European Business News (EBN), 97-08-28

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Page last updated Thu, August 28 6:06 PM CET

CONTENTS

[01] US economy continues rapid expansion as GDP is revised up to 3.6%

[02] ING Groep agrees to buy Furman Selz for $600 million

[03] Lufthansa profit trebled in first half

[04] Kohl, Jospin seek to dispel doubts about their approach to the single currency

[05] Kremlin cancels oil development accord with Exxon

[06] Rolls Royce returns to the black as engine demand revs up

[07] Matav calls meeting to vote on terms of IPO

[08] Novartis profit rises 27%, firm sees further gains

[09] Skanska first half pretax profit soars to $1.32 billion

[10] Bunds and Deutsche mark gain on Tietmeyer's inflation view

[11] Fortis profit jumps 28% in first half on strong bank earnings

[12] KBB swings to loss, prompting restructuring

[13] Deutsche Telekom parent operating profit gains 39%

[14] Metro's operating profit jumps 37% in the first half

[15] Closing of Magellan fund to new investors is generally applauded by analysts

[16] Dow Jones licenses indexes to Merrill Lynch, Bankers Trust

[17] Corporate and Economic Briefs

[01] US economy continues rapid expansion as GDP is revised up to 3.6%

The Commerce Department report on the gross domestic product, the sum of all goods and services produced within US borders, marks a substantial change from a month-old estimate showing the economy expanding at a sedate 2.2% rate in the second quarter.

The revision, the largest in three and a half years, nearly wipes out what economists had viewed as a welcome, inflation-calming respite from the rapid 4.9% growth rate in the first three months of the year.

In response to the revised GDP figure US blue-chip stocks moved lower in early trading. The Dow Jones Industrial Average is down 40 points at 7747. US Treasurys climbed after the release of the revised figure.

Most of the GDP revision was attributed to faster-than-previously estimated growth in exports and a larger build-up in inventories at wholesalers. But consumer spending, production of housing and business investment in new equipment all looked slightly stronger as well.

In the week after last month's initial estimate of second-quarter GDP, the stock market soared to record highs. Traders believed the slowdown meant Federal Reserve policy-makers had no reason to quell inflationary pressures by engineering still-slower growth.

But since then, inflation jitters have sent stocks on a roller-coaster ride and the market's value, as measured by the Dow Jones industrial average, has dropped about 6% over the past three weeks.

The Fed hasn't touched short-term interest rates since March, but many analysts are looking for an increase when policy-makers meet next at the end of September.

Higher interest rates would be a threat to corporate profits, which rose 1.2% to a record seasonally adjusted annual rate of $473 billion in the second quarter following a 2.9% increase in the first.

The GDP report still shows an abrupt downshift in the growth of consumer spending - accounting for about two-thirds of economic output - from 5.3% in the first quarter to 1% in the second. That's a bit stronger than the previous estimate of 0.8%.

Business investment in equipment from computers to telephones zoomed at a 23.8% annual rate, the best in 14 years. Housing construction grew at a 7.1% rate and government spending advanced at a 3.1% pace.

An inflation measure tied to GDP rose at a scant 1.5% annual rate, the mildest in five years.

The various changes put the economy's output in the second quarter at a seasonally and inflation-adjusted annual rate of $7.16 trillion.

[02] ING Groep agrees to buy Furman Selz for $600 million

The Dutch banking and insurance group, which will spread the payment over three years, said the deal will immediately lift its earnings per share by 1% to 1.5%.

The company also posted a 28% rise in first-half net profit to 1.94 billion guilders ($957.7 billion), at the top end of expectations.

'The acquisition is the results of ING's strategic goals to increase its activities in the areas of investment banking, securities trading and asset management in the U.S.,' ING said.

In Early July, ING acquired U.S. insurance group Equitable of Iowa for $2.2 billion.

ING said it would pay two-thirds of the $600 million on the day the deal becomes definite and one-third three years after that date. Part of the deal is the set up of a bonus pool which will be paid to employees of Furman Selz three years after the acquisition becomes official.

The spreading of the payment and the favourable fiscal treatment will bring the net take-over price to about $425 million, including the bonus pool, ING said.

The group added that it is hopeful that the deal can be concluded before the end of the year.

Referring to its results, the company said it expects earnings per share to rise 7% to 12% in 1997 from 4.56 guilders in 1996. Per-share earnings reached 2.55 guilders in the first half of 1997, up from 2.12 guilders in the same period in 1996.

