European Business News (EBN), 97-09-17

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Page last updated Wed, September 17 5:17 PM CET

CONTENTS

[01] BG plans $2 billion buyback to restructure capital

[02] Bundesbank says it will remain vigilant about inflationary pressures

[03] Europe's biggest exchanges form alliances to take on London

[04] Russia joins Paris Club of creditor nations

[05] Waigel pours cold water on talk of Bonn diverging from 3.0% deficit criteria

[06] UK retail sales and jobless data point to a continuing economic boom

[07] Yamaichi Securities is suspended from government bond trading in corporate payoff scandal

[08] Clinton calls on Congress to pass key tobacco reforms

[09] IMF upbeat on outlook for global economy

[10] Euro may be more significant than the currencies it replaces, IMF says

[11] EU set to block P&O-Stena link unless substantial changes are made

[12] Kingfisher earnings jump 36% to $225 million, bolstered by UK businesses

[13] Pechiney first half profit nearly triples

[14] Kodak vow to trim costs may result in massive layoffs

[15] Adecco set to buy $387 million TAD Resources International

[16] Japan's trade surplus more than doubles, setting stage for G-7 pressure

[17] European aerospace industry is expected to continue its rapid growth

[18] European and Corporate Briefs

[01] BG plans $2 billion buyback to restructure capital

The UK gas distribution company posted a loss of £28 million, which BG said reflected the effect of a £514 million tax expense. Excluding the tax, BG showed a pretax profit of £486 million.

There are no comparable financial figures for the year-earlier half as these are the first interim results since the February breakup of British Gas into BG and domestic gas supplier Centrica.

BG further said it's planning to seek shareholder approval for the stock buyback and said the programme will start later in the year. As part of the capital restructuring, BG will conduct a share consolidation.

Looking ahead, the company said a good underlying performance by all its businesses means the company is well placed to meet the challenges set by regulatory authority the Monopolies & Mergers Commission in a recent report on BG.

'BG is in good shape to play its key role in facilitating the implementation of domestic competition in Great Britain, and to pursue sound opportunities to participate in the development of hydrocarbon resources and of overseas gas markets,' it said.

Forecast production for the full year is expected to be equivalent to around 60 million barrels of oil.

[02] Bundesbank says it will remain vigilant about inflationary pressures

But as the Bundesbank was issuing its monthly report for September and saying that it was important to act early to counter any dangers to monetary stability, a key central bank council member said inflation indicators were going the wrong way.

The German central bank said it must remain on alert regarding monetary policy when foreign exchange market signals are unclear about inflation and that it aims to further moderate M3 money supply growth.

The Bundesbank said it was keeping a close eye on volatile foreign exchange markets and a broad range of other forward-looking indicators for potential danger signs.

'Despite undoubtedly increased risks, there is no reason to date to dramatise price developments. Risks on the inflation side connected to exchange rate developments will have to be closely monitored,' the Bundesbank said.

Price rises in recent months were due to a combination of higher administrative costs and foreign-exchange developments, it said.

Bundesbank vigilance also extended to monetary stability, and it said it was important to act early to counter any dangers to monetary stability, especially when policy indicators gave a diverse and uncertain picture.

The Bundesbank cited this year's modest wage rises and improved productivity gains as a counterweight to the inflationary pressure stemming particularly from higher import prices, which rose on a weaker Deutsche mark over the course of the summer.

However, the central bank also said it would watch closely wage developments, among other indicators, for signs of inflation in months to come.

'The decisive factor is whether wage increases will continue to be moderate and balance out the effects of imported inflation,' the report said. 'The Bundesbank will conduct a monetary policy aimed at preventing exogenous price influences from getting out of hand and leading to continued price increases in the overall economy.'

The Bundesbank also said that it continues to regard M3 money-supply growth as a key indicator of price developments and warned that M3 growth has reached the upper limit of the range tolerated by the central bank.

Meanwhile, Bundesbank council member Ernst Welteke was in London saying inflation indicators were going the wrong way. Welteke said: 'All the inflation indicators are going in the wrong direction, so we need to look very carefully to the next data.'

His comments echoed those of fellow council member Otmar Issing last week, who said, 'In Germany we have seen a turning point in inflation. Indicators are going in the wrong direction.'

Asked about the currency market, Welteke said: 'The dollar has now come down and this makes me less nervous than when the dollar was sharply rising.'

