said it wants a profitable company.

'It will not be a turnaround situation. We want a quality company,' Ahold's chief executive officer, Cees van der Hoeven, said.

The company also said it would be willing to look as far as the north of Chicago, although it added it wouldn't go west of that city.

'There are still a lot of interesting companies adjacent to the area in which we are a part of the market,' said board member Rob Zwartendijk. Van der Hoeven said the company's earlier profit forecast for the whole of 1997 didn't take into account the strength of the dollar.

The dollar has risen sharply against the guilder in the first months of 1997 and this gain has had a 'quite considerable' impact on Ahold's results, he added.

In the first quarter of 1997, Ahold generated $4.2 billion of its sales in the U.S., out of a total 12 billion guilders in overall sales.

[13] Nestle announces 19% rise in first-quarter sales

'The preliminary April figures confirm this trend' of the first quarter, the food group said.

The company also said it will get a boost from currency rates for its 1997 results as a result of an earlier strategy of widening its profit base beyond coffee.

Nestle said it expects 'good growth' in group sales and net profit for the whole of 1997 but cautioned that growth will slow in the second half because 'the foreign exchange comparison will be established on a less favourable base.'

Nestle is satisfied with its current structure and for the time being has no plans to acquire new companies or to sell recent acquisitions, chief executive Maucher said.

Being more specific, Maucher said that French company L'Oreal, in which Nestle owns a 49% stake, was a 'strategical participation, and it's even possible that Nestle will acquire a majority stake in the company in the future.' Maucher said L'Oreal's profit and sales had grown about 60% over the last five years, while its share value increased 157% for the same period.

Maucher called another of Nestle's recent acquisitions, the Alcon group, 'highly profitable.' Both Alcon sales and profit rose about 52% in the last five years, according to Maucher. 'I can't see any reason why we should re- sell Alcon,' Maucher concluded.

Chief executive designate Peter Brabeck said Nestle has just 'completed a phase of external growth and is now focusing on internal growth.'

The company credited foreign exchange rates as a major boost to sales. Nestle said internal volume growth was 2.2%, 'with an evident acceleration' in March. Volume growth for all of 1996 was 2.7%.

[14] Adidas first quarter earnings jump 33%

Shoe sales rose 32% to 785 million marks in the first quarter of the year, Adidas said, without providing a comparable year-earlier figure.

Pretax profit rose 42% to 243 million marks for the quarter, compared with 171 million marks a year ago.

In April, the company had forecast first quarter profit to be 'over 235 million marks.'

[15] Hochtief says it expects to show flat profit for the year

'The result this year should at least hold to the 1996 level,' said chief executive Hans-Peter Keitel at a news conference.

'The difficult situation in the German construction industry will not improve in 1997,' Keitel said. And he warned that troubles were more general. 'With the difficult overall economy and the structural change in construction, we will face great problems. We must accept that fact that we are in a structural crisis.'

Consolidation in German construction had caused intense price competition, said Keitel. Although costs have risen in the last 12 months, prices have fallen one percent, he said. To improve its domestic situation, Hochtief planned to expand its restructuring into focused service units. It would form new construction materials and equipment service units this year, after forming separate project development, software and highway construction companies in 1996, he said.

However, the building group's incoming orders in the first quarter of 1997 increased to 3.2 billion Deutsche marks ($1.4 billion), a strong rise from 2.3 billion in the corresponding year-earlier period.

Hochtief also said backlog orders in the quarter stood at 13.8 billion marks, reported as a rise of 26%. A spokeswoman could not immediately provide a comparative figure for the year-earlier quarter.

Hochtief noted the 'extremely bad situation in the German construction sector,' adding it was nevertheless able in 1996 to achieve a higher profit.

Group net profit in 1996 was 146 million marks, up from 137 million a year earlier. Construction revenue reached 12.2 billion marks compared with 11.1 billion marks in 1995.

