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Could Yukos be a blessing in disguise?
Other things being equal, the notion of entrepreneurs languishing in jail while their companies are sold off for a song ought to be bad for business.
But in the looking-glass world of modern Russia, the opposite might just be true, a new report* has argued. The study, from the Centre for Economic Policy Research, does not praise the rough handling of oil company Yukos. But it argues that more rigorous tax policing has benefited all Russian firms, even targets of the tax police. "An increase in tax enforcement can increase the amount [of dividends and other income] outside shareholders will receive, even accounting for increased levels of taxation," the authors say.
The paper's reasoning is complex, and is based on a sophisticated model of the relationship between tax regimes and corporate governance - in particular, the propensity of management to steal from the company. The calculations demonstrated what many Russian analysts already knew: that increasing the tax rate increases the amount that managers steal, since undeclared income becomes relatively more valuable. In the West, meanwhile, higher tax rates translate far more smoothly into higher government revenues. On the other hand, increasing the rigour with which taxes are collected encourages companies to become more transparent, forcing them to be able to demonstrate their financial position far more accurately. The net result, the authors say, is that the extra amount companies pay in tax is more than compensated for by greater efficiency and financial soundness.
After Vladimir Putin became president in 2000, he did not raise taxes, but put a lot of effort - too much, critics argue - into enforcement.
Since then, the Russian stock market has more than trebled in value, a rise the authors attribute at least in part to the newly tough approach. The report highlights the case of Sibneft, a Russian oil company that came close to merging with Yukos last year. After Mr Putin came to power, the company's overall effective tax rate rose from 2.6% to 10.4%, and Sibneft was the target of a series of aggressive raids by fiscal police. But shareholders benefited hugely: Sibneft started to pay dividends - $53m in 2000 and almost $1bn in 2001 - and closed down the network of opaque subsidiaries it had previously used for siphoning off unofficial funds. According to the authors, although a variety of changes were sweeping through Russian industry at the time, the increase in tax enforcement is the only likely explanation for the change of fortunes at Sibneft and many of its peers.
Does this analysis make sense? In part, certainly. For all its faults, corporate Russia has become far more orderly and law-abiding since 2000. Companies have rushed to list their shares on international stock exchanges - something unthinkable in the wilder days of the 1990s - and most large firms now produce their accounts to international standards. Foreign direct investment, long negligible, is starting to flow in serious amounts - $7bn in 2003 - and stock market returns have been among the healthiest in Europe. But the authors' model does not quite cover all the complexities. For a start, the model assumes that the various parties have clearly-defined motivation: companies want to maximise profit, governments want to maximise tax revenue. In fact, the alarmingly close connections between big business and government in Russia - connections often greased by bribery - blur the apparently antagonistic relationship. Companies can, for example, persuade officials to overlook non-payment of taxes.
And the authors' definition of tax enforcement seems unrealistically Western. Genuine, disinterested tax collection might well work wonders in Russia; the problem with recent examples has been the erratic and unpredictable way laws are enforced. The case against Yukos, for example, has moved in fits and starts, with little clarity from the government about its intentions, and little faith from investors that the letter of the law would be followed. As far as most commentators are concerned, the state is pursuing Yukos out of a political vendetta, rather than simply to enforce fiscal rectitude. Since Yukos' founder, Mikhail Khodorkovsky, was arrested a year ago, the Russian market has dropped by 10% - an indication that few investors feel optimistic about the salutary effect on corporate performance.
| But it argues that more rigorous tax policing has benefited all Russian firms, even targets of the tax police.The calculations demonstrated what many Russian analysts already knew: that increasing the tax rate increases the amount that managers steal, since undeclared income becomes relatively more valuable.The net result, the authors say, is that the extra amount companies pay in tax is more than compensated for by greater efficiency and financial soundness.Since then, the Russian stock market has more than trebled in value, a rise the authors attribute at least in part to the newly tough approach.The report highlights the case of Sibneft, a Russian oil company that came close to merging with Yukos last year."An increase in tax enforcement can increase the amount [of dividends and other income] outside shareholders will receive, even accounting for increased levels of taxation," the authors say.According to the authors, although a variety of changes were sweeping through Russian industry at the time, the increase in tax enforcement is the only likely explanation for the change of fortunes at Sibneft and many of its peers.Genuine, disinterested tax collection might well work wonders in Russia; the problem with recent examples has been the erratic and unpredictable way laws are enforced.And the authors' definition of tax enforcement seems unrealistically Western.The paper's reasoning is complex, and is based on a sophisticated model of the relationship between tax regimes and corporate governance - in particular, the propensity of management to steal from the company.On the other hand, increasing the rigour with which taxes are collected encourages companies to become more transparent, forcing them to be able to demonstrate their financial position far more accurately.For all its faults, corporate Russia has become far more orderly and law-abiding since 2000. |
India and Iran in gas export deal
India has signed a $40bn (£21bn) deal to import millions of tonnes of liquefied natural gas from Iran.