'I was concerned but now I'm more optimistic that we will have stable import prices.'

Welteke said M3 was within the Bundesbank's target range which was 'good news' but he added the 'bad news' was that German inflation rate was more than the 2%. Usually, a rate below 2% is considered to indicate price stability.

[03] Europe's biggest exchanges form alliances to take on London

The German, Swiss and French bourses said they have a preliminary agreement to establish trading links on all stock and interest rate instruments, creating Europe's largest derivatives market.

France's Societe des Bourses Francaises, which operates the French stock exchanges, Germany's Deutsche Borse, which owns the DTB, and the Swiss futures exchange Soffex said they plan to finalise a formal partnership before December 31 1997.

Deutsche Borse also said that the partners planned to deliver a single range of six interest rate derivatives to the market as soon as the euro parities are fixed.

'The alliance will offer the largest derivatives market in Europe,' the three bourses said.

In a related move, the SBF said it will take full control of the Matif futures exchange. The SBF had held one-third of voting rights and 26% of Matif's capital.

Gerard Pfauwadel, president of the Matif, said the alliance with the German and Swiss exchanges would result in the eventual closure of its Bobl contract, launched last spring, and its FX options contracts.

Pfauwadel said the plan aims to establish a dual-quote system to allow members of all three exchanges to have access through either open outcry or electronic link to futures products on the other exchanges.

He said the agreement will also put in place a cross-margining system that allows members to cover trades on all exchanges by depositing margin on one exchange.

Finally, he said the agreement envisions the development of common Euro products and marketing efforts.

Among the products he envisioned was the launch of a new 10-year bond futures contract with an underlying pool of bonds from countries that adopt the single currency in the first wave.

Pfauwadel said such a 'multi-issuer' product couldn't be launched before May 1, 1998, when currency parities are set for those countries that participate in the single currency.

He said the Matif may also launch a short-term interest rate futures contract called the 'Euribor' as a successor to the Paris Inter Bank Offered Rate futures. The new contract would be traded electronically but using a French platform.

[04] Russia joins Paris Club of creditor nations

The First Deputy Prime Minister Anatoly Chubais said Wednesday said that joining the Paris Club as a full-fledged member was an important political and economic event for Russia.

Speaking at a press conference, Chubais said that accession 'is a very important political event' since it puts Russia on an equal footing with other member countries on the treatment of debts owed to Russia.

Better repayment thanks to that footing should strengthen Russia's budgetary situation, Chubais said, and the country is considering contacting international debt ratings agencies to try to obtain a ratings upgrade.

Under the terms of the accord, the Paris Club will apply an immediate conversion rate of 0.6 ruble to the dollar on monies owed to the former Soviet Union, in order to make those debts comparable to debts owed other member states.

After that conversion, there will be a discount of 30% to 80% applied on debts owed to Russia, with the discount amount to be based on the financial health or fragility of the debtor country.

The 80%-discount level will only apply to the poorest and most indebted countries.

Even with the discounts, Chubais said he expects payments on these debts to jump dramatically now that Russia is part of the Club.

Chubais said that until now, Russia had been repaid at an average rate of $150 million to $200 million per year, while repayments from now are expected to range from $500 million to $700 million per year.

[05] Waigel pours cold water on talk of Bonn diverging from 3.0% deficit criteria

Deputies in Chancellor Helmut Kohl's Christian Democrats had distanced themselves from the view that the euro could only be launched if potential members score a direct hit on financial targets in a paper.

Waigel also downplayed remarks by Foreign Ministrer Klaus Kinkel that appeared to allow for EMU even if Germany and France had budget deficits of 3.2 percent of gross domestic product, instead of the three percent target set by the Maastricht Treaty.

'Kinkel stresses that he didn't speak about 3.1 or 3.2 percent. This was contained in the question, but was not a comment from him,' Waigel said.

'What's in the CDU/CSU paper is not a divergence from what the chancellor and I have said about fulfilling the criteria,' Waigel said at a news conference to present the German versions of the new euro coins.

The Maastricht Treaty requires members of European economic and monetary union to achieve a deficit of not more than three percent. Some members of Kohl's coalition insist this must mean exactly 3.0%.

But when Kinkel was asked in a radio interview if the euro would come as planned on January 1, 1999, even if the deficit criterion stood at 3.0, 3.1 or 3.2%, he replied: 'Indeed, that's how it will be.'