Pre-tax profit in the group's banking sector rose 37% to 1.94 billion guilders, while the insurance activities posted a pre-tax profit of 1.39 billion guilders, up 20%.

[03] Lufthansa profit trebled in first half

Airline sees further gains in rest of year

Lufthansa said it expected continued improvement in profit and sales in the second half of 1997, after posting its best-ever pretax profit in the first six months of the year.

Lufthansa's pretax profit more than tripled in the first half to 397 million Deutsche marks ($220 million) from 119 million marks the year earlier.

Operating profit more than tripled to 327 million marks from 107 million marks the year earlier.

Chief executive Juergen Weber said the German airline was on track for its best year ever,adding that the group was currently expanding its fleet to cope with increased demand. Weber also underlined the importance of alliances with other airlines in raising the group's competitiveness.

Lufthansa formed the Star Alliance with Air Canada ,SAS ,Thai International and United Airlines in May and Weber said he hoped to announce another major partner in Asia this year.

Chief financial officer Klaus Schlede took a cautious stance in making a forecast for the second half. 'With our capacity utilisation as high as it is, and considering we did so well a year ago, it is hard to imagine more than a slight improvement in pre-tax profit,' he said.

[04] Kohl, Jospin seek to dispel doubts about their approach to the single currency

A previous meeting of the two leaders in the French city of Poitiers on June 13, shortly after Jospin's Socialist-led government took power, was distinctly cool.

'Chancellor Kohl and Prime Minister Jospin reiterated their conviction that the introduction of a stable euro, according to the timetable in the Maastricht Treaty and strict adherence to the stability criteria is essential for the future of Europe and its economic competitiveness,' said a statement released by the German federal press office.

The statement also said that 'Germany and France stand unconditionally by the agreements already made and will do everything to fulfil the conditions for the introduction of the euro,'

'Both heads of government were in agreement that Germany and France would stand side by side to push forward the process of European integration,'.

[05] Kremlin cancels oil development accord with Exxon

Russian Natural Resources Minister Viktor Orlov, citing unspecified 'legal irregularities' annulled the results of a bidding contest held late last year in which an Exxon affiliate, Exxon Arkhangelsk Ltd., beat out several international consortia for a 50% stake in the development of oil fields in the Timan-Pechora province.

The cancellation puts the brakes on a $1.5 billion dollar project and comes as the latest blow to the increasingly tarnished image of Russia's oil industry. The sector has seen sharp declines in output since funding from Soviet central planners dried up and requires tens of billions of dollars to develop remote fields.

Russian companies don't have that kind of capital, and Western oil concerns eager to invest have been frustrated by bureaucratic hurdles and foot- dragging on several crucial laws regulating their participation in Russian development ventures.

Exxon spokesman James Riley called the Kremlin's decision to overturn the agreement 'inappropriate.' He warned that such a move 'certainly would not be conducive to encouraging private investment in Russia.'

Other Western observers agreed. 'It raises the question of whether a deal is a deal in Russia because Exxon is meticulous to a fault in following the letter of the law,' said Bruce Bean, the head of Coudert Brothers law offices in Moscow and a member of the Gore-Chernomyrdin Commission, an investment trouble-shooting board chaired by Vice President Al Gore and Russian Prime Minister Viktor Chernomyrdin.

Russian officials say they were forced to scrap the agreement after discovering five undisclosed 'violations' made by Exxon during the selection process. Mr. Riley strongly refutes that claim. 'The award decision was carried out in full compliance with all applicable laws,' he says, adding that 'Exxon has acted in good faith throughout the tender process.'

The annulment took few by surprise. It follows weeks of speculation that the so-called production-sharing project was in deep trouble and intense public grumbling by Russian oil companies like Rosneft and Komitek that Exxon got too sweet a deal.

Though Exxon alone had received the right to develop the fields, its agreement called for the company to share some exploration and production with local outfits such as Rosneft. Exxon says it was willing to do so. But Vladimir Tyumarkin, a spokesman for Rosneft says the U.S. oil major was throwing its weight around and demanding 'unacceptable conditions' from prospective partners.

The contested deposits hold some 150 million metric tons of recoverable crude oil, about 10 times Rosneft's output last year. Mr. Tyumarkin confirmed that Rosneft will push for, and plans to bid in, a new tender. But he denied industry speculation that the withdrawal of Exxon's extraction rights was orchestrated to increase Rosneft's sale price. 'That's pure fantasy' he said.