Firms led by the Oil & Natural Gas Corporation (ONGC) will also assist in the development of Iranian oil fields. Ministers, eager to gain access to energy supplies to meet the demands of a booming economy, secured a similar deal to one between Iran and China. The announcement comes as ONGC said it was in talks to buy former assets of troubled Russian oil firm Yukos. The agreements with Iran were sealed after talks in New Delhi between Middle East producers and Asia's biggest energy consumers - China, India, Japan and South Korea.
Iran - Opec's second-biggest oil producer and one of the world's top gas producers - has been pursuing a series of deals, rewarding LNG buyers with participation in development of its oil fields. Under the agreement, it will supply India with 7.5 million tonnes of LPG annually over a 25 year period from 2009. ONGC and the National Iranian Oil Company (NIOC) reached a preliminary deal for Indian firms to take part in the development of the Yadavaran and Jufeyr oilfields, both countries said in a statement. India's oil production has stagnated over recent years, and it is having to look abroad to secure future supplies. India imports about 70% of its total oil consumption. Consumption has jumped to 2.4 million barrels per day, compared with 474,000 bpd in 1973.
| Iran - Opec's second-biggest oil producer and one of the world's top gas producers - has been pursuing a series of deals, rewarding LNG buyers with participation in development of its oil fields.India imports about 70% of its total oil consumption.India has signed a $40bn (£21bn) deal to import millions of tonnes of liquefied natural gas from Iran.Firms led by the Oil & Natural Gas Corporation (ONGC) will also assist in the development of Iranian oil fields.ONGC and the National Iranian Oil Company (NIOC) reached a preliminary deal for Indian firms to take part in the development of the Yadavaran and Jufeyr oilfields, both countries said in a statement. |
'Standoff' on Deutsche's LSE bid
Deutsche Boerse investors unhappy with its London Stock Exchange bid will have no chance to throw out the exchange's management until May, Reuters says.
The Sunday Times reported that hedge funds TCI and Atticus were planning to demand the removal of the group's chairman and chief executive. But Deutsche Boerse told news agency Reuters such a move would have to wait until May's annual general meeting. Investors want Deutsche to return cash to shareholders rather than bid. "We are long-term investors and are experienced in removing management. We are not scared to take this to its conclusion this time," Atticus' David Slager told the Sunday Times. However, Deutsche Boerse told Reuters: "TCI's request for the removal of the supervisory board will be considered at the annual general meeting on May 25."
The Sunday Times reported that TCI had been drawing up a list of heavyweight executives to replace Deutsche's chairman Rolf Breuer and chief executive Werner Seifert. The group owns more than 5% of Deutsche - more than enough to demand an extraordinary general meeting to call on shareholders to oust the German exchange's management. Under German law Deutsche does not need investor backing to make a takeover bid. TCI and Atticus have opposed the LSE bid for some time saying it would destroy shareholder value, and would be better spent on a share buyback. Deutsche is in competition with pan-European bourse Euronext to take over the London exchange. Many commentators have suggested a bidding war between the two could break out. However, any such move would have to wait until March when the Office of Fair Trading completes an investigation into the competition aspects of the pair's takeover proposals.
| Deutsche Boerse investors unhappy with its London Stock Exchange bid will have no chance to throw out the exchange's management until May, Reuters says.But Deutsche Boerse told news agency Reuters such a move would have to wait until May's annual general meeting.However, Deutsche Boerse told Reuters: "TCI's request for the removal of the supervisory board will be considered at the annual general meeting on May 25."The group owns more than 5% of Deutsche - more than enough to demand an extraordinary general meeting to call on shareholders to oust the German exchange's management.Under German law Deutsche does not need investor backing to make a takeover bid.The Sunday Times reported that hedge funds TCI and Atticus were planning to demand the removal of the group's chairman and chief executive. |
Indonesia 'declines debt freeze'
Indonesia no longer needs the debt freeze offered by the Paris Club group of creditors, Economics Minister Aburizal Bakrie has reportedly said.
Indonesia, which originally accepted the debt moratorium offer, owes the Paris Club about $48bn (£25.5bn). Mr Bakrie told the Bisnis Indonesia newspaper that a $1.7bn donors' aid package meant that the debt moratorium was unnecessary. This aid comes on top of a previously-pledged $3.4bn package. Most of this 'normal aid' would be used to finance the country's budget deficit. The Indonesian Economics Minister explained that the money - $1.2bn in grants and $500m in soft loans - was for the rebuilding of Aceh province, which was badly hit by the tsunami of 26 December. Nevertheless, one of Mr Bakrie's deputies, Mahendra Siregar, told AFP news agency that Indonesia was still considering the offer by the Paris Club of rich creditor nations to temporarily suspend its debt payments. "What is true is that we are still discussing... the Paris Club decision to find out more details such as how much of our debt will be subject to a moratorium. That's how far we are at this stage," said Mr Siregar.