His comments represented one of the clearest indications to date that Bonn will not insist on a strict interpretation of the Maastricht criteria when EMU members are chosen next year.

The minister has often advised journalists asking about the deficit criterion to look in the treaty, which talks of 'three percent' and not 3.0.

'The euro will come in accordance with the timetable and adhering to the stability criteria, that means also the deficit margin which is demanded,' he added in Wednesday's interview, a transcript of which was released by his ministry.

EBN interactive round-up

[06] UK retail sales and jobless data point to a continuing economic boom

The latest U.K. retail sales and labour market data are likely to provide some cause for concern that the current rate cycle is far from over.

And with the Bank of England indicating in the latest minutes of its Monetary Policy Committee meeting that inflationary risks are 'skewed to the upside,' rates are not expected to remain on hold at 7% for long.

Market-watchers are placing their bets on a further quarter point rate rise to 7.25% in November, while some economists predict rates could go even higher.

'There is scope for a 25 basis point rise in November, but I wouldn't rule out rates going up to 7.5% by the end of the year,' said Nick Stamenkovic, economist at DKB International.

'If spending continues to grow at a healthy pace, the inflationary risks are still to the upside,' he pointed out.

In addition, he said, the Bank of England doesn't have to worry so much about higher interest rates boosting sterling and damaging the export industry, since the pound has been declining from the eight-year high against the Deutsche mark it hit in July.

U.K. retail sales went up 0.4% in August and 5.6% on the year, according to the Office for National Statistics. The numbers were much stronger than a Dow Jones median survey which had forecast 0.1% growth on the month, and 5.2% from 1996.

Sales of household goods hit an all-time high of 8.2% on the quarter, clear evidence that the current consumer boom shows no sign of abating, according to analysts.

ONS officials said this was mainly due to the continued spending of windfall gains made from free shares issued to deposit holders in U.K. building societies that have been converting to publicly listed banks.

The ONS said household goods sales in the latest quarter were 17.7% higher than at the same time a year ago.

The rise pushed retail sales growth up 6.0% over the last three months, its highest rate of growth since September 1988.

But with the cash value of August retail sales are only 6.4% higher than a year ago, and some economists feel there is little evidence of inflationary pressures building up on the high street itself.

'With volumes up 5.6%, price inflation therefore remains incredibly modest, ' said Richard Iley, economist at ABN-Amro Bank.

Underlying average earnings rose to 4.5% in July on the year, their highest since March and above forecasts for 4.25% growth in a Dow Jones survey.

'The combination of continuing buoyant consumer confidence and pay growth returning to the critical rate of 4.5% should see the monetary policy committee raise rates again,' added Iley.

U.K. unemployment fell a seasonally adjusted 48,600 in August against expectations for 30,000, while the unemployment rate fell to 5.3% from 5.5% in July.

The unemployment rate is now at a 17-year low while further evidence of a tightening labour market came with news of a 64,000 rise in the number of workers in jobs in the second quarter.

[07] Yamaichi Securities is suspended from government bond trading in corporate payoff scandal

The long-term impact of a series of arrests and further Ministry of Finance punishments on the smallest of Japan's 'Big Four' brokerages will take time to determine, but Yamaichi will surely suffer a drop in revenue in the current fiscal year, industry watchers agree.

Earlier in the day, Japan's Securities and Exchange Surveillance Commission filed a criminal complaint against Yamaichi, accusing the brokerage house of violating securities law by compensating 'sokaiya' corporate racketeer Ryuichi Koike for trading losses.

The Tokyo District Public Prosecutors Office then arrested one current and four former Yamaichi officials on suspicion of paying off Koike, and raided the brokerage firm's head office.

To top it off, the Ministry of Finance then indefinitely suspended Yamaichi from underwriting and bidding for Japanese government bonds until a formal administrative punishment has been suspended.

'Initially, (the MOF suspension) is just a slap on the wrist,' says J. Brian Waterhouse, an analyst at James Capel Pacific in Tokyo. 'But if (the punishment) is as severe as Nomura, the impact will be significant.'

Around 40% of Yamaichi's business derives from equity commissions, compared with less than 30% for Nomura, according to Robert Garone, an analyst at Dresdner Kleinwort Benson (Asia) in Tokyo.

If stuck with the same kind of penalties as Nomura, 'Yamaichi will probably take a hit of 25 billion yen ($207 million) in revenue this fiscal year from the drop in commissions and underwriting,' Garone says. 'This is going to hurt their image as well.'