[06] Rolls Royce returns to the black as engine demand revs up

The UK-based aerospace and engineering company showed first half net profit of £116 million ($186.8 million) following a year-earlier loss of £169 million.

Earnings from ongoing operations, which exclude the impact of a £248 million exceptional loss in the first half of 1996, rose 20% to £115 million from last year's £96 million profit. This increase was the result of improved performance at the company's Aerospace operations, which posted a 33% rise in sales during the latest period.

However, the company warned it was facing some production inefficiencies as growth in its spares business was lagging behind growth in new engine sales and because of the start of production of its new Trent turbofan engines for widebody airliners.

'New commercial engine sales have increased at a faster rate than spare part sales and there has been an increasing impact from launch deliveries for the Trent engine,' the company said.

'The sharp increase in demand has led to some inefficiencies which have offset the impact of operational improvements. These factors have prevented any significant increase in the trading margin.'

Rolls Royce said that the trading environment in its aerospace business remains 'as competitive as ever,' but noted the company is continuing to improve its position.

'With 28% of commercial orders placed during the first half of the year, the company is making progress towards its goal of a third of the world civil market,' Rolls Royce said. 'This success is building the long term future of the business as the company establishes a larger and more mature range of products in service.'

[07] Matav calls meeting to vote on terms of IPO

In newspaper advertisements, the Hungarian telecommunications company said items on the Sept. 29 agenda include the introduction of series A shares and 'golden' voting preference shares to remain in state hands.

The voting preference share, or 'golden share,' will give the government control over certain strategic decisions. Specifics about the rights attached to the share are still being negotiated.

Matav is expected to list its shares on the Budapest Stock Exchange and its American Depository Receipts in the US after an international and domestic flotation of its shares in early November.

Analysts have said the value of the initial public offering could top $1 billion depending on the number of shares offered. That would make Matav by far the biggest single flotation to come out of Hungary.

Matav also said that the shareholders' meeting, to be held in Budapest, would decide on a split of its shares, although the terms of the split weren't specified. Each share currently has a par value of 10,000 forints ($50.82).

Matav is 67% owned by MagyarCom, a consortium of Germany's Deutsche Telekom and Ameritech of the US. The Hungarian government holds about 25%. Most of the rest of the shares are held by the European Bank for Reconstruction and Development, the International Finance Corp., Matav employees and small investors.

[08] Novartis profit rises 27%, firm sees further gains

The group said its first half net profit rose to 3.12 billion Swiss francs ($2.1 billion), with all three divisions contributing to the gain.

The company said it expected this favourable trend to continue into the second half as it continues to realise cost synergies and to focus on the ongoing business.

The group, formed last year through the merger of Sandoz and Ciba-Geigy, said operating income grew strongly despite investment in new products. Savings from merger synergies between Ciba and Sandoz led to reductions in administration and general overheads in the first six months of the year, although the majority of savings are expected in the second half of the year.

This, coupled with sales and profit growth in all divisions, led Novartis to forecast continued improvements in operating and net income for the full year.

In the first six months of 1997 volume gains, merger synergies and a lower Swiss franc pushed the operating margin to 24.2% from 23.0%, while corporate expenses fell by 128 million Swiss francs. This offset a 27% increase in marketing and an 18% increase in research and development costs, the company said without giving absolute figures.

[09] Skanska first half pretax profit soars to $1.32 billion

Meanwhile, and without the capital gain from Skanska's sale of its shares in Swedish industrial group Sandvik earlier this year, half year operating profit fell 11% to 1.34 billion kronor from 1.51 billion the corresponding year-earlier period.

Six-months operating profit was pressured by a weak Swedish construction market, Skanska said.

Order bookings increased sharply though, up 38% to 32.08 billion kronor from 23.19 billion kronor, mainly due to an improvement in the company's US operations.

More than one-half of Skanska's six-month sales of 24.58 billion kronor, compared with 21.99 billion kronor a year earlier, was derived from markets outside Sweden, the company said.

'The group's construction operations in the US are benefiting from relatively strong growth in several of the regional markets,' Skanska said.

[10] Bunds and Deutsche mark gain on Tietmeyer's inflation view

Bundesbank President Tietmeyer said late Wednesday that the central bank will be 'very carefully monitoring the further price development in Germany,' following the rises in German import and consumer prices, but stressed that he didn't want to 'dramatise' the recent price acceleration and that current German interest rates are appropriate. Bundesbank Central Bank Council member Helmut Hesse, also Wednesday, said the Bundesbank won't act on rates provided the dollar is kept in check but that it would oppose any dollar rise above 1.80 marks.

