European Business News (EBN), 97-09-30

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CONTENTS

[01] French unemployment surge casts shadow over job creation talks

[02] Italy GDP grows 1.6% in second quarter

[03] Shell International to restructure into three broad geographic areas

[04] Benetton's profit soars 21% to $80 million

[05] Societe Generale de Belgique seeks merger partner

[06] ING refuses to comment on rumours it that will buy Banque Bruxelles

[07] Winterthur posts a 41% first half profit rise to $240 million

[08] EU Court opinion backs mad cow ban on British beef

[09] Cordiant first half profit rises 30% to $32.3 million

[10] Fletcher Challenge Canada sells Blandin Paper to UPM-Kymmene for $650 million

[11] Federal judge rules against ITT's plans for a three way split

[12] Friends Provident fined $724,000 by UK pensions watchdog

[13] Telefonica expected to pay $62 million to leave Unisource

[14] Boeing forecasts production difficulties over next six months

[15] Britain's Manchester United soccer club to launch subscription television channel

[16] Switzerland CPI data support SNB's loose policy

[17] Japan data suggests economy is unlikely to recover soon

[18] Corporate and Economic Briefs

[01] French unemployment surge casts shadow over job creation talks

The number out of work jumped by 19,600 to 3,132,600, slightly above the previous record of 3,130,900, reached in June, the month when the Socialist- led government took power with jobs as its top priority.

Data issued by the employment ministry showed an unemployment rate, measured on the basis of International Labour Organisation standard, of 12.5%, unchanged from the previous month.

'There's been an economic pick-up for a short while now, led by exports, but to have an impact (on jobs) it will have to go on for longer and internal demand will have to pick up,' said Jean-Louis Mourier, an economist at Louis Dreyfus Finance.

But an increase in unemployment on such a scale is politically delicate and will increase the pressure on the government ahead of the talks it has called between unions and employers.

'If anything, it does put a little more pressure on the government to push ahead with the national conference on unemployment,' Merrill Lynch strategist Joanne Perez said.

Adding to the pressure, three unions at France Telecom held a one-day strike in opposition to its sale, which they fear will lead to more job cuts.

Socialist Prime Minister Lionel Jospin said on French TF1 television yesterday that even if economic growth were set to pick up on the way into 1998, more would be needed to create a sufficient number of jobs.

His 'Pink-Red-and-Green' coalition wants to create 350,000 youth jobs over three years with the help of state funds and by cutting in the legal work week to 35 hours from 39.

This second leg of its job creation strategy depends largely on the extent to which it can get employers and unions to negotiate a shift to a shorter work week.

Employers and unions are due to meet in less than two weeks for the 'national conference' on jobs and work time, with employers vehemently opposed to any attempt to set a deadline by law for the shift to a shorter week.

One employer representative has gone as far as suggesting a boycott of the talks.

French Finance Minister Dominique Strauss-Kahn said on Monday that he wanted a relatively speedy transition to the 35-hour week.

Jospin acknowledged that the task would be tough, and the government has yet to reveal whether or not it will set a deadline for the transition to 35 hours.

[02] Italy GDP grows 1.6% in second quarter

National statistics office Istat said gross domestic product between April and June jumped 1.6% quarter-on-quarter against a provisional forecast released last month of 1.5%. On a year-on-year basis, GDP grew 1.9% from a forecast 1.7%.

It was the largest quarterly increase since early 1995. Analysts said the data had been helped by statistical and calendar effects, but added that the economic outlook was better than many had previously thought after a disastrous first quarter, when GDP fell 0.6% year-on-year.

'The economy is not some rocket heading off into the sky, but things are steadily improving,' said Giovanna Mossetti, chief economist at Milan brokerage Caboto.

Many analysts scoffed at original government targets for economic growth of an annual 1.2% in 1997 as overly optimistic, but they now concede that the goal will probably be reached and say the official 1998 forecast of 2% growth is too cautious.

Next year's economic outlook is also boosted by prospects of further interest rate cuts as European monetary policy converges ahead of the planned launch of the single currency in 1999.

'We now see GDP at 2.4% next year, but you must remember that this will still be well below average growth for western Europe which is seen at 3.3%, ' said Ilaria Fornari, analyst with JP Morgan in Milan.