At a press conference following the SESC and MOF announcements, Yamaichi President Shohei Nozawa concurred, and was pessimistic about the current fiscal year earnings.

'It is going to be tough,' to post a pretax profit for the fiscal year ending March 1998, Nozawa says.

[08] Clinton calls on Congress to pass key tobacco reforms

The five guidelines include boosting the price of a pack of cigarettes by as much as $1.50 over the next ten years to cut teenage smoking, giving the Food and Drug Administration full power to regulate nicotine, forcing the tobacco industry to reveal its past misconduct, promoting health goals such as cutting back on second-hand smoke, and protecting America's tobacco farmers from any financial fallout from a tobacco deal.

The President's announcement stakes out his position on any proposed tobacco legislation and marks a sharp departure from the approach advocated by state attorney's general.

Several state attorneys general hammered out a complex settlement with the tobacco industry earlier in the summer in the hopes that it would be used as the basis for new legislation.

However, since then, it has become increasingly clear that Congress wouldn't act on formulating any tobacco legislation this year. Given this, the White House decided to issue a set of principles that any final deal would have to include instead of adopting a more detailed approach.

[09] IMF upbeat on outlook for global economy

'There are reasons to believe that the current expansion can be sustained, possibly into the next decade,' the IMF said in its new World Economic Outlook. It foresees global growth of about 4.5% a year over the next five years, compared with an average of 3.75% over the past quarter-century.

The U.S. will continue to lead the world economy, the international financial institution said. It predicted the U.S. economy, which grew 2.8% in 1996, will expand by an inflation-adjusted 3.7% this year and 2.6% next year, substantially faster than the IMF projected six months ago, without much of a pickup in inflation.

But the IMF said the Federal Reserve probably will have to raise interest rates to ensure that the economy slows in time to avoid an acceleration of inflation.

The IMF outlook for continental Europe is largely unchanged. The agency expects the European recovery to 'gradually gain momentum,' thanks to healthy exports and interest-rate reductions made last year. The IMF sees growth in Germany of 2.3% this year and 2.8% in 1998, and in France of 2.2% this year and 2.3% in 1998.

The IMF reduced its growth forecast for Japan by a full percentage point for both 1997 and 1998. It now predicts growth this year to be little better than 1%, compared with 3.5% in 1996. 'Should growth fail to pick up in the second half of 1997, some fiscal measures' -- tax cuts or spending increases -- 'will need to be considered,' it said. For 1998, it predicted growth of 2% to 2.25%, but said the fallout from Southeast Asia's currency crisis could mean slower growth.

Still, the IMF gave three reasons to justify its upbeat outlook for the global economy:

-- It sees few signs of the 'tensions and imbalances' that usually precede downturns. Inflation is subdued, and the commitments of central banks to price stability are 'perhaps stronger than at any other time in the post war era.' Governments are reducing budget deficits. Exchange rates are 'generally . . . consistent with medium-term fundamentals.'

-- Unemployment and unused industrial capacity in continental Europe and Japan has kept the world economy from overheating despite strong growth in the U.S. and some smaller industrialised countries. As economies in the U.S., United Kingdom and elsewhere slow, revived growth elsewhere will pick up the slack.

-- The economic successes in developing countries and in countries emerging from communism will provide new markets and production capacity, 'stimulating trade and growth worldwide while helping to dampen price pressures.'

David Wessel, The Wall Street Journal

[10] Euro may be more significant than the currencies it replaces, IMF says

Underlying demand for the euro will reflect policies and economics in the E.U. member countries that merge their systems to create the new currency, according to the Washington-based IMF's semi-annual World Economic Outlook.

In preparing for the euro's introduction, planned for 1999, the IMF said there are significant risks for Europe. 'A particularly difficult scenario would be one in which a delay in EMU's start date was perceived as a significant possibility,' said the report.

'Concerns about whether the process as a whole will proceed as planned could lead to widespread turbulence in European financial markets, which would erode confidence further, slow output growth and widen fiscal deficits,' said the IMF. It said dangers of turbulence would intensify if economic fundamentals, such as unemployment, worsened.

The IMF said that while macroeconomic fiscal and budget conditions appear to be satisfying Maastricht treaty conditions, efforts to improve labour market conditions have shown less promise. 'This is the main criticism,' said an official of the IMF commenting on the report.