'If the dollar climbs to 1.90 marks and more, the Bundesbank will act,' Hesse said. One decisive factor is how producer prices will react to the rise in import prices, he said.

Bond dealers noted that the short end especially benefited from investor reassurance but that those gains were frail.

'For now Euromarks are gaining on the general feeling that there won't be any short-term rate increase,' said a trader with a German bank in London. 'But all you need is a surge in the dollar. In the long term we see prices falling,' on dealer said.

Tietmeyer said 'You cannot be certain that the Bundesbank will do nothing, neither should you be certain that the Bundesbank will do something,' he said. 'It is genuinely an open question.'

He added that although the current price conditions were not satisfactory, they should also not be overdramatised.

The Bundesbank chief said the German economy had shown itself to be in a phase of cyclical recovery in the second quarter of the year which should continue.

But he noted that the primary driving force for growth came from exports while domestic demand remained weak, despite a 'slight pick-up' in the last few months. 'There is still no strong interior dynamic,' he said.

Turning to currencies, Tietmeyer said he was more satisfied with the current level of the dollar against the mark but declined to make any prediction of further movements.

'We are more satisfied with the current level than we were (with the level) 10 days ago,' he said.

[11] Fortis profit jumps 28% in first half on strong bank earnings

The Dutch-Belgian financial group said net profit rose to 466 million ECUs ($439.8 million) from 366 ECUs the year before. Fortis, which is jointly owned by Fortis AG of Belgium and Fortis Amev of the Netherlands, said its operating result had risen 20% to 688 million ECU from 574 million ECU the year earlier.

Fortis said it expected net profit and earnings per share at parent companies Dutch Fortis AMEV and Belgian Fortis AG to rise 15% to 20% for the year.

Fortis said MeesPierson and fellow Dutch banking unit VSB Bank had developed favourably due to improved net interest income and higher net commission income.

'This was reinforced by the excellent conditions in the stock and derivatives markets,' Fortis said.

First-half net profit in Fortis' banking activities surged 77% to 187 million ECU from 106 million ECU last year in the same period. Net profit in the insurance sector was up 10% to 313 million ECU from 284 million ECU last year.

Analysts were broadly positive on the results. They said strength in the banking sector had offset a disappointing performance by parts of Fortis's insurance business.

'The results were as expected...The banking sector exceeded expectations but the insurance sector in some parts left something to be desired,' said Jacob Bosscha of Labouchere.

Fortis reported a group operating loss in its accident and health insurance business in the Netherlands. The technical result from life insurance in the Netherlands matched the previous year's high level, however. The first- half results also were hurt by exchange rate fluctuations in the Netherlands, where the operating results from insurance activities in ECUs were down 11% to 115 million ECU. The decline was principally a result of losses on sick leave insurance, Fortis said.

[12] KBB swings to loss, prompting restructuring

The company also said that two of its board members have resigned.

KBB showed a net loss of 222.5 million guilders ($110 million) in the fiscal first half compared with net profit of 2.5 million guilders the year before.

Looking ahead, KBB said it was 'too early' to make a forecast for the full fiscal year because of the 'seasonal character' of the group's operations. It added, however, that fiscal 1998, including the extra charge of 200 million guilders, would end with a loss.

The loss prompted the company to implement far-reaching measures to restore 'structural profit growth.'

One of the measures is to end the activities of the M&S Mode chain of ladies clothing shops in Germany, which have suffered significant losses. The number of subsidiaries abroad and the number of chain stores are to be reduced, hopefully making the company more 'alert.'

The restructuring measures will cut about 3,000 domestic and foreign jobs, reducing the number of employees to 24,000.

Other measure include selling retail chains Decorette and Lampenier. KBB added that retail chains Signature Jeans, Van Dalen, will also be sold or even closed. And the company will try to find buyers for non-core activities such as publisher Wij Special/Media, advertising agency PlusPoint and RetailService.

The units make up about 4% of the group's annual sales. KBB also said the cost of the restructuring, 200 million guilders after tax, will be taken as an extraordinary charge in the first half of fiscal 1998. The measures will be implemented over the next three years and should lead to lower costs and a reduction in losses of about 100 million guilders.

Peter Dirks, one of the two resigning board members, announced his resignation after the restructuring plans became clear. While Theo Henselijn is resigning on 'health reasons'.