The second quarter GDP figures were pumped up by a boom in car sales as Italians rushed to take advantage of a generous government scheme introduced to encourage people to scrap old vehicles and buy new ones in exchange. The transport sector, dominated by carmaker Fiat, saw a 10% year- on-year increase in fixed investments as car production was stepped up to satisfy demand.

Istat said the car incentive programme was also behind a dramatic 14.3% year-on-year growth in imports. Exports rose a more modest 6%, but their actual worth was still well above that of imports.

[03] Shell International to restructure into three broad geographic areas

The proposed changes, which involve taking a more pan-European viewpoint, could affect approximately 15% of European Oil Products jobs during the next two to three years, the release said.

The proposed changes include: Aligning the manufacturing, supply and distribution activities in Europe into one separate entity in order to optimise profits across the total Europe supply chain.

This will involve the establishment of a new management services company, Shell Europe Oil Products on January 1 1998, which will promote European strategies and sales support activities.

Beneath this single European unit, the manufacturing, supply and distribution activities will be grouped into three broad geographic areas - probably north, west and south, a Shell International spokesman said.

'Each cluster will be managed in its own right, and there will also be a pan-European management of the whole,' he said. He was unable to specify which countries could be most affected by the changes. Many country managers of oil product operations are also involved in other activities such as upstream activities, he noted.

The press release said Shell would be 'commercialising support service functions to support front line customer service and deliver economies of scale'.

When asked whether the statement means that support service functions will be contracted out, the Shell spokesman said: 'Outsourcing is a possibility'.

The new SEOP management services company will be led by a president and nine vice-presidents, three of which will cover sales across the region. The others will be responsible for manufacturing, supply and distribution, retail, commercial, human resources, finance/planning and transformation. The company will have a supervisory board consisting of chief executives of four of the major operating companies.

[04] Benetton's profit soars 21% to $80 million

First half net profit was 140 billion lire ($80.9 million), or 9% of sales.

The company said it made Ulrich Weiss, a member of member of its board. Deutsche Bank's Weiss is responsible for Italy, Spain and Portugal in addition to southwest Germany. He is chairman of the board of Continental, and sits on boards of corporations including BASF, Fiat and ABB Mannheim.

Benetton has long-standing ties to Deutsche Bank, the company said explaning the appointment.

Consolidated sales rose 5% to 1.539 trillion lire ($888.9 million) in the first half, the company said.

'The increase in profit is due to the company's effort to improve its industrial organisation and managerial efficiency, which has resulted in cost reduction as well as a more efficient distribution and commercial strategy,' Benetton said in a statement.

Gross operating margin rose 45 billion lire, or seven percent, to 639 billion. Operating profit was up 13% at 230 billion lire.

The group had a net cash position of 88 billion lire at the end of the first half, compared to debt of 235 billion lire at the same period last year.

[05] Societe Generale de Belgique seeks merger partner

Etienne Davignon said a merger with Banque Bruxelles Lambert was still a possibility as was a merger with banking group ASLK-CGER.

Belgian banking stocks have gyrated recently on the back of speculation about the creation of a big Belgian bank, an idea that has waxed and waned since 1995.

Speculation that a merger for BBL is imminent mounted earlier in the day when Belgian Dutch-language daily De Morgen reported that Dutch financial group ING Groep is preparing a takeover bid for the bank. ING already controls 20% of BBL's voting rights.

Davignon said that the chances of a merger with BBL were slim for the time being. 'On the basis of the knowledge available today I don't see a merger happening unless something comes up,' he said.

The SGB chief said the idea of forming a big Belgian bank, which would be able to compete in the post-monetary union world, remained a priority for the industry in Belgium.

'I think we're all preoccupied, in the most positive sense of the word, by this situation,' Davignon said.

Earlier, Societe Generale de Belgique announced first half net profit rising to 11.44 billion Belgium francs this year from 6.72 billion francs in 1996, thanks in part to a large boost in exceptional income.

SGB said profit from one-time items rose to 3.35 billion francs in first- half 1997 from only 407 million francs ($313.4 million) in the like period of 1996. Profit before exceptional items rose to 8.09 billion francs from 6.31 billion francs.