[16] Trygg-Hansa reports rise in first quarter profit

The pretax profit plus the change in surplus asset value amounted to 950 million kronor, compared with 656 million kronor in the first three months of 1996. The non-life insurance business reported a technical result of 94 million kronor for the quarter, down from 98 million kronor the same period of 1996. A technical result is premiums minus claims.

The life and savings business reported a sharp improvement. It swung to a pretax profit plus changes in surplus asset value of 96 million kronor from a loss of 5 million kronor a year earlier. 'The efforts we started in the savings market last year are now becoming apparent both in terms of sales volume and results,' said Lars H. Thunell, president and chief executive officer of Trygg-Hansa. 'The greatest increase was in unit-linked insurance, which grew by more than 80% compared with the same period last year,' he said. The unit-linked life insurance business saw a rise in gross premiums written to 360 million kronor from 199 million kronor.

Total premium income amounted to 3.35 billion kronor, compared with 3.38 billion kronor in the first quarter 1996. The life and savings business showed a 120% increase in business volume measured in premiums written, savings in funds and bank deposits, to 4.32 billion kronor. Excluding the acquisition of Credit Lyonnais the increase was a more modest 35%, however. The return on investments increased to 1.41 billion kronor from 992 million kronor. Of this 902 million kronor was the result of realised capital gains.

[17] Corporate and Economic Briefs

Germany aims to privatise Postbank either through a private placement or a bourse listing this year and to list the Post Office next year, Telecommunications Minister Wolfgang Boetsch said. In an interview with daily newspaper Die Welt, Boetsch said he would do everything in his power to see that the privatisation of the Postbank, the banking arm of the former Deutsche Bundespost agency, took place this year. 'Let's just leave open whether this happens via cooperation partners or on the stock exchange, ' he said. The government expects revenues of some three billion marks from the privatisat ion, which could involve selling as much as 75% of the bank to the public.

German retailing giant Metro announced group sales of 14.8bn Deutsche marks (8.7bn dollars) in the first quarter of 1997. Unadjusted, that's a rise of 2.4%; adjusted for the sale of a subsidiary and the group's smaller supermarkets, the rise in sales was 'around' 4.5%, Metro reported. The company didn't provide a full year forecast, but said it doesn't expect weak German consumer demand to pick up in 1997.

Deutz said that sales in the first four months of the year rose 17% to 858 million Deutsche marks ($496 million) and that it expects to end its string of operating losses this year. The German engineering company also said it expects sales for the full year to exceed those of 1996. Chairman Anton Schneider told a news conference that the company made an operating loss of 56 million marks in 1996, but that there would be no losses in 1997. Deutz revised upward it revised up its 1996 net profit to 874 million marks from the 800 million marks originally reported because of the completion of restructuring measures during 1996.

Roche Holding expects group profit to rise this year, barring ''unforeseen events,'' Chairman Fritz Gerber told shareholders Tuesday, repeating his mid-April prediction. As reported, Roche's 1996 group net rose 16% to SF3.899 billion on a sales increase of 11% to SF15.966 billion. ''The Roche group is well-positioned in all areas of operation,'' Gerber said at the company's annual meeting. Gerber said, ''how substantially'' Roche's profit will rise depends on ''which new products we are able to launch this year.'' The Roche chairman cautioned that the introduction of newly-approved products ''will require the investment of significant sums ... This will naturally have short-term consequences for profit growth.''

Swedish tobacco company Swedish Match reported a rise in pretax profit to 352 million kronor ($45.6 million)in the first quarter from 298 million kronor a year earlier. The improvement came despite a 2.9% drop in total sales to 1.68 billion kronor. The Cigarettes business area saw the largest drop in sales to 349 million kronor from 425 million kronor in the first quarter 1996, mainly due to stockpiling by consumers ahead of a large tax increase on cigarettes in Sweden on Jan. 1, 1997. The operating result for the Cigarettes division fell to 94 million kronor from 143 million kronor. This was more than compensated for by increases in both price and volumes within the two business areas Snuff and Chewing Tobacco, however.

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