[13] Deutsche Telekom parent operating profit gains 39%

Sales increased to 29.4 billion marks from 27.9 billion. Sales at the parent company account for about 90% of group sales.

Group results are still being calculated, Telekom said, and will be released Sept. 18.

'Initial signals show that at the group level, there's also a positive sales development,' the company said.

Based on the favourable first-half trend, Telekom expects a 'satisfactory full-year profit' that will allow a dividend payment of 1.20 marks for 1997, compared to 0.60 marks for 1996.

The company said that the rise in first-half sales came largely from increased business in the private customer telephone service sector.

'On the basis of a positive cashflow in our operations, financial liabilities have been reduced as planned since the end of 1996 by a further 3.3 billion marks to about 92.3 billion marks as of June 30,' the company added.

[14] Metro's operating profit jumps 37% in the first half

In the half, the retailer's operating profit jumped to 94.8 million Deutsche marks ($53 million). Sales rose 3% to 29.65 billion marks.

The retailer's department stores narrowed their losses to 69.1 million marks from 87 million marks.

For the full year the company forecast group sales of about 65 billion marks -- up from 62 billion marks in 1996 -- with growth coming from expansion of distribution lines in Poland, Turkey and China. Weak demand and price competition in Germany was expected to limit domestic results.

[15] Closing of Magellan fund to new investors is generally applauded by analysts

The move represents a bid by Fidelity to quash criticism that the fund had grown too big to be managed effectively and was being kept open to generate higher management fees at the expense of existing shareholders.

Fidelity has picked up such criticism lately not just from outsiders, but from its own customers. Indeed, Fidelity marketing executives have been particularly vocal in wanting to clamp the fund because they felt keeping it open was generating a damaging backlash.

But the move is sure to raise eyebrows in the investment world. By closing Magellan, Fidelity will be depriving itself of one of the few investment vehicles with a true brand name and marketing cachet. Fidelity will also be cutting off potential growth in Magellan's management fees, a large source of revenue.

The move represents a bid by Fidelity to quash criticism that the fund had grown too big to be managed effectively and was being kept open to generate higher management fees at the expense of existing shareholders.

Fidelity has picked up such criticism lately not just from outsiders, but from its own customers. Indeed, Fidelity marketing executives have been particularly vocal in wanting to clamp the fund because they felt keeping it open was generating a damaging backlash.

But the move is sure to raise some eyebrows in the investment world. By closing Magellan, Fidelity will be depriving itself of one of the few investment vehicles with a true brand name and marketing cachet. Fidelity will also be cutting off potential growth in Magellan's management fees, a large source of revenue.

Generally though, analysts applauded the move. 'It's about time. They should have closed it a long time ago,' said Stephen Savage, executive director at Value Line Publishing Inc. in New York. 'I think they wanted to close on an up note, and its relative performance has improved somewhat.'

In fact, while Magellan's performance still lags behind the Standard & Poor's 500 Stock Index this year, returning 23.16% to the index's 26.36%, it has outperformed the index since April.

Magellan has gained 18.5% since April, compared with a 16.1% return in the market, according to Lipper Analytical Services Inc. Investors were beginning to take note of the turnaround in performance, and the fund is on track to have inflows of about $4 million for August, said David O'Leary, president of Alpha Equity Research in Portsmouth, N.H. That would mark the first time Magellan has had inflows since April 1996, O'Leary noted. From April 1996 to this July, outflows totalled $11 billion, O'Leary added, although the fund's assets kept growing because of its returns.

Magellan is not only Fidelity's flagship, but, for some, an icon of stock- picking. It has made stars out of many of its managers (or vice versa, as some claim), including Peter Lynch, Jeffrey Vinik and now Robert Stansky. But, during its more than 30-year history, the fund has gone through some tumultuous periods. Many say it no longer resembles the shoot-for-the-moon investment portfolio it once was.

Some say its strange forays in recent years into other investment classes - most notably Vinik's 30% shift into cash and bonds in 1996 - was a direct result of the fund's extreme size and managers' difficulty finding places to invest. Under the fund's new manager, Stansky, the fund is again fully invested, but some critics say it now more closely resembles an index fund.

Nevertheless, the closing of the fund to new investors may not stymie inflows as much as some may expect, simply because the lion's share of Magellan's assets (some estimate as much as 70%) come from 401(k) and other types of retirement plans. As long as a plan sponsor has established Magellan as an investment option by Sept. 30, investors can continue to put new money into the fund.