The 19 member countries of the Paris Club are owed about $5bn this year in debt repayments by nations affected by the Indian Ocean tsunami. Indonesia, Sri Lanka and the Seychelles accepted the Paris Club offer, which was criticised by some aid groups as being too little. Thailand and India have however declined the offer, with Thailand prefering to keep up with its payments while India said it would prefer to rely on its own resources rather than on international aid. Putting off payments may lower a country's rating among financial organisations, making it more expensive and more difficult for them to borrow money in the future, analysts said. Separately, the Indonesian government has said it will announce monthly how much it has received in foreign donations and how it has spent the money. Welfare Minister Alwi Shihab told AP news agency that this announcement should allay suspicion of official corruption in relief operations.
| Indonesia, which originally accepted the debt moratorium offer, owes the Paris Club about $48bn (£25.5bn).Mr Bakrie told the Bisnis Indonesia newspaper that a $1.7bn donors' aid package meant that the debt moratorium was unnecessary.Indonesia no longer needs the debt freeze offered by the Paris Club group of creditors, Economics Minister Aburizal Bakrie has reportedly said.Nevertheless, one of Mr Bakrie's deputies, Mahendra Siregar, told AFP news agency that Indonesia was still considering the offer by the Paris Club of rich creditor nations to temporarily suspend its debt payments.Indonesia, Sri Lanka and the Seychelles accepted the Paris Club offer, which was criticised by some aid groups as being too little.The 19 member countries of the Paris Club are owed about $5bn this year in debt repayments by nations affected by the Indian Ocean tsunami. |
Markets signal Brazilian recovery
The Brazilian stock market has risen to a record high as investors display growing confidence in the durability of the country's economic recovery.
The main Bovespa index on the Sao Paolo Stock Exchange closed at 24,997 points on Friday, topping the previous record market close reached the previous day. The market's buoyancy reflects optimism about the Brazilian economy, which could grow by as much as 4.5% in 2004. Brazil is recovering from last year's recession - its worst in a decade.
Economic output declined 0.2% in 2003 and President Luiz Inacio Lula da Silva - elected as Brazil's first working-class president in 2002 - was strongly criticised for pursuing a hardline economic policy.
Investors have praised his handling of the economy as foreign investment has risen, unemployment has fallen and inflation has been brought under control. Analysts believe the stock market will rise above the 25,000 mark for the first time before too long. "There should be more space for gains until the end of the year, somewhere up to 27,000 points," said Paschoal Tadeu Buonomo, head of equities trading at brokers TOV. Brazil's currency, the real, also rose to its highest level against the dollar in more than two years on Friday. Although interest rates still stand at a punitive 17.25%, inflation has fallen from 9% to 7% while exports are booming, particularly of agricultural products. "For the first time in decades, we have all three economic policy pillars in line during a recovery," Finance Minister Antonio Palocci told the Associated Press news agency. "Government accounts are in surplus, we have a current account surplus and inflation is under control."
Investors were deeply suspicious of President da Silva, a former trade union leader who campaigned on a programme of extensive land redistribution and a large rise in the minimum wage. However, Mr da Silva has stuck to an orthodox monetary policy inherited from his predecessor even in the face of last year's economic crisis. This has earned him the disapproval of rural farm workers, thousands of whom who took to the streets of Brasilia on Thursday to protest against government policies. President da Silva has defended his policies, arguing that Brazil cannot afford to continue the cycle of boom and bust which afflicted it in recent decades.
| Investors have praised his handling of the economy as foreign investment has risen, unemployment has fallen and inflation has been brought under control.The Brazilian stock market has risen to a record high as investors display growing confidence in the durability of the country's economic recovery.However, Mr da Silva has stuck to an orthodox monetary policy inherited from his predecessor even in the face of last year's economic crisis.President da Silva has defended his policies, arguing that Brazil cannot afford to continue the cycle of boom and bust which afflicted it in recent decades.Economic output declined 0.2% in 2003 and President Luiz Inacio Lula da Silva - elected as Brazil's first working-class president in 2002 - was strongly criticised for pursuing a hardline economic policy.Analysts believe the stock market will rise above the 25,000 mark for the first time before too long.Although interest rates still stand at a punitive 17.25%, inflation has fallen from 9% to 7% while exports are booming, particularly of agricultural products. |
Fed chief warning on US deficit
Federal Reserve chairman Alan Greenspan has warned that allowing huge US budget deficits to continue could have "severe" consequences.