Minimising risks could be best achieved through intensified efforts to fiscal actions this year and next by the member countries, said the IMF. Early understandings reached between member governments about the participation plans would also help calm nerves, even if some of the details weren't publicly disclosed, the IMF said.

'Compliance with the inflation and interest rate criteria now appears to have been achieved by all those E.U. members that plan to participate initially,' the IMF said. But it also said that a number of candidates, including France and Germany, may not strictly satisfy the 3% fiscal deficit target for 1997 'partly owing to relatively large margins of economic slack, which have raised public expenditures and reduced tax revenues.'

But on a cyclically adjusted, or structural basis, the IMF said, its estimates suggest that the deficits of all early EMU candidates will be within about 2% of GDP. On that basis, fiscal imbalances pose less of a risk to macroeconomic and fiscal stability, the fund said.

'What is important at this stage is a clear commitment of those countries to go significantly further in their fiscal consolidation efforts in 1998 and beyond with greater emphasis on fundamental reforms,' the IMF added.

Meanwhile, the multilateral organisation forecast that 'over the medium to longer term, several factors suggest a broader role and thus greater demand for the euro than for the current E.U. currencies, which are currently underrepresented in global transactions relative to the U.S. dollar despite the similar size of their economic bases.'

Proof of the under-representation of the E.U. currencies is that although both the U.S. and Europe account for about 20% of world trade flows, nearly half of global trade is priced in dollars but only 30% in E.U. currencies. The differences are even more pronounced in global asset holdings, official reserves of governments and in foreign exchange transactions, said the IMF.

But within Europe, the euro will present lower transaction costs for trade and should find interest there as a reserve currency.

The IMF said the associated shift in portfolios away from dollars will represent only a modest portion of U.S. international assets and liabilities, which stood at $3.35 trillion and $4.13 trillion, respectively, at the end of last year.

The economic impact of the euro for the U.S., as well as for Japan, is partly contingent on usage patterns of the new euro currency, although the IMF said likely trends are unclear. 'The emergence of the euro may well hamper the development of the yen as an international currency, although the planned deregulation of the Japanese financial sector should increase the attractiveness of the yen for non-residents,' the report said.

Discussing the likely move away from established currencies, such as the dollar, the IMF said 'the shift will occur gradually, as market participants become familiar with the properties of the euro and as the incumbency advantages of other reserve and vehicle currencies linger.'

For the euro itself, the important issue is not how widely it becomes accepted for portfolio or reserve purposes, but how well its member countries are performing. 'In fact, the effects of increased demand for the euro for portfolio purposes are likely to be less important than such influences as the stance of policy and differences in economic performance across countries,' concluded the IMF.

The IMF said the greatest effect could be for some countries in eastern and central Europe, as well as for the African countries in the so-called franc zone, particularly highly indebted countries that tie their currencies to E.U. ones but have dollar obligations.

[11] EU set to block P&O-Stena link unless substantial changes are made

'We will indicate whether we will ultimately go for prohibition,' the official, who asked not to be named, said.

The Commission already informed P&O and Stena in June of its 'serious doubts' about the linkup, under which the U.K. and Swedish company plan to combine their cross-Channel ferry services. In particular, EU regulators say the venture risks creating a dominant duopoly between P&O Stena and the Channel Tunnel operator.

'The key question is the risk of the duopoly situation with the tunnel,' the official said, adding that the ferry operators, and Eurotunnel would together 'have something like 86%' of the passenger and freight market.

P&O and Stena plan to combine their respective ferry operations on the Short French Sea and Belgian Straits in a new joint venture company, P&O Stena Line.

Under the agreement, the new venture would operate a regular service between the Southern UK port of Dover and Calais in France, departing every 45 minutes. The company will continue to operate P&O's current three vessel, freight-only service on the Dover/Zeebrugge route as well as Stena's services on the Newhaven in the U.K. to Dieppe in France route.

The Commission began probing the linkup last October. In its so-called 'statement of objections' to be sent next week, the companies will have six weeks to reply and come up with a modified arrangement

[12] Kingfisher earnings jump 36% to $225 million, bolstered by UK businesses

The UK retailer said profit before exceptionals jumped to £150.1 million ($225 million) from £110.7 million a year earlier. Analysts had projected that the company would earn between £135 million £141 million.