[06] ING refuses to comment on rumours it that will buy Banque Bruxelles

'We're still in the phase that we don't comment on speculation or rumours. Now and then they're coming up and, well, we let it be and we have nothing to say,' ING spokesman Ruud Polet told AP-Dow Jones.

The daily newspaper De Morgen reported that, 'according to its information, there is an effective offer for BBL in the making.'

ING owns 13.4% of BBL's capital and controls another 6.73% until February via the voting rights of Befco Investment, a Belgian holding company. Rumors have circulated for years that ING - which made an unsuccessful bid for BBL in 1992 - is planning to buy BBL.

BBL spokeswoman Louise Van Heel said the lender, the second largest in Belgium in terms of its balance sheet, has not been informed of any changes in shareholding.

'For us, we're not aware of any imminent changes in the shareholding. We're becoming a bit blase because this sort of situation arises every two or three months. It's just another scenario about the bank's future,' Van Heel said.

ING is a Dutch banking and insurance company.

[07] Winterthur posts a 41% first half profit rise to $240 million

The company reported a first half group net profit of 350.5 million Swiss francs ($240.8 million) as compared to a profit of 248.4 million in the 1996 first half. Gross premiums were up by more than nine percent to 15.64 billion.

Winterthur said it expected its 1997 profit clearly to exceed the 21% growth rate of the previous year.

'Subject to any unusual events in the remaining months of the year, we expect to achieve a growth rate which is clearly above that of the previous year (plus 21%),' Winterthur chief executive Peter Spaelti said in a speech prepared for an interim news conference.

Winterthur's 1996 group net profit totalled 506.7 million Swiss francs.

Winterthur said in its report that the first half was marked by intensified cooperation with Credit Suisse, by an extended application of its multi- distribution concept, a stronger focus on customer needs and further structural streamlining.

Commenting on the full-year outlook, Spaelti said premium growth would be especially high in Asia/Pacific markets, but unfavourable economic conditions, deregulation, stiffer competition and a profitability-oriented underwriting policy would limit growth in various European markets, including Switzerland.

Winterthur also expected investment income to rise while investment expenses remain relatively stable for the full year. 'Thus, we expect a substantially higher net investment income by the end of 1997 as against the previous year,' Spaelti said. First half investment income rose to 3.298 billion Swiss francs as compared to 2.778 billion in the same period of 1996.

Spaelti said this higher investment return would have 'an important impact' on the increase in annual profit.

He also said shareholder equity would rise markedly as against the end of 1996 due to a wide margin on stocks and the influx of capital following the conversion of a bond issue.

In addition, he forecast that the expense ratio in non-life operations would remain stable for the full year and improve in the near future because of restructuring projects and synergy effects from the planned merger with Credit Suisse.

[08] EU Court opinion backs mad cow ban on British beef

The opinion by the European Court of Justice's Advocate General, Giuseppe Tesauro, came after the ban was challenged by Britain's National Farmers Union, with the government's backing.

The full court is expected to rule on the issue by the end of the year, but the advocate general's opinion often is a good indication which way the ruling will go.

The EU's executive Commission banned exports of British beef in March 1996 after researchers linked mad cow disease to a fatal human ailment, Creutzfeldt-Jakob Disease.

Tesauro said that the gravity of mad cow disease, or Bovine Spongiform Encephalopathy, 'constituted a real risk, which vindicates the decision.'

The NFU, whose farmers have suffered from the ban, said the EU Commission, which runs the day-to-day affairs of the 15-nation bloc, was acting outside of its mandate when it imposed the ban.

NFU president Sir David Naish stressed Tesauro's opinion 'still has to be considered by the European Court of Justice later this year' and added Britain had 'taken enormous steps forward in further helping to eradicate the risk of BSE.'

British Agriculture Minister Jack Cunningham said that despite the legal action, the government was 'working constructively with the European Commission ... which would permit the gradual resumption of beef exports.'

The ban also covers exports to non-EU nations. 'The ban on exports to non- member countries is an indispensable tool for ensuring that the decision is truly effective,' Tesauro said.

The ban has proved to be flawed. The EU Commission has said it was aware of illegal exports involving only some 2,200 tons of beef.