Speaking to the House Budget Committee he urged Congress to take action to cut the deficit, such as increasing taxes. While the US economy is growing at a "reasonably good pace" he warned that budget concerns were clouding the economic outlook for the US. Pension and healthcare costs posed the greatest risks to the economy, he said.
The government program faces severe financial strains in coming decades as the massive baby-boom generation retires. "I fear that we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver. If existing promises need to be changed, those changes should be made sooner rather than later," Mr Greenspan said. He also warned that unless the nation sees unprecedented rises in productivity "retirement and health programmes would need "significant" changes. He called on Congress to cut promised benefits for retirees, as the promised benefits for the soon-to-retire baby boom generation were much larger than the government could afford.
Meanwhile any move to narrow the deficit gap by raising taxes could pose a significant risk to the economy by dampening growth and spending, he added. He also urged Congress to reinstate lapsed rules that require tax cuts and spending to be offset elsewhere in the budget in an effort to prevent the US heading further into the red. Despite the dire warnings, Mr Greenspan did offer some good news for the short term. As US growth gathers steam and incomes rise that should lead to a narrowing of the deficit. Recent increases in defence and homeland security spending were also not expected to continue indefinitely, which should cut some costs. Since President George W Bush came to office the federal budget has swung from a record surplus to a record deficit of $412bn last year.
| Federal Reserve chairman Alan Greenspan has warned that allowing huge US budget deficits to continue could have "severe" consequences.He also urged Congress to reinstate lapsed rules that require tax cuts and spending to be offset elsewhere in the budget in an effort to prevent the US heading further into the red.While the US economy is growing at a "reasonably good pace" he warned that budget concerns were clouding the economic outlook for the US.Meanwhile any move to narrow the deficit gap by raising taxes could pose a significant risk to the economy by dampening growth and spending, he added.Speaking to the House Budget Committee he urged Congress to take action to cut the deficit, such as increasing taxes.As US growth gathers steam and incomes rise that should lead to a narrowing of the deficit. |
Mixed signals from French economy
The French economy picked up speed at the end of 2004, official figures show - but still looks set to have fallen short of the government's hopes.
According to state statistics body INSEE, growth for the three months to December was a seasonally-adjusted 0.7-0.8%, ahead of the 0.6% forecast. If confirmed, that would be the best quarterly showing since early 2002. It leaves GDP up 2.3% for the full year, but short of the 2.5% which the French government had predicted.
Despite the apparent shortfall in annual economic growth, the good quarterly figures - a so-called "flash estimate" - mark a continuing trend of improving indicators for the health of the French economy. The government is reiterating a 2.5% target for 2005, while the European Central Bank is making positive noises for the 12-nation eurozone as a whole. Also on Friday, France's industrial output for December was released, showing 0.7% growth. "The numbers are good," said David Naude, economist at Deutsche Bank. "They send a positive signal of a rebound in output... and open the way for a continuation in that trend into the New Year." Service sector activity improved in January, hitting a seven-month high. But unemployment remains high at about 10%.
| Despite the apparent shortfall in annual economic growth, the good quarterly figures - a so-called "flash estimate" - mark a continuing trend of improving indicators for the health of the French economy.Also on Friday, France's industrial output for December was released, showing 0.7% growth.It leaves GDP up 2.3% for the full year, but short of the 2.5% which the French government had predicted.Service sector activity improved in January, hitting a seven-month high.But unemployment remains high at about 10%. |
WorldCom director admits lying
The former chief financial officer at US telecoms firm WorldCom has admitted before a New York court that he used to lie to fellow board members.
Speaking at the trial of his former boss Bernard Ebbers, Scott Sullivan said he lied to the board to cover up the hole in WorldCom's finances. Mr Ebbers is on trial for fraud and conspiracy in relation to WorldCom's collapse in 2002. He pleads not guilty. The firm had been overstating its accounts by $11bn (£8.5bn). Mr Sullivan, 42, has already pleaded guilty to fraud and will be sentenced following Mr Ebbers' trial, where he is appearing as a prosecution witness. Mr Ebbers, 63, has always insisted that he was unaware of any hidden shortfalls in WorldCom's finances.
In the New York court on Wednesday, Mr Ebbers' lawyer Reid Weingarten asked Mr Sullivan: "If you believe something is in your interest, you are willing and able to lie to accomplish it, isn't that right?"
"On that date, yes. I was lying," replied Mr Sullivan. Mr Weingarten has suggested that Mr Sullivan is implicating Mr Ebbers only to win a lighter sentence, something Mr Sullivan denies. Mr Sullivan also rejects a suggestion that he had once told fellow WorldCom board member Bert Roberts that Mr Ebbers was unaware of the accounting fraud at WorldCom. The trial of Mr Ebbers is now into its third week.