[16] Dow Jones licenses indexes to Merrill Lynch, Bankers Trust

Dow Jones said the securities firm and the banking company would be allowed to offer customised 'over-the-counter' products based on the industrial average and other indexes. The move follows an earlier licensing agreement between Dow Jones and three exchanges to allow futures, options and exchange-traded funds based on the blue-chip index.

Among other products, Merrill Lynch and Bankers Trust will offer customised options, which give investors the right, but not the obligation, to buy or sell the industrial average's level at a predetermined price. Unlike exchange-traded futures and options, the size and duration of the structured contracts will be flexible.

Officials from Bankers Trust and Merrill said the over-the-counter investments will target an institutional audience, in comparison with the listed exchange products, which have been marketed to retail investors.

A Dow Jones spokesman said the company is likely enter into similar licensing agreements with other financial-services companies and will continue discussions with fund companies about offering mutual funds based on the widely watched index.

[17] Corporate and Economic Briefs

Dutch Consumer spending rose 2.2% in June, compared with the same month in 1996, the Dutch Central Bureau for Statistics said. The CBS said spending rose 3.2% in the three months ended June 30, 1997, compared with a 2.9% increase in the same 1996 period. The rise was largely attributed to durable goods sales which rose 4.1% in the first half of this year. The CBS added that in the second quarter, most household earnings went to clothing, furniture, household appliances and do-it-yourself goods.

Renault said it sold its entire 3% stake in Swedish rival Volvo, ending the last link between two companies that once had envisaged a merger. Renault said it sold 12,692,191 class A shares, but gave no other details. A spokeswoman said Renault would have a capital gain on the sale of a bit more than 1 billion French francs ($163million). Volvo in July sold its entire 11.4% stake in Renault for 5.9 billion kronor ($756.4 million), realizing a capital gain of 750 million kronor.

Finland's unemployment rate in July dropped to 12.7%, its lowest level in five years, the government statistics agency said. Last month's rate was down from 15% in June, and 15.5% in July 1996, Statistics Finland said. However, the figures are not directly comparable because the agency has changed calculation methods in the past year. The dramatic fall in unemployment was mostly attributed to an upswing in the economy after a severe recession which began in the early 1990s. In January 1994, Finland's joblessness rate peaked at 20.6 %. The July figures mean that 333,000 people were out of work in a population of 5.1 million, making the Finnish rate still one of the highest in the European Union.

UK Ladbroke released an encouraging 39% rise in earnings at the half-way stage, on the back of buoyant sales in both its gaming and hotel markets. Ladbroke's increased first half pretax profit to £101.2 million ($161.9 million) from £72.8 million, with an increase in its interim dividend to 2.6 pence from 2.4 pence per share. The figures came in at the top end of analysts' forecasts of between £94 million and £101 million, although the dividend rise was largely expected.

Dutch retailer Vendex International said it is acquiring the Prijs-Slag supermarket chain from Hermans Groep. Vendex said its Vendex Food Groep BV subsidiary will take over 26 stores Sept. 15 and convert them into its own Basismarkt supermarket stores. All 200 employees will receive employment with Vendex. No financial details were disclosed, but Vendex said the acquisition is expected to contribute to 1997-1998 earnings.

Metsae-Serla said its tissue unit will start a joint venture with Georgia Pacific for the distribution and production of Georgia-Pacific Ultimatic and Cormatic washroom systems. Metsae-Serla Tissue will own 46% of the joint venture company, Ultimatic Systems GmbH. Georgia-Pacific will own 54%. Through the joint venture, which will be based in Zug in Switzerland, the two companies will expand their sales to all of Europe, Metsae-Serla said. Ultimatic Systems has appointed Metsae-Serla as exclusive European licensed manufacturer of the Ultimatic and Cormatic paper towels and tissues, the Finnish company said.

France's trade surplus in June rose to 18.78 billion French francs ($3.07bn) from 16.27 billion francs in May, the finance ministry said. The country's surplus during the first half of the year doubled to 80.58 billion francs from 37.52 billion francs a year earlier, well on its way to breaking last year's record trade surplus of 122 billion francs. The June surplus was higher than the 14 billion francs average estimate among economists, although the figure is difficult to predict. Exports in June rose slightly to 137.2 billion francs from 135.8 billion francs in May, while imports slipped to 118.4 billion francs from 119.6 billion francs.

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