Kingfisher raised its dividend to 6.5 pence a share, ahead of forecasts for a 5.5 pence a share payout.

Kingfisher's overall sales increase by 10.3%, with like-for-like sales growth of 7.9%. The strongest like-for-like sales increase was at electrical appliances retailer Comet, rising 12.4%, just higher than home improvements division B&Q which saw growth of 12%.

Chief Executive Sir Geoffrey Mulcahy said: 'B&Q's strong growth with (total) sales up 19% and profit up 54% demonstrates further improvements in operational efficiency and that B&Q is outperforming the market.'

The group's French operation's profit was unable to equal the performance of the group's other main businesses as sterling's strength cut profit by £7.9 million to £37.7 million .

'The results have been achieved in a difficult economic environment which has led to erratic electrical market changes,' the company said.

'Overall, market trends have been slightly negative, with political uncertainty ahead of and during the election affecting consumer confidence, ' Kingfisher added.

[13] Pechiney first half profit nearly triples

The French group's net profit in the first six months soared to 1.03 billion French francs ($175 million) from 426 million francs on higher sales and 560 million francs in capital gains.

And Pechiney said that if the stronger demand in the aluminium and packaging markets and the price of aluminium and the strength of the dollar all maintained their first-half levels, 'the company should have a significant rise in its operating profit compared to the second half of 1996.'

In order to meet those demands, chairman Jean-Pierre Rodier said that the company would boost aluminium production by 40,000 metric tons by the end of the year and another 85,000 tons by the end of 1998. As a result, he said, 'Pechiney should be at full production by the end of 1998.'

Pechiney had reduced its production by 125,000 tons a year over the past two years. According to the company's 1996 annual report, Pechiney has factory capacity to produce 1,052,000 tons of aluminium a year.

[14] Kodak vow to trim costs may result in massive layoffs

The company's financial woes pivot around a film-price feud with archrival Fuji Photo Film, which has been underselling Kodak on its home turf by as much as 20% to 30% this summer. Kodak earnings also have been hurt by the dollar's strength abroad and weak sales of photofinishing products, X-ray film and recordable CDs.

Operating profit in the third quarter could be as much as 50% lower than a year ago. The company earned $410 million, or $1.22 a share, on revenues of $4.18 billion for the third quarter ended Sept. 30, 1996.

While providing few specifics, Kodak promised to cut costs sharply, sell underperforming businesses and trim the work force of 94,000.

'We've raised the bar for ourselves in terms of how much cost we think we do have to get out,' said Kodak's chief financial officer, Harry Kavetas. 'We're not nickel-and-diming things. We want to get an important result and we want to get it in place and realise it as quickly as possible.'

The poor outlook caused Kodak stock to fall 5% Tuesday after an 8% slide Monday.

Eastman Kodak Chief Executive George Fisher has favoured a unit-by-unit assault on bloated costs since taking over in 1993. He plans to meet Thursday with his division chiefs and then with investors in New York in November.

'They're being extremely evasive,' said Gene Glazer, an analyst with Fortis Advisers in New York. 'This does involve people losing their jobs and they've got to be sensitive on that.

'To be effective, to have some impact, it would have to be thousands' of layoffs, Glazer predicted. He said the cutbacks would likely occur over a period of time.

B. Alex Henderson of Prudential Securities said Kodak officials, in a conference call with Wall Street analysts Tuesday, suggested that its actions might take a while.

'They need very aggressive and quick action here to stabilise their earnings,' he said. 'The idea that they may not do it this year begs the question, 'Well, gee, how long are you going to let the damage accrue?''

Over the last year, Kodak has steadily lost domestic market share to Fuji in its core film business - which generates half its profits - and the rate of loss has accelerated at mass merchandisers, drug stores and food stores.

Kodak said it will try to claw back share through promotions, distribution deals and advertising but will hold back on cutting film prices.

Kodak's share of the U.S. film business has fallen 4-to-6 percentage points over the last year and Fuji's has jumped to about 20%, Henderson said. 'It brings Kodak down under 70 points if you're talking (film) units,' he said.

John Larish, a consultant and writer on electronic photography, said he expects Kodak to hone in on cuts in middle management.

[15] Adecco set to buy $387 million TAD Resources International

TAD is a privately held provider of personnel services, especially in technical fields, and has 312 branches. Its revenues in 1996 totaled more than $1 billion.

Adecco said the transaction is expected to close by the end of October.