Under 23 hours of questioning from a federal prosecutor, Mr Sullivan has previously told the court that he repeatedly warned Mr Ebbers that falsifying the books would be the only way to meet Wall Street revenue and earnings expectations. Mr Sullivan claims that Mr Ebbers refused to stop the fraud. Mr Ebbers could face a sentence of 85 years if convicted of all the charges he is facing. WorldCom's problems appear to have begun with the collapse of the dotcom boom which cut its business from internet companies. Prosecutors allege that the company's top executives responded by orchestrating massive fraud over a two-year period. WorldCom emerged from bankruptcy protection in 2004, and is now known as MCI.
| Mr Sullivan, 42, has already pleaded guilty to fraud and will be sentenced following Mr Ebbers' trial, where he is appearing as a prosecution witness.Mr Sullivan claims that Mr Ebbers refused to stop the fraud.Mr Weingarten has suggested that Mr Sullivan is implicating Mr Ebbers only to win a lighter sentence, something Mr Sullivan denies.Mr Sullivan also rejects a suggestion that he had once told fellow WorldCom board member Bert Roberts that Mr Ebbers was unaware of the accounting fraud at WorldCom.Mr Ebbers is on trial for fraud and conspiracy in relation to WorldCom's collapse in 2002.The trial of Mr Ebbers is now into its third week.In the New York court on Wednesday, Mr Ebbers' lawyer Reid Weingarten asked Mr Sullivan: "If you believe something is in your interest, you are willing and able to lie to accomplish it, isn't that right?"Mr Ebbers, 63, has always insisted that he was unaware of any hidden shortfalls in WorldCom's finances. |
News Corp makes $5.4bn Fox offer
News Corporation is seeking to buy out minority investors in Fox Entertainment Group, its broadcasting subsidiary, for about $5.4bn (£3.7bn).
The media giant, run by Rupert Murdoch, owns 82% of the shares in the company, home to the Fox television network and the 20th Century Fox film studio. The move follows News Corp's decision to register its business in the US. 20th Century Fox's recent film releases include I Heart Huckabees and I, Robot, while Fox puts out hit TV series 24.
Under the terms of the offer, minority Fox shareholders will receive 1.90 News Corp shares in return for each Fox share they hold. Analysts said the decision to list News Corp in the US - which will result in the firm's shares trading in New York rather than Sydney- nullified the need to retain a separate stock market listing for Fox Entertainment shares. News Corp investors voted in October to approve the transfer of the company's corporate domicile from Australia to the US state of Delaware. The move is designed to help News Corp attract more investment from the largest US financial institutions, and make it easier to raise capital. Fox Entertainment Group generated revenues of $12bn last year. News Corp shares fell 25 cents to $17.65 after the share offer was announced while Fox shares were up 19 cents at $31.22.
| Under the terms of the offer, minority Fox shareholders will receive 1.90 News Corp shares in return for each Fox share they hold.News Corp shares fell 25 cents to $17.65 after the share offer was announced while Fox shares were up 19 cents at $31.22.Analysts said the decision to list News Corp in the US - which will result in the firm's shares trading in New York rather than Sydney- nullified the need to retain a separate stock market listing for Fox Entertainment shares.News Corporation is seeking to buy out minority investors in Fox Entertainment Group, its broadcasting subsidiary, for about $5.4bn (£3.7bn). |
US trade deficit widens sharply
The gap between US exports and imports has widened to more than $60bn (£31.7bn), an all-time record.
Figures from the Commerce Department for November showed exports down 2.3% to $95.6bn, while imports grew 1.3% to $155.8bn on rising consumer demand. Part of the expanding deficit came from high prices for oil imports. But the numbers suggested the sliding dollar - which makes exports less expensive - has had little impact, and could indicate slowing economic growth.
The trade deficit - far bigger than the $54bn widely expected on Wall Street - prompted a rapid response from the currency markets.
By 1650 GMT, the dollar was trading against the euro at $1.3280, almost a cent and a half weaker than before the announcement. Against the pound, the dollar was down about 0.7% at $1,8923. "The dollar's fall has been sudden, violent and appropriate given this number," said Brian Taylor of Wells Fargo in Minneapolis. "Recent exchange rate movements certainly haven't had any impact yet." Treasury Secretary John Snow put a brave face on the news, saying it was a sign of strong economic expansion. "The economy is growing at such a fast rate that it is generating lots of disposable income... some of which is used to buy goods from our trading partners."
