European Business News (EBN), 97-08-22

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

Page last updated Fri, August 22 6:08 PM CET

CONTENTS

[01] The US stocks stabilize after early plunge

[02] BT and MCI trim merger price 20%

[03] German July import prices up 4.2% on year

[04] Philip Morris CEO concedes there may be smoking risks

[05] Dutch retail sales rose 1.6% in June; up 3.8% on the year

[06] Aegon first half net profit rises by 27%

[07] Nutricia posts 25% rise in net profit to $65.7 million

[08] Karstadt first half sales rises 1.6%

[09] UK second quarter capital spending rises 9.8%

[10] Corporate and Economic Briefs

[01] The US stocks stabilize after early plunge

Andrew Baptiste, senior vice president at J.P. Morgan in New York, said thin trading due to summer holidays in the US and unusually light London trading before a three-day labor-day weekend in the UK was exaggerating market volatility.

As the DJIA's slide reversed, the dollar found support against the mark at 1.8068 and 116.05 at 1230 GMT, said Kevin Harris, an international economist with MCM Currencywatch in New York.

The dollar shot up against the yen and against the mark - though less so - at mid-morning in New York as US stocks stabilized and started to recover.

Dealers said the move in dollar-yen was enhanced by technical factors and that the mark remains the most sensitive to the Dow Jones Industrial Average's vagaries.

'If you know where the Dow goes you know where dollar/mark goes,' said Baptiste.

Around 1500 GMT, the dollar was quoted at 1.8189 Deutsche marks, up from 1.8081 marks in London around 1235 GMT but down from 1.8360 marks in New York late yesterday. The US currency was also changing hands at Y117.07, up from Y116.13 earlier in London but down from Y117.14 late Thursday in New York.

Traders said the dollar will trade between 1.8055-1.8265 marks and 116.05- 117.70 yen in the next few hours.

[02] BT and MCI trim merger price 20%

'We are pleased that we have been able to reach agreement so quickly on the best way forward following the changes in the US telephone market,' said BT chairman, Iain Vallance.

Vallance also said that the two companies have already signed up more than $100 million worth of new business for their merged company - Concert. He said the companies will soon name 12 customers that have signed up for Concert's service.

The proposed mega-merger will be delayed for at least four months as new shareholder approvals are sought. But analysts said the renegotiation salvages a deal that was on the rocks after MCI stock fell in recent weeks on news that profit will fall far short of expectations for the next two years. The terms of the renegotiated deal - now worth just over $16 billion instead of $21 billion - were better than they had hoped.

MCI stockholders will receive 0.375 American Depositary Share of Concert and $7.75 cash for each MCI share, rather than 0.54 ADS and $6 cash. 'I think the best-case scenario has come true,' said Andrew Moffat, telecommunications analyst with Societe Generale Strauss Turnbull in London.

Like many analysts, SGST's Moffat had expected a discount to the original acquisition price of between 10% and 15%. 'Instead, they've come up with 21.9%,' he said. 'It's major.'

The revised proposal assured many analysts that British Telecommunications has become more active in asserting its influence over the establishment of Concert. MCI's profit picture had been blackened by its failure to penetrate US local-telephone markets as quickly as expected. The company has said that could cost it $800 million this year and a similar amount next year.

Even so, analysts said BT is caught between the short-term gains of controlling MCI's spending and the potential long-term benefits if the US company is permitted to expand aggressively in local US markets.

'They're a bit between the devil and the deep blue sea,' Exton said. 'I'd like to give BT managers a bit of credit and think that they're trying to manage MCI's cost base, rather than just cut MCI's plans. They're just restraining MCI from being totally gung-ho to being moderately gung-ho, so to speak.'

[03] German July import prices up 4.2% on year

'This is the strongest increase for imports on a year-on-year basis since June 1989,' the office commented.

Excluding prices for crude oil and petroleum products, import prices were 0.4% higher on the month and up 3.9% from July 1996.

The office also provided import price changes for July compared to June. The price of cellulose rose 6.7% in the period; the price of veal and beef was up 4.3%; and petroleum product prices rose 2.5%, the office said.

July export prices were also reported.

[04] Philip Morris CEO concedes there may be smoking risks

Geoffrey Bible, chairman and chief executive officer of the U.S.'s largest cigarette maker, made the surprise admission at the end of nearly two hours of questioning in preparation for trial in Florida's case against the tobacco industry.

Ron Motley, a lawyer representing the state, called the statement a major breakthrough because, except for one maverick, other industry leaders have not made such a concession. Bennett LeBow, chief of the smallest of the major cigarette makers, Liggett Group, a unit of Brooke Group, has said that cigarettes kill and are addictive.

