European Business News (EBN), 97-07-24

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

Page last updated Thu, July 24 6:13 PM CET

CONTENTS

[01] LVMH pushes case for 3-way merger plan

[02] ICI reports a fall in first-half earnings to $267 million

[03] Germany's Commerzbank posts positive first-half results

[04] Novartis posts 19% rise in first-half revenues; lower than analysts' forecasts

[05] Electronic giant Philips earnings more than double

[06] Bayerische Vereinsbank predicts strong results for 1997

[07] Demand for British manufactured goods falls at fastest rate for six years

[08] Western German CPI up 0.5% on the month; up 1.8% on year

[09] Bayerische Vereinsbank predicts strong results for 1997

[10] Trichet: Dollar has corrected from previous imbalances

[11] AOL plans to give telemarketers members phone numbers

[12] Nomura Securities admit responsibility for its illegal transactions

[13] Corporate and Economic Briefs

[01] LVMH pushes case for 3-way merger plan

The French luxury goods to spirits company said in a statement released in London that its plans for such a merger would lead to further cost savings of £65 million ($108.9 million) over and above what the British companies identified in their own two-way merger plan. Guinness and Grand Met had said that their planned £24 billion merger into GMG Brands, the biggest in British corporate history, would result in annual cost savings of £175 million.

'LVMH remains convinced that its proposal creates maximum value for all shareholders,' the statement said. LVMH's chairman Bernard Arnault wants to merge his company's Moet Hennessy cognac and champagne business with the spirits arms of Guinness and Grand Met, setting up a company worth over 60 billion francs ($9.8 billion) in sales.

He wants the merged company, which would include famous brands such as Moet Chandon champagnes, GrandMet's Smirnoff, Gilbey's, J&B and Bailey's along with Guinness's Johnnie Walker, Dewar's, Gordon's and Tanqueray drinks, to be floated in Paris and London.

French analysts and investors already appear to back Arnault's efforts to elbow in on the merger, even if it's proving costly - analysts estimate his raid on GrandMet shares cost about £617.7 million ($1.04 billion), which was only partially off set by selling Guinness shares valued at £191.53 million.

LVMH shares soared yesterday to 1,626 French francs ($264.73), up 67 francs, or 4.3%.

[02] ICI reports a fall in first-half earnings to $267 million

ICI said the effects of cyclical price erosion in the discontinuing Polyester and Tioxide businesses together with the strong pound reduced profits by almost £300 million. Although this was partly offset by higher volumes and productivity savings. The strong pound hit profits by £90 million compared to the first half of 1996.

'Despite good volume growth, especially in mainland Europe and the Americas the first half performance remained unsatisfactory,' said Sir Ronald Hampel, the group's chairman.

ICI said it plans to reduce its exposure to commodity chemicals, and will achieve future growth through its Speciality Chemicals, Coatings and Materials divisions.

Trading profits at ICI's materials business slipped to £48 million from £82 million. Although demand for acrylics continued to be strong with volumes up 11% on 1996, intensely competitive markets and the strong pound have help back results. Polyurethane volumes increase by 8% with strong market demand in the U.S., but sales volumes in Asia Pacific were only marginally above last year due to the uncertainty and general weak market conditions in the regions, ICI said.

Industrial Chemicals was also hit by sterling's strength as profits fell to 55 million GBP from 135 million GBP, with a weak fertilizer market also contributing to the decline. Meanwhile profits in the group's paints division were up 8% to 68 million GBP from 63 million in 1996, benefiting from higher volumes and acquisitions. Sales increased to 1.07 billion GBP from 1.05 billion.

[03] Germany's Commerzbank posts positive first-half results

'Providing business remains good, there's room' for a dividend increase at the end of the year, as long as Commerzbank can also devote a sufficient portion of its net profit to strengthening its capital base, it said.

For 1996, Commerzbank paid a dividend of 1.35 marks, unchanged from 1995. Commerzbank attributed the increase in its interest income to 'dynamic credit and securities business.'

Among the mostly positive developments, the bank said its net trading income fell by over 60% to nearly 140 million marks. But Commerzbank, which reports its results according to German accounting standards, said its trading income would have appeared higher if it applied International Accounting Standards.

Commerzbank also said its total business volume at the end of the six months was at 516 billion marks, 14% higher than in all of 1996.

[04] Novartis posts 19% rise in first-half revenues; lower than analysts' forecasts

The drug and agribusiness group said first-half sales totalled 16.562 billion Swiss francs ($11.155 billion), up from 13.891 billion Swiss francs in the same period of 1996.

When expressed in the local currencies of its various markets and before translation into Swiss francs, Novartis' first-half sales rose 7%. That increase approximated analysts' forecasts.

As reported previously, the second big Swiss drug group, Roche Holding, posted a 20% rise in first-half sales in Swiss francs and a 6% increase figured in local currencies. Both of those figures came in at the upper end of analysts' expectations.