Although the White House officially still backs the US's traditional "strong dollar" policy, it has tacitly indicated that it would be happy if the slide continued. The dollar has fallen by 50% against the euro - as well as by 30% against the yen - in the past three years. The main catalyst, most economists accept, is the large budget deficit on the one hand, and the current account deficit - the difference between the flow of money in and out of the US - on the other. The trade deficit is a large part of the latter. In November, the fall in exports was largely due to a decline in sales of industrial supplies and materials such as chemicals, as well as of cars, consumer goods and food. One small bright spot for US policy-makers was a slight decline in the deficit with China, often blamed for job losses and other economic woes. Although China's overall trade surplus is expanding, according to Chinese government figures, the Commerce Department revealed the US's deficit with China was $19.6bn in November, down from $19.7bn the month before. But the deficit with Japan was at its worst in more than four years.
| Although China's overall trade surplus is expanding, according to Chinese government figures, the Commerce Department revealed the US's deficit with China was $19.6bn in November, down from $19.7bn the month before.Against the pound, the dollar was down about 0.7% at $1,8923.But the deficit with Japan was at its worst in more than four years.The gap between US exports and imports has widened to more than $60bn (£31.7bn), an all-time record.One small bright spot for US policy-makers was a slight decline in the deficit with China, often blamed for job losses and other economic woes.By 1650 GMT, the dollar was trading against the euro at $1.3280, almost a cent and a half weaker than before the announcement.But the numbers suggested the sliding dollar - which makes exports less expensive - has had little impact, and could indicate slowing economic growth.The trade deficit is a large part of the latter. |
Consumers drive French economy
France's economic growth accelerated in the last three months of 2004, driven by consumer spending, a report shows.
Gross domestic product (GDP) rose by 0.8% in the fourth quarter compared with the previous three month period, the statistical office INSEE said. That expansion pushed annual growth to 2.3%, the fastest rate in two years. Consumer spending was up by 1.2% in the fourth quarter, and there also was a rebound in business investment that gave the recovery an extra shove.
Analysts warned that France still was facing challenges and was unlikely to keep expanding at its current pace.
"France still has a strong economic growth," said Marc Toutai, an economist at Natexis Banques Populaires. "But, if we check the figures in detail, there's a problem." "Consumer spending is still high. But French households have spent their savings to consume. "France can't sustain a high growth rate without an improvement in the job market. There's too much of a gap between growth and employment." Unemployment levels are currently stuck at about 10%, and is proving difficult to bring down despite government efforts. Another worry is that demand in Germany and Italy, two of France's main trading partners, is sluggish.
Despite the concerns, analysts pointed out that France was outperforming the majority of its European counterparts and that its economy was looking more robust than in previous years. As well as strong domestic demand, exports climbed by 1.3% in the fourth quarter - the biggest increase in foreign sales for a year. "It's an economic growth that seems well balanced," said Nicolas Claquin, an analyst at CCF. "In the beginning of 2004, growth was mainly driven by consumer spending. Here it gets contributions from investment and exports, though household consumption is still strong. "But we expect overall economic growth to fall to 2.0 percent in 2005."
| "In the beginning of 2004, growth was mainly driven by consumer spending.France's economic growth accelerated in the last three months of 2004, driven by consumer spending, a report shows."France still has a strong economic growth," said Marc Toutai, an economist at Natexis Banques Populaires.Consumer spending was up by 1.2% in the fourth quarter, and there also was a rebound in business investment that gave the recovery an extra shove."Consumer spending is still high."It's an economic growth that seems well balanced," said Nicolas Claquin, an analyst at CCF.There's too much of a gap between growth and employment."Despite the concerns, analysts pointed out that France was outperforming the majority of its European counterparts and that its economy was looking more robust than in previous years. |
France Telecom gets Orange boost
Strong growth in subscriptions to mobile phone network Orange has helped boost profits at owner France Telecom.
Orange added more than five million new customers in 2004, leading to a 10% increase in its revenues. Increased take-up of broadband telecoms services also boosted France Telecom's profits, which showed a 5.5% rise to 18.3bn euros ($23.4bn; £12.5bn). France Telecom is to spend 578m euros on buying out minority shareholders in data services provider Equant.
France Telecom, one of the world's largest telecoms and internet service providers, saw its full-year sales rise 2.2% to 47.2bn euros in 2004.
Orange enjoyed strong growth outside France and the United Kingdom - its core markets - swelling its subscriber base to 5.4 million. France Telecom's broadband customers also increased, rising to 5.1 million across Europe by the end of the year. The firm said it had met its main strategic objectives of growing its individual businesses and further reducing its large debt. An ill-fated expansion drive in the late 1990s saw France Telecom's debt soar to 72bn euros by 2002. However, this has now been reduced to 43.9bn euros. "Our results for 2004 allow us to improve our financial structure while focusing on the innovation that drives our strategy," said chief executive Thierry Breton.