EU spokesman Klaus Van der Pas said the Commission's powers to enforce the ban were limited because border controls

[09] Cordiant first half profit rises 30% to $32.3 million

Cordiant said trading margins improved by nearly a third in the period, and chairman Charles Scott said the demerger into Saatchi & Saatchi and Cordiant Communications Group was expected to aid revenue momentum and margin improvement.

Cordiant added that its first half profit was £20.2 million ($32.3 million). The comparable figure last year was £15.5 milllion.

Underlying revenue and trading profit, excluding the impact of disposals and exchange rates, rose by 7.2% and 48.4% respectively.

The group broke out pro forma results for its two future demerged companies. Saatchi & Saatchi made pre-tax profit of £7.6 million on revenue of 190.2 million, while CCG turned in pre-tax profit of 13.1 million on revenue of 158.6 million.

The two advertising agencies will jointly own Cordiant's other business, media services group Zenith.

Cordiant is not paying a half-year dividend, but said the two demerged groups would propose final dividends for the current year equivalent to 1.2 pence per Cordiant share.

Cordiant, which faced intense financial difficulties earlier in the 1990s, said the first half performance, together with new business wins, showed that revenue momentum and an associated improvement in margins was beginning to be realised.

[10] Fletcher Challenge Canada sells Blandin Paper to UPM-Kymmene for $650 million

Fletcher Challenge Canada said the deal will enable it to 'further focus the energy and resources of the company on our newsprint and groundwood specialty paper business - which targets the markets of western North America and northern Asia.'

The company added that it remains committed to growing its newsprint and groundwood specialty paper business.

The sale will result in an after-tax gain of about C$300 million for Fletcher Challenge Canada. The company said closing is subject to necessary regulatory approvals and is expected to occur by the end of November.

The sale of the Blandin mill is the second major transaction announced by Fletcher Paper in two days.

It follows the announcement on Monday that Fletcher Paper's wholly owned subsidiary UK Paper has sold its Donside mill in Scotland for £33 million (NZ$84 million).

'In recent months, Fletcher Challenge Paper has undertaken four significant transactions totalling around NZ$2 billion in value to progress its strategy,' said Hood.

'The transactions announced (Monday and Tuesday), and the sale of Fletcher Challenge Canada's 51.6% interest in TimberWest Forest Ltd., in Canada, have seen us exit from activities outside our proposed core businesses. Meanwhile, we have lifted our presence in our desired product and geographic arenas by increasing our shareholding in Australian Newsprint Mills to 100%.'

Fletcher Challenge Canada President Doug Whitehead said the decision to sell the Blandin Mill follows the previously announced consideration of strategic alternatives for Blandin.

'While a full range of options was considered for Blandin, we concluded this transaction locks in excellent value for shareholders,' said Whitehead.

[11] Federal judge rules against ITT's plans for a three way split

U.S. District Judge Phillip Pro issued an injunction against the plan and ordered ITT to hold its once-postponed annual meeting by Nov. 14.

Hilton Chairman Steve Bollenbach immediately offered to discuss possible takeover terms with ITT, but ITT spokesman Jim Gallagher indicated the company would take the issue to its shareholders.

'We look forward to and welcome a shareholder vote,' Gallagher said. 'We remain highly confident that ITT's plan provides greater shareholder value.'

Pro did not address the legality of the split itself, but said that ITT's attempt to stagger the terms of its board of directors as part of the plan was an attempt to 'impede the shareholder franchise.'

Pro said he found 'no justification as to why the implementation of the comprehensive plan cannot be deferred until at the annual meeting.'

ITT had wanted to implement the plan prior to its annual meeting, which was postponed from May and now must be held by Nov. 14.

Bollenbach hailed the decision as a victory for ITT stockholders and said he would contact the company Tuesday to try and work out a takeover settlement.

'My hope is that the management of ITT will work with us to structure this transaction to maximize the value to all our shareholders,' Bollenbach said. 'I will attempt to contact them tomorrow (Tuesday) to try and do that.'

The ruling came after two hours of oral arguments on Hilton's attempt to block the plan announced July 15 to split ITT into three companies. ITT said at the time that it did not need shareholder approval for the plan.