The Swiss company said the acquisition represents a step in its drive to gain the first or second positions in the major markets worldwide.

[16] Japan's trade surplus more than doubles, setting stage for G-7 pressure

The nation's global trade surplus for August totalled 742.1 billion yen, chalking up a 113.6% jump from a year before, the Finance Ministry said. The August figure represented the fifth consecutive monthly increase.

The politically sensitive surplus with the US also soared 59.8% from a year earlier to 350.6 billion yen, the eleventh consecutive rise.

The ministry reiterated the surplus' surge is a short-lived movement stemming mainly from sluggish domestic demand following an April 1 consumption tax hike.

Japan, however, is expected to come under strong pressure from the U.S. and other Group of Seven countries at their weekend meeting in Hong Kong to ensure a domestic demand-led recovery and avoid a significant rise in the trade surplus.

A Finance Ministry official said the ministry does not rule out the possibility that Japan's trade surplus will show an uptrend over a short period.

'Given the recent structural changes in Japan's trading behaviour, however, the nation's trade surplus is unlikely to continue a surge over the medium and long term,' he said.

The Group-of-Seven industrialised nations, whose financial officials will meet in Hong Kong this weekend, 'wouldn't want to turn off that tap and risk pushing the Japanese economy into a recession,' said Matthew A. Poggi, an economist at Lehman Brothers.

However, without a significant appreciation of the yen, Japan's trade surplus is unlikely to shrink even if domestic demand improves.

As a result, the trade surplus 'will definitely go higher,' Poggi said.

A continued rise in Japanese car exports to the U.S. will likely remain a sore point with U.S. car makers. However, analysts said they didn't expect the Clinton administration to actively take up the issue.

'The U.S. is not that concerned about the external sector,' Poggi said, noting that the U.S. economy remains strong.

Japan's auto exports to the U.S. surged 41.5% in value during August compared with a year earlier.

Some analysts suggested that Japanese manufacturers, including car makers, may start to increase their exports to Europe to deflect some of the criticism from the U.S.

Japanese car makers 'have an informal quota of auto exports' to Europe, Morgan said. With continued criticism from U.S. car makers, 'they may try to ease' that quota, he said.

Poggi said he hadn't noticed a redirection of exports to Europe so far, but added that Japanese manufacturers were likely to increase local production in the US and Europe to help check export growth.

[17] European aerospace industry is expected to continue its rapid growth

Speaking at the Association's annual review of the European Association of Aerospace Industries in London, General Secretary Peter Fitchmuller said first-half results from aerospace companies across Europe show 'significant growth over and above that seen last year.'

'This was demonstrated by Airbus which has taken almost as many orders in the first half of this year as it took in the whole of 1996,' said Fitchmuller.

However, he warned companies mustn't be complacent and should remember they operate in a cyclical industry and that a downturn in activity will eventually occur.

'But this downturn, when it comes, will be less dramatic than the last one five years ago,' he said.

'When the peaks and troughs are ironed out we forecast average annual growth of 2% to 3% over the next 20 years,' he added.

Sir Dick Evans, chairman of British Aerospace and president of the 6 was achieved in part by an upturn in the civil aircraft market but also as the industry recovered from the end of the cold war.

'Cold war changes are bottoming out and now governments have a number of new defense decisions to take,' Evans said.

[18] European and Corporate Briefs

Next said it boosted pretax profit to £71.2 million ($112.5 million) from £56 million for the first-half on the back of strong sales growth in almost all its divisions. The latest figure included an exceptional gain of £3.9 million, the difference between a £9.4 million gain on the disposal of shares in BSkyB and a £5.5 million provision for a deficit in the employee share scheme. Overall sales rose to £520.9 million from £406.4 million for the first half of 1996. Next raised its interim dividend to 6.0 pence against 5.0 pence and earnings per share increased to 13.9 pence against 10.9 pence. The profit and dividend were at the higher end of analysts' forecasts.

Bowthorpe said the strength of sterling pushed its interim pretax profit down 5.4% to £40.2 million ($63.5 million) - in line with market expectations. Bowthorpe said the latest profit figure would have been 4.0 million GBP higher at constant exchange rates. The group expects to take a total hit of £7 million to full-year pretax profit, assuming current exchange rates prevail. The adverse impact of exchange rates more than offset a modest underlying growth the group experienced in all segments and geographic regions except the UK. Bowthorpe said the improvement in market conditions it highlighted at the annual general meeting in May continues; the order books are strengthening and there's been a modest improvement in margins.