Looking ahead, the company forecast like-for-like sales growth of between 3% and 5% over the next three years. France Telecom is consolidating its interest in Equant, which provides telecoms and data services to businesses. Subject to approval by shareholders of the two firms, it will buy the shares in Equant it does not already own. France Telecom said it would fund the deal by selling an 8% stake in telephone directory company PagesJaunes.
| France Telecom, one of the world's largest telecoms and internet service providers, saw its full-year sales rise 2.2% to 47.2bn euros in 2004.Increased take-up of broadband telecoms services also boosted France Telecom's profits, which showed a 5.5% rise to 18.3bn euros ($23.4bn; £12.5bn).France Telecom is to spend 578m euros on buying out minority shareholders in data services provider Equant.France Telecom is consolidating its interest in Equant, which provides telecoms and data services to businesses.An ill-fated expansion drive in the late 1990s saw France Telecom's debt soar to 72bn euros by 2002.Strong growth in subscriptions to mobile phone network Orange has helped boost profits at owner France Telecom. |
UK 'risks breaking golden rule'
The UK government will have to raise taxes or rein in spending if it wants to avoid breaking its "golden rule", a report suggests.
The rule states that the government can borrow cash only to invest, and not to finance its spending projects. The National Institute of Economic and Social Research (NIESR) claims that taxes need to rise by about £10bn if state finances are to be put in order. The Treasury said its plans were on track and funded until 2008. According to NIESR, if the government's current economic cycle runs until March 2006 then it is "unlikely" the golden rule will be met. Should the cycle end a year earlier, then the chances improve to "50/50". Either way, fiscal tightening is needed, NIESR said.
The report is the latest to call into question the viability of government spending projections. Earlier this month, accountancy firm Ernst & Young said that Chancellor of the Exchequer Gordon Brown's forecasts for tax revenues were too optimistic.
It claimed revenues were likely to be £6bn below estimates by the end of the tax year despite the economy growing in line with forecasts. A Treasury spokesperson dismissed the latest claims, saying it was "on track to meeting spending rules and the golden rule in the current cycle and beyond". "Spending plans have been set out until 2008 and they are fully affordable." Other than its warning on possible tax hikes, the NIESR report was optimistic about the state of the UK and global economy.
It said the recent record-busting surge in oil prices would have a limited effect on worldwide expansion, saying that if anything the "world economy will continue to grow strongly". Global gross domestic product (GDP) is tipped to be 4.1% this year, dipping to 4% in 2005, before picking up again to 4.2% in 2006. The US will continue to drive expansion until 2006, albeit at a slightly slower rate, as will be the case in Japan. Hinting at better times for UK exporters, NIESR said the euro zone "is expected to pick up speed".
Growth in Britain also is set to accelerate, it forecast. "Despite weak growth in the third quarter, the forces sustaining the upswing remain intact and the economy will expand robustly in 2005 and 2006," NIESR said, adding that "the economy will become better balanced over the next two years as exports stage a recovery". GDP is expected at 3.2% in 2004, and 2.8% in both 2005 and 2006. The main cloud on the horizon, NIESR said, was the UK's much analysed and fretted over property market.
| Other than its warning on possible tax hikes, the NIESR report was optimistic about the state of the UK and global economy.The UK government will have to raise taxes or rein in spending if it wants to avoid breaking its "golden rule", a report suggests.A Treasury spokesperson dismissed the latest claims, saying it was "on track to meeting spending rules and the golden rule in the current cycle and beyond".Hinting at better times for UK exporters, NIESR said the euro zone "is expected to pick up speed"."Despite weak growth in the third quarter, the forces sustaining the upswing remain intact and the economy will expand robustly in 2005 and 2006," NIESR said, adding that "the economy will become better balanced over the next two years as exports stage a recovery".Either way, fiscal tightening is needed, NIESR said.According to NIESR, if the government's current economic cycle runs until March 2006 then it is "unlikely" the golden rule will be met.The rule states that the government can borrow cash only to invest, and not to finance its spending projects.The Treasury said its plans were on track and funded until 2008. |
Cairn shares up on new oil find
Shares in Cairn Energy have jumped 6% after the firm said an Indian oilfield was larger than previously thought.
Cairn said drilling to the north-west of its development site in Rajasthan had produced "very strong results". The company also said it now believed the development area would be able to produce oil for more than 25 years. Cairn's share price rose 300% last year after a number of oil finds, but its shares were hit in December following a disappointing drilling update. December's share fall means that Cairn is still in danger of being relegated from the FTSE 100 when the index is reshuffled next month. Cairn's shares closed up 64 pence, or 6%, at 1130p on Thursday.
Before Christmas, Cairn revealed that drilling to the north of the field in Rajasthan had been disappointing, which caused its shares to lose 18% in one day.