Hilton, which has offered $11.5 billion for ITT, turned to the courts to try and win its takeover battle after ITT rejected an earlier bid and then announced the decision to split into three companies to try and thwart the takeover.

Hilton, which covets ITT's casino operations, launched its takeover bid in January with an offer of $55 a share. It later raised it to $70 a share, or $8.3 billion, and said it would assume $3.2 billion of ITT debt.

[12] Friends Provident fined $724,000 by UK pensions watchdog

The PIA said the fine was levied for Friends Provident failure to take all reasonable steps to carry out the review of the misselling and monitor the review by other businesses for which it had accepted responsibility.

The company was also ordered to pay PIA costs of £20,000. The fine is the largest ever imposed by a financial regulator in connection with the pensions scandal.

Serious failings were found by the PIA's pension review monitoring department during a visit conducted in June 1997, particularly the slow progress in reviewing priority cases.

The regulator said it had taken account of the substantial resources allocated for the review by the firm and that a significant proportion of the cases related to business purchased by Friends Provident where it had inherited an obligation to carry out the review.

Friends Provident is the latest in a long list of companies to have fallen foul of the regulators as efforts to sort out pension misselling have been stepped up.

On Monday Midland Bank was hit with a fine £150,000 by the Investment Management Regulatory Organisation.

There have been 43 PIA fines to date totalling £1,150,000. DBS Financial Management was fined £425,000 at the beginning of September, the largest penalty imposed prior to today.

[13] Telefonica expected to pay $62 million to leave Unisource

A Telefonica spokesman declined to comment.

According to an article in the Cinco Dias financial daily, Telefonica's board approved a plan last week whereby the telecommunication company will renounce its 25% stake in Unisource and at the same time regain control of its data transmission unit TTD as well as its satellite transmission unit VSAT.

While the Spanish company's spokesman did confirm that there was a Telefonica board meeting on Friday, he didn't divulge what was discussed. In April, Telefonica signed a strategic alliance with British Telecom and MCI Corp., which called into question its previous alliance with Unisource, market participants said.

According to the same Cinco Dias article Telefonica originally tried pay Unisource in June around 1 billion pesetas to leave the venture.

The Telefonica spokesman declined to comment. If Telefonica's plan is accepted that will officially end the joint venture that the Spanish company had with Unisource as well as KPN, Telia and Swiss Telecom, the news article said.

At 0937 GMT Telefonica stocks were up 15 pesetas, or 0.3%, to 4,675 pesetas per share on volume of 704,533 shares traded.

[14] Boeing forecasts production difficulties over next six months

Philip Conduit, the chairman and chief executive officer of Boeing also said that Boeing believes there is a market for a new superjumbo but it is a small market and it might prove an 'impossible economic task' to recoup development costs.

Condit said that two years ago the company instituted a rapid increase in average production from 18.5 planes per month to 40 over an 18-month period.

'Such a rapid increase in production puts many strains on systems for suppliers to Boeing' and also creates problems in areas like training, Condit said.

By next spring, the company will complete its production buildup to 43 Boeing planes per month, and 48 per month when including McDonnell Douglas planes.

Boeing merged with McDonnell Douglas last August. To improve delivery speed, Boeing has begun a program which has elements of Toyota Motor Corp.'s 'just- in-time' system, concerning such areas as procurement of parts, but which is clearly adapted to aircraft needs. 'That program is currently going forward and should be completely implemented by late 1998,' Condit said. 'Certainly by 2000 most of the activity associated with that program will be completed.'

Condit also reiterated the possibility that Boeing might develop expanded variants of the 747 that would be less costly than developing a more ambitious all-new superjumbo as Airbus plans.

He said that Boeing believes there is a market for a new superjumbo but it is a small market and it might prove an 'impossible economic task' to recoup development costs.

'However, it is possible a derivative airplane can meet those conditions (for recouping costs) and be profitable to both airlines and Boeing,' Condit said.

The costs of developing and testing new variants of Boeing's 747 could amount to $1 billion, while the costs of developing Airbus' all-new superjumbo are estimated at a minimum of $8 billion.

[15] Britain's Manchester United soccer club to launch subscription television channel

The service, which will be broadcast on satellite and cable services, 'will provide an important source of future income for Manchester United', Chairman Sir Roland Smith said.