In the key drug sector, Swiss franc sales rose 23% in the first half. In local currencies, drug sales gained 10%. The entire healthcare sector, including drugs, posted a 21% rise in sales to 9.193 billion Swiss francs from 7.599 billion Swiss francs in the same 1996 period; local currency sales rose 8%. Novartis credited its pharmaceuticals growth in the U.S., but said official cost-cutting in Germany and Japan weighed on sales in those countries.

The company's second main division, agribusiness products, saw sales rise 16% to 5.285 billion francs in the first half from 4.548 billion Swiss francs in the same period of 1996. In local currencies, sales rose 4%.

Novartis' chief financial officer, Raymund Breu, said the first-half sales figures demonstrate that the company remains on track for a marked increase in net profit this year. He said, however, it was too early to attach figures to the outlook. The company will publish first-half profit figures on August 28. Breu grounded his profit expectation in the high volume growth of sales, synergies from the merger of Ciba-Geigy and Sandoz that formed Novartis, and favourable currency rates.

[05] Electronic giant Philips earnings more than double

Shares of the electronics giant opened considerably stronger on the news.

Philips noted, however, that net results in the second quarter of 1996 were pressured by a 760 million guilders extra charge for restructuring its Sound and Vision division.

Philips said net profit from ordinary operations in the second quarter rose 128% to 693 million guilders, from 304 million guilders a year earlier, and that sales rose 6.7% to 17.25 billion guilders, from 16.17 billion guilders in the second quarter of 1996.

The company said all product sectors except 'Miscellaneous' contributed to the improvement in income. The latest figures bring the company's net profit in the first half to 1.63 billion guilders, from 236 million guilders in the first half of last year. Calculated per share, earnings at Philips in the first half amounted to 4.69 guilders, up from the 0.69 guilders it earned per share in the year-earlier period. 'The first-half results indicate that the improvement program started in 1996 is on track. A number of restructuring programs, which are still under way, should contribute to profits in future quarters,' Philips said in a written statement.

Though Philips gave no specific forecast for its performance over the full year, the company said it remains committed to double-digit growth in operating income, a positive cash flow of over 1 billion guilders in 1997, and a 24% return on net assets in the longer term.

[06] Bayerische Vereinsbank predicts strong results for 1997

At the heart of the improvement was a 7.9% increase in income from the bank's core lending business. This rose to 2.47 billion marks from 2.29 billion marks, with income from mortgage lending registering a particularly strong 12% gain. Approvals for new mortgage loans rose 11% from a year earlier to 9.8 billion marks.

Vereinsbank also reported a 20% rise in net commission income, stemming mainly from its securities and depot management business.

Net trading income, however, edged only a fraction higher to 197 million marks from 192 million marks a year ago.

The bank's shares, which have surged massively in recent days, were trading down in early trade.

[07] Demand for British manufactured goods falls at fastest rate for six years

Domestic demand, however, rose at the fastest rate since April 1995, the CBI said in its quarterly industrial trends survey. The rate of growth in overall demand slowed slightly in the latest four months, although it is expected to pick up in the coming four months due to a pickup in domestic demand.

The survey shows that 39% of manufacturers said their export orders had fallen over the latest period compared with 19% reporting an increase. The difference between the two, a net balance of 20 percentage points, compares with seven points in the four months to April and one point in January.

Andrew Buxton, chairman of the CBI economic affairs committee, said the survey highlights the dichotomy in the economy.'The survey results clearly show a sharp dichotomy in the economy, with domestic demand continuing to grow, while export orders and confidence in the longer-term prospects are being hit by the strength of sterling,' Buxton said.

'Manufacturers expect these trends to continue over the coming months. More positively, the growth in output is likely to continue, underpinned by domestic orders. Encouragingly this is also helping to boost manufacturers' investment plans,' he added.

The survey showed that manufacturers' optimism about exports in the year ahead has fallen at the fastest rate since October 1980, achieving a negative balance of 28%.

And over the next four months, prices are expected to prove an even greater constraint on export orders than they have since October 1981.

[08] Western German CPI up 0.5% on the month; up 1.8% on year

The increase in July was above market expectations. Western German consumer prices were estimated to have edged up 0.3% in July from the previous month and to have risen 1.6% from a year ago, according to a survey of analysts by Dow Jones.

In June, consumer prices in western Germany had risen 0.2% on the month. The statistics office also revised upward to 1.7% its June year-on-year figure, from a previously reported 1.6% year-on-year rise.

The statistics agency compiles its preliminary inflation data based on the results from the largest western Germany states of Bavaria, Hesse, Baden- Wuerttemberg and North Rhine-Westphalia.

The statistics agency's final July inflation data for Germany as a whole plus separate data for western and eastern Germany will be published in mid- August.