Florida, which is seeking $12.3 billion for the public cost of smoking- related illnesses, was the first of 40 states suing the industry to bring a case to trial. Jury selection began Aug. 1 and continues during the taking of depositions.

In another trial under way in Miami, industry executives, when asked the same question about whether one death can be blamed on smoking, have said they don't know whether cigarettes kill.

Public-health officials estimate 450,000 Americans die each year from illnesses caused by smoking and second-hand smoke.

[05] Dutch retail sales rose 1.6% in June; up 3.8% on the year

The unadjusted figures don't compensate for price changes during the reported period. In the first six months of the year, the CBS said retail sales rose an unadjusted 3.8% from the same period a year earlier. The CBS noted that the six-month rise was largely fueled by sales of non-food items, which rose by 5.5% in the first half of the year.

The CBS said most branches of the non-food sector showed increases in retail sales in the first half of the year. Particularly strong increases were seen in sales of jewelry, which rose 10.9% in the first half from a year earlier, and in sales of DIY articles, which increased by 9.8%.

Sales of photographic articles increased by 6% in the first half, while sales of furniture rose by 5.6%, the CBS said.

In the food sector, overall sales growth was limited to 2.3% in the first six months of the year.

While the CBS pointed out that most branches of the food sector saw sales increase modestly in the first half, it said Dutch butchers saw their sales in that period decline by 1.5% from a year earlier.

Sales at supermarkets in the first six months increased by 2.7%, and sales at grocery stores edged up 1.5% from the first six months of last year, the CBS said.

[06] Aegon first half net profit rises by 27%

Aegon said the larger part of the first half profit increase came from its life insurance operations in the Netherlands and in the US, while exchange rate movements -notably the stronger dollar- had a positive effect on earnings 'upwards of 5%.'

Calculated per share, Aegon's net profit in the first half amounted to 3.37 guilders, up from the 2.70 guilders it earned per share a year earlier.

Aegon said it plans to pay in interim dividend of 1.40 guilders per share, up from the 1.18 guilders it paid a year earlier.

Regarding the remainder of the year, Aegon said the recent acquisition of the insurance activities of Providian in the US will give rise to 'a substantial increase in net income.'

As a result, Aegon said it now expects earnings per share in the full year to show an increase of 25% from last year. Formerly, Aegon said it expected earnings per share in 1997 to rise 15%.

[07] Nutricia posts 25% rise in net profit to $65.7 million

Nutricia said exchange rates had pushed up operating profit by 13.5 million guilders.

The group was hurt by having to recall some of its products in the U.K., Ireland and France. The recalls pushed down operating profit by 14 million NLG and sales by 20 million NLG in the first half of 1997.

The organic sales growth in the period was 1.2%, Nutricia said, noting sales would have increased by 2.6% without the negative influences of the recalls.

Nutricia said it would split its shares 5-to-1 on September 1, 1997.

It also reiterated that full year results are seen to rise 12% to 20% compared with 1996.

Results are seen improving in the second half of 1997 because the downward trend in sales of its Milupa unit in Germany has bottomed out.

[08] Karstadt first half sales rises 1.6%

In July, the company said it expects to swing to a group net profit of around 150 million marks ($82.4 million) in 1997. In 1996, Karstadt group's sales were 26.9 billion marks which resulted in a net profit of 58.6 million marks, down significantly from 109 million marks in 1995.

[09] UK second quarter capital spending rises 9.8%

Spending rose to the highest level since the second quarter of 1990 and was up 26% from the same quarter a year earlier.

The seasonally adjusted figures from the Office for National Statistics show that manufacturers spent £3.63 billion ($5.8 billion) on investment in the second quarter, compared with £3.30 billion in the first and £2.87 billion a year earlier. All manufacturing industries increased their spending in the second quarter, particularly the machinery and equipment industry where investment rose 17% to £1.40 billion from £1.20 billion in the first. Investment in the service sector was little changed between the first and second quarters. There was a sharp rise in investment in the construction sector due to spending on new buildings, vehicles and plant and machinery, all intended for future rental.

[10] Corporate and Economic Briefs

The Czech merchandise trade deficit in July was 13.77 billion koruna ($3.2 billion), compared with 9.5 billion at the end of June, the Czech Statistics Office (CSU) reported. The CSU said the country's trade deficit measured from January to July was 88.410 billion koruna, compared with 83.963 billion koruna for the same period in 1996. Total imports over January to July were valued at 471.746 billion koruna, while total exports were worth 383.338 billion koruna.

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