Each party will have a one-third equity stake in the venture, MUTV, which should be operational from autumn 1998.

The news came alongside the group's full year earnings which showed a rise in pretax profit to £27.6 million ($44.5 million) from £15.4 million in 1996.

Manchester are recommending a final dividend of 4.3 pence per share from 3.6 pence a year ago, pushing the company's total dividend to 6.2 pence from 5.2 pence in 1996.

Earnings per share grew to 29.8 pence from 27.6 pence per share, while sales rose 65% to £87.9 million.

Manchester United's move into television is the first such initiative by an English soccer club. MUTV will be a daily service offering six hours of prime-time programming.

It will show live and recorded coverage of United reserve and youth games, first team frendlies and matches from the archives. It will also feature interviews with players and staff.

Martin Edwards, the chairman of Manchester United, wouldn't give any financial details about the venture, although he did say BSkyB and Granada would put up 'most of the money.'

He said the business plan estimates break even in three years, and that subscribers were likely to be paying up to £10 ($16) a month for the channel.

Edwards noted one assumption of the plan is United gets around 10% of its fan base subscribing to the channel.

Manchester United said the new service will provide an important source of future income. As well as subscription revenues, United will use the channel as a means to advertise club products.

[16] Switzerland CPI data support SNB's loose policy

The Federal Statistics Office said that Swiss consumer prices were flat on the month in September and rose 0.4% from a year earlier. Monthly and annual growth rates both slowed in September after rising 0.2% and 0.5%, respectively, in August.

'The rise was slightly less than expected,' said Bernard Lambert, an analyst at Geneva-based private bank Pictet & Cie. Like most market- watchers, he had expected a 0.1% monthly rise and 0.5% annual growth.

But Lambert won't change his full-year inflation forecast on the data, calling them 'the usual divergence observed on month-to-month forecasts.' He expects inflation to stand at an annual 0.5% at year end, down from 1.5% a year earlier, and forecasts an average rate of 0.5% for the year, below 1996's 1.0%.

Ernst Zbinden, head of fixed-income analysis at private lender Bank Leu, called the data 'a slight surprise' and said he'll cut his year-end and full-year average inflation estimates, both of which stand at 0.6% now.

'The figures are a clear confirmation of the Swiss National Bank's loose policy,' he said, adding that the weaker-than-expected price growth lets the SNB 'extend its expansive phase.'

However, Bank Leu's Zbinden cautioned that short-term interest rates will rise markedly as soon as leading indicators signal an economic upturn. He sees inflation standing at 1.2% on the year at the end of 1998 and averaging 0.9% next year.

'For the time being, the SNB will continue its current (expansive) policy,' said Andre Tomfort, senior economist at Bank Julius Baer. But if the Bundesbank were to raise rates in 1998, the Swiss central bank would likely follow suit to avoid the danger of imported inflation stemming from a weaker Swiss franc, he added.

The SNB's discount rate, now at 1.0%, is likely to remain unchanged, but short-term rates would climb if the central bank were to drain liquidity from the money market, Tomfort said.

A consensus forecast published by the Swiss Association of Business Economists projects average inflation of 0.7% in 1997 and 1.3% in 1998.

Anita Greil, Dow Jones Newswires, Zurich

[17] Japan data suggests economy is unlikely to recover soon

'Things are getting less bad and you can say that consumption has troughed. But these figures also reinforce the fact that you can't look for a sustainable domestic demand-led recovery until next year,' said Cameron Umetsu, senior economist at UBS Securities in Tokyo.

The Ministry of International Trade and Industry said industrial production shrank by 2.2% from levels in July, far outpacing the 0.8% decline that MITI forecast last month and exceeding the 1.4% decline forecast on average by economists surveyed by Dow Jones Newswires.

August shipments declined by 1.8% and inventories edged 0.2% higher, pushing the inventories- to-shipments ratio up 1.9% to a reading of 118.8 - the highest level since June 1996.

'The biggest disappointment was industrial output,' said Mineko Sasaki- Smith, senior economist at CS First Boston in Tokyo.

'Industrial production's not weak enough to help with inventory adjustment efforts, but it's not recovering either. Output will probably remain weak for an extended period,' she said.