[09] Bayerische Vereinsbank predicts strong results for 1997

At the heart of the improvement was a 7.9% increase in income from the bank's core lending business. This rose to 2.47 billion marks from 2.29 billion marks, with income from mortgage lending registering a particularly strong 12% gain. Approvals for new mortgage loans rose 11% from a year earlier to 9.8 billion marks.

Vereinsbank also reported a 20% rise in net commission income, stemming mainly from its securities and depot management business.

Net trading income, however, edged only a fraction higher to 197 million marks from 192 million marks a year ago.

The bank's shares, which have surged massively in recent days, were trading down in early trade.

[10] Trichet: Dollar has corrected from previous imbalances

Trichet, during a radio interview, also said the central bank approved of what 'the government presented, a substantial plan to reduce the deficit.'

The seven-week-old leftist government on Monday made budget amendments that should trim the 1997 deficit by 32 billion francs ($5.2 billion), or 0.4% of gross domestic product. That should bring the deficit down to between 3.1% and 3.3% of GDP, just above the 3.0% desired by the Maastricht Treaty on European economic and monetary union. 'We shouldn't exclude that we could make a final little effort, pretty tiny, to get to 3.0%,' Trichet told RTL radio.

He declined to criticise the budget fixes, which some economists say will slow down the economy because they rely heavily on increased corporate taxes levied on the largest companies, and thus may hurt investment.

Trichet said the Bank of France has argued that economic growth and more jobs could come only if corporate investment increased. But he also said the government's credibility in financial markets in combating deficits was equally important for the economy, since it keeps interest rates low.

[11] AOL plans to give telemarketers members phone numbers

In a quiet move that could alienate customers and raise privacy concerns, the on-line service will begin handing over the home phone numbers of its 8.5 million members to aggressive telemarketers such as CUC International.

In the past, AOL's 'terms-of-service' agreement said it could rent out its members' mail and electronic-mail addresses to marketers, but members' phone numbers were off limits. Now, a few telemarketers that reached partnership agreements with AOL earlier this year - about the same time the company suffered overloaded phone lines and service outages - will be privy to the phone numbers as well.

Although AOL is calling the change in policy a 'member benefit' that will introduce useful products to its customers, some members are less than enthusiastic.

Although the changes were quietly added to the terms-of-service contract, AOL now says it plans to give subscribers plenty of notice, as well as information on how to opt out, before the calls begin in the fall. How this information will be handed out hasn't been determined.

An AOL spokeswoman said the company only will make its members' phone numbers available to marketers with which it has entered broader agreements and which it believes are beneficial to its members.

To be sure, telemarketers rent names and phone numbers from subscriber lists all the time. But it's usually done quietly. Moreover, the information AOL could gather about its members is more in-depth than that available from most other companies - it potentially can record every place its members go on-line.

Privacy experts say AOL will be under particular scrutiny because of the leading role the Dulles, Va., company has taken in protecting on-line privacy. 'I would not be at all surprised to see a member backlash, particularly because (AOL has) held themselves out as being very forward- looking on privacy,' said Deirdre Mulligan of the Center for Democracy and Technology, a non-profit group in Washington that follows civil liberties on the Internet.

In its old terms-of-service agreement, AOL specifically stated it would not supply members' phone numbers. Because this is such a change from those earlier conditions, AOL has an obligation to alert its members, Mulligan contended. 'They should be educating their users of this as well as they advertised the change to flat-rate fees' last year, she said.

[12] Nomura Securities admit responsibility for its illegal transactions

'I have been informed that the alleged illegal activities were actually conducted,' he said at a hearing at the Finance Ministry.

Ujiie said a series of its illicit stock transactions with the racketeer, such as investment-loss reimbursement, were conducted by the company, adding, 'The illegal activities constituted reckless behaviour by our former executives including the former president.' 'I deeply regret our activities, which ran contrary to fairness and transparency in the stock market,' he said.

The hearing was held to hear statements from Ujiie following the July 15 recommendation by the Securities and Exchange Surveillance Commission, which advised the finance minister to penalise Nomura for illicit stock transactions with the racketeer.

The Finance Ministry will decide on administrative penalty within this month, and the nation's largest brokerage house is likely to face a four- to five-month partial suspension of its operations, Japan's heaviest punishment for a securities house to date.

Ujiie said the company will face penalties 'solemnly,' and that he is ready to punish employees directly involved with the illegal activities.

In this scandal, former Nomura President Hideo Sakamaki and two other former executives have been indicted on charges of violating the Commercial Code and the Securities and Exchange Law. Nomura is alleged to have paid some 49.7 million yen from January to June in 1995 to sokaiya Ryuichi Koike, who is also indicted in this case, by shifting securities trade profits of its own company accounts to compensate for part of Koike's investment losses.

[13] Corporate and Economic Briefs

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

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