Vendex International said it plans to set up convenience stores with Exxon's Europe unit, Esso. In a news release Vendex said the stores will focus on the sale of food and will be set up separately from Esso's existing gas stations. The first of the stores is expected to open in the spring of 1998. Esso operates about 700 gas stations in the Benelux and runs refineries in Antwerp and Rotterdam. Its annual sales are about 15 billion Dutch guilders ($7.35 billion). Vendex owns leading supermarkets and convenience stores in the Netherlands and Belgium and in its 1996-1997 fiscal year booked net sales of around 4.8 billion guilders.

Ascom Holding , a maker of telecommunications products, said its first- half pretax income surged but warned against extrapolating that development over a longer period. Ascom said its pretax income rose to 95 million Swiss francs ($63.3 million) from 8 million francs in the first half of 1996. The company said much of the gain came from the $130 million sale in June of its Nexion unit to Fujitsu Network Communications, a unit of Fujitsu Ltd. of Japan. For that reason, company Chairman Felix Wittlin cautioned against 'making an extrapolation into the future...for fear of arousing false hopes.'

Italy's industrial wholesale sales index rose an unadjusted 7.2% in June from a year earlier, the state statistical institute Istat said. The most recent sales figure compares with an unchanged index in May, Istat said.

CRH said that it bought US CPM Development, an aggregates and concrete maker in Spokane, Wash., for a cash sum of $94 million. CRH said the CPM Development acquisition continues the expansion of its Oldcastle unit in the western US. CPM Development's plants in Washington and Idaho will function as a stand-alone within Oldcastle's facilities in Idaho, Nevada, Utah, Colorado and New Mexico. CPM Development earned pretax profit of $14.6 million in calendar 1996 on sales of $131 million. The company said that no goodwill cost will be charged as a result of the acquisition.

Austrian consumer prices in August were up 1.2% from a year earlier, but unchanged from July, the Central Statistics Office reported. The August Consumer Price Index figures are roughly in line with revised July data, showing prices were up 1.1% from a year earlier and flat from June, the agency said.

French car seat and luggage maker Bertrand Faure said that net profit in the first-half of 1997 rose to 280.5 million French francs ($45.9 million) from 175.8 million francs, due to improved results in the automotive division. The car seat division had operating earnings of 513.8 million francs in the first-half of 1997 compared with total operating earnings of 558.4 million francs, the company said. Meanwhile, Bertrand Faure said it continued to reduce debt due to favorable interest rate changes. But it noted that taxes had increased by 75.9 million francs not only because of higher earnings but because of the new French corporate tax rules instituted this summer.

Neste is bidding 494m Austrian schillings ($39.5m) for Austria's Krems Chemie, a deal which Neste said will make the company the world's largest maker of adhesive resins. The Finnish oil, energy and chemicals company said the bid is strongly supported by the management and major private shareholders of Krems Chemie. Neste said it is offering 585 schillings a share, which it said is a 34% premium over the highest price paid for Krems shares over the past four weeks. The Finnish company has already bought 15% in Krems Chemie and committed to itself to another 20% from the major private shareholders.

Bic said that the New York state supreme court of appeals approved the suspension of the sale of US Sheaffer to its management and set a court date for January 1998. Bic had applied to the appeals court for a suspension of the sale in late August. Bic said it signed a contract with Sheaffer's key shareholder Gefinor on July 31 to buy the US pen maker for an undisclosed amount and that Sheaffer had since broken that contract. Gefinor, a Luxembourg bank with headquarters in Geneva, on Aug. 22 agreed to allow Sheaffer's management to take over the company instead, Bic said. Bic contends the management illegally exercised their so-called 'first rights' option on the company. The management is operating under the name of Alchemy Partners.

The supervisory board of German diversified industrial group Preussag approved the company's takeover of German travel group Hapag-Lloyd, Preussag said. Preussag has sought to acquire a 99.2% stake in Hapag-Lloyd from its current major shareholders - Gevaert, Veba, Lufthansa, Metro, Deutsche Bank, Dresdner Bank and Veritas. The company plans to acquire the remaining 0.8% from minority shareholders at a later date. Preussag said in August it would buy Hapag Lloyd at a price of 1,040 Deutsche marks a share.

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

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