MITI says it expects industrial output to contract by 0.4% in the July- September quarter compared with the previous quarter.

Japanese housing starts figures also continued to languish in August, falling 17.5% from a year earlier to 112,004 units for the eighth consecutive month of declines from the prior year, the Construction Ministry said.

Economists said the figures were in line with expectations, partly reflecting strong growth in housing investment in the year-earlier period.

'The year-ago numbers did exaggerate the weakness partially, but they were also weak in absolute terms,' said Peter Morgan, economist at HSBC James Capel in Tokyo.

Some said that expectations that tax reform steps set to take effect in the fiscal year beginning April 1, 1998 could continue to damp demand, as home buyers wait to take advantage of the moves.

The one positive feature in August was the smaller pace of decline in retail sales compared with the year earlier. Overall retail sales dropped 0.5% to 11.344 trillion yen ($94.53 billion), showing a smaller decline than the 1.9% fall in July and the 4.0% fall in June.

'Retail sales are slowly inching higher - and these were the best figures since April,' said Matthew Poggi, economist at Lehman Brothers in Tokyo.

Brian Fowler Dow Jones Newswires, Tokyo

[18] Corporate and Economic Briefs

A consortium of Belgium's Kredietbank and insurer Irish Life will raise its 10% stake in Hungary-based Kereskedelmi & Hitelbank to 57%, marking the second stage in the privatization of the Hungarian retail bank. Irish Life and Kredietbank will double their initial investment of $30 million and receive the larger share, while the European Bank of Reconstruction and Development will convert its subordinated bond loan of $30 million to KHB into a 17% stake in the bank. This second stage of the privatization will be completed by the end of November, said a Kredietbank spokeswoman.

The Nokia telecommunications group has clinched a $165 million deal to supply Thailand's Digital Phone Company with a GSM 1800 cellular network and transmission system. The agreement will cover supplies over the next five years, and makes Nokia DPC's sole supplier of the Global System of Mobile communications systems.

Finland's total output of goods and services increased by 7.8% in July from the same month a year earlier, Statistics Finland said. After adjustment for seasonal variation, output in July was 0.8% higher than in June. Figures in the table compare the latest month with the same month a year earlier.

The Finnish government's decision on a possible merger of the state-owned power company Imatran Voima Oy and state-controlled petrochemicals concern Neste Oy may be announced tomorrow. 'We are preparing our decision to give to the economic committee today,' Ministry of Trade and Industry Director General of Industry Markkuakinen told Dow Jones. The economic committee is chaired by Finland's Prime Minister Paavo Lipponen and includes Trade and Industry Minister Antti Kalliomaki and six other ministers in Lipponen's cabinet, Makinen said. The ministry has been in charge of evaluating the potential merger of the country's two largest energy concerns since June.

Promodes Chairman Paul-Louis Halley said that he would offer a seat on Promodes' board to Casino Guichard family shareholders, according to a question-and-answer interview in Les Echos. 'I am interested in having at my side someone knowledgeable about Casino, his attachments, his traditions and his culture,' Halley said. Antoine Guichard, the head of the Guichard family, would be a welcome member, Halley said. Promodes launched an offer for rival Casino at the beginning of September. It bettered that offer last week after Rallye, which already owns 29% of Promodes' equity and 36% of its voting rights, launched its own white-knight bid.

Primagaz said that net profit in the half-year to June 30 1997 fell 33% to 147 million French francs ($24.9 million) from 218 million francs in the same period in 1996. The company attributed its poorer performance to warm weather in Europe in the first quarter of 1997, higher tariffs, higher input prices, and an increase in investment write-offs. Operating profit fell 28% to 339 million francs on a 7.1% improvement in revenues to 4.99 billion francs. Primagaz said in a statement that full-year net profit will fall by 15% to 20%, but second-half earnings should be improved from the same period last year.

Caisse d'amortissement de la dette sociale said it has established a new 60 billion French francs ($10 billion) credit line in preparation for financing an additional 87 billion francs in social security deficits as of Jan. 1, 1998. The quasi-governmental agency said 50 billion francs of the credit is being syndicated by a group of six banks, including Banque Nationale de Paris, Credit Agricole-Indosuez, Dresdner Bank, JP Morgan, NatWest Markets and UBS. Cades said it is also ending a syndicated credit for 20 billion francs of an original 60 billion francs launched in June 1996 among these same banks. Cades was established in early 1996 to pay down 140 billion francs of accumulated French social security deficits from 1992 through 1995 over the following 13 years with a special surtax, called the Remboursement de la dette sociale.

Societe Generale said it bought the remaining 38.4% of Credit du Nord that it had already said it would buy in an agreement with Groupe Paribas earlier this year. In January, Societe Generale said it would buy the bank from Paribas in a multi-part agreement for a total of 2.2 billion French francs ($372.8 million) in cash over three years. The move essentially ends Paribas' retail banking operations in France. Credit du Nord swung to a 1996 net profit of 191 million francs from a 14 million francs loss the prior year thanks to a 25% reduction in bad loan provisions.

The European-Taiwanese high-speed rail consortium led by Germany's Siemens and France's GEC Alsthom is hot favorite to win a multi-billion- dollar contract to construct a high-speed rail link in Taiwan, German economics minister Guenter Rexrodt said. Rexrodt had met with Taiwanese officials in Taipei yesterday, who last week said that the Franco-German consortium was the front-runner in the bidding for the rail contract. The economics minister noted, however, that the consortium still needs to use considerable 'persuasion' to convince the Taiwanese to accept its bid over that of a Asian rival by year-end. The 345-kilometer high-speed rail link from Taipei to Kaosiung is slated for completion by 2003 at a cost of 21 billion Deutsche marks $11.6 billion), according to consortium estimates.

GEC Alsthom said it has won a $160-million order to supply drive systems for subway trains in New York. The group said in a statement that the order covers the manufacture of 952 'drive propulsion systems' which will be produced by US engineering group Bombardier. GEC Alsthom said part of the systems will be made at its recently acquired US plant at Hornell 'in order to meet US regulatory requirements'.

Norway's current account showed a surplus of 5.3 billion Norwegian kroner ($738.1 million) in July, wider than the 4.9 billion kroner surplus in July 1996, Statistics Norway, the national statistics agency said. The July surplus was also wider than the June surplus of 4.5 billion kroner, according to the agency. But in the first seven months, Norway's current account showed a surplus of 40.5 billion kroner, narrower than 42 billion kroner in the same period of 1996, due to lower investment income.

The Swedish Consumer Confidence Indicator improved to 6 in September from 2 in August, national statistics agency SCB reported. A positive number indicates that households believe economic conditions are improving and a negative number that they expect deteriorating conditions. The portion of households who believe economic conditions in Sweden will improve over the coming 12 months rose by 7 percentage points in Sept. from August, while those who believe the economy will deteriorate declined by 5 percentage points. Also, the households surveyed expect consumer prices to rise 1.8% in the coming 12 months, unchanged from August.

UK building materials group Hepworth announced a first-half pretax profit of £11.1 million ($17.7 million), a fall by more than two-thirds from £35.5 million for same period a year ago. The company's profit was hit by strong sterling, which took out £2.2 million, a pension charge of £3.4 million, up from £2.9 million a year ago, and closure of unit Saunier Duval's Beligian factory in May which took away £5.9 million from the profit line. A further loss of £13 million was sustained on the sale of discontinued operations, such as the refractories division in April. Profit came in well below analysts' consensus forecasts of £24 million, but the company heeded observers' advice and cut the interim dividend to 3.0 pence a share from 5.5 pence a share a year ago. The group said profit levels weren't high enough to provide adequate cover for the historic level of dividend

Yule Catto & Co reported a 3.7% rise in first-half pretax profit to £18 million ($28.8 million) in line with market expectations. However, sales slipped to £184.5 million from £193.3 million, largely due to currency translation, the company said. Earnings per share grew to 11.6 pence from 10.6 pence, while the dividend was increased to 4.0 pence from 3.6 pence. A continuing emphasis on higher value products combined with operating efficiencies has again resulted in better overall profitability, the group said. The group also said underlying growth in its chemical operations has been strong, 'maintaining the consistent upward trend in profitability over many years'. Trading conditions in the UK have been generally favorable for the group's chemical operations, although there have been more competitive pressures in overseas markets, especially in the Far East, the company said.

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

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