However, on Thursday, the group said its belief that the path of oil in the area actually moved further to the west had proved correct. "This area does need more appraisal drilling but it looks very strong," Dr Mike Watts head of exploration said. Chief executive Bill Gammell added: "The more we progress in Rajasthan the better we feel about it." Cairn made the discovery after having been granted an extension to their drilling licence in January by Indian authorities. The firm has applied for a 30-month extension to scout for oil outside its main development area, which includes the Mangala and Aishwariya fields where Cairn has previously announced major discoveries. It also said production at its other fields across the globe was likely to surpass levels seen in 2004.
| Cairn said drilling to the north-west of its development site in Rajasthan had produced "very strong results".Before Christmas, Cairn revealed that drilling to the north of the field in Rajasthan had been disappointing, which caused its shares to lose 18% in one day.The firm has applied for a 30-month extension to scout for oil outside its main development area, which includes the Mangala and Aishwariya fields where Cairn has previously announced major discoveries.The company also said it now believed the development area would be able to produce oil for more than 25 years.Shares in Cairn Energy have jumped 6% after the firm said an Indian oilfield was larger than previously thought.Cairn's share price rose 300% last year after a number of oil finds, but its shares were hit in December following a disappointing drilling update. |
Standard Life concern at LSE bid
Standard Life is the latest shareholder in Deutsche Boerse to express concern at the German stock market operator's plans to buy the London Stock Exchange.
It said Deutsche Boerse had to show why its planned £1.35bn ($2.5bn) offer for the LSE was good for shareholder value. Reports say Standard Life, which owns a 1% stake in Deutsche Boerse, may seek a shareholder vote on the issue. Fellow shareholders US-based hedge fund Atticus Capital and UK-based TCI Fund Management have also expressed doubts.
Deutsche Boerse's supervisory board has approved the possible takeover of the LSE despite the signs of opposition from investors. "The onus is on Deutsche Boerse's management to demonstrate why the purchase of the LSE creates more value for shareholders than other strategies, such as a buyback," said Richard Moffat, investment director of UK Equities at Standard Life Investments. Atticus Capital, holding 2% of Deutsche Boerse, wants it to buy back its own shares rather than buy the LSE. And TCI which holds about 5%, has made a request for an extraordinary shareholders meeting to be held to vote on replacing the company's entire supervisory board. It has also demanded that shareholders be consulted about the proposed acquisition, and whether the operator of the Frankfurt stock exchange should return $500m (£266m) to shareholders instead.
In December, Deutsche Boerse, which also owns the derivatives market Eurex and the clearing firm Clearstream, put an informal offer of 530 pence per LSE share on the table. However, the LSE said the cash offer "undervalued" both its own business and the benefits of such a tie-up. Since then an improved offer from Deutsche Boerse has been anticipated as its management has continued talks with LSE chief executive Clara Furse. But the London exchange is also holding talks with Deutsche Boerse's rival Euronext, which operates the Amsterdam, Brussels, Lisbon and Paris exchanges, as well as London-based international derivatives market Liffe.
| It said Deutsche Boerse had to show why its planned £1.35bn ($2.5bn) offer for the LSE was good for shareholder value.Since then an improved offer from Deutsche Boerse has been anticipated as its management has continued talks with LSE chief executive Clara Furse.Standard Life is the latest shareholder in Deutsche Boerse to express concern at the German stock market operator's plans to buy the London Stock Exchange."The onus is on Deutsche Boerse's management to demonstrate why the purchase of the LSE creates more value for shareholders than other strategies, such as a buyback," said Richard Moffat, investment director of UK Equities at Standard Life Investments.In December, Deutsche Boerse, which also owns the derivatives market Eurex and the clearing firm Clearstream, put an informal offer of 530 pence per LSE share on the table.Reports say Standard Life, which owns a 1% stake in Deutsche Boerse, may seek a shareholder vote on the issue. |
Weak dollar trims Cadbury profits
The world's biggest confectionery firm, Cadbury Schweppes, has reported a modest rise in profits after the weak dollar took a bite out of its results.
Underlying pre-tax profits rose 1% to £933m ($1.78bn) in 2004, but would have been 8% higher if currency movements were stripped out. The owner of brands such as Dairy Milk, Dr Pepper and Snapple generates more than 80% of its sales outside the UK. Cadbury said it was confident it would hit its targets for 2005. "While the external commercial environment remains competitive, we are confident that we have the strategy, brands and people to deliver within our goal ranges in 2005," said chief executive Todd Stitzer.
The modest profit rise had been expected by analysts after the company said in December that the poor summer weather had hit soft drink sales in Europe.
Cadbury said its underlying sales were up by 4% in 2004. Growth was helped by its confectionery brands - including Cadbury, Trident and Halls - which enjoyed a "successful" year, with like-for-like sales up 6%. Drinks sales were up 2% with strong growth in US carbonated soft drinks, led by Dr Pepper and diet drinks, offset by the weaker sales in Europe. Cadbury added that its Fuel for Growth cost-cutting programme had saved £75m in 2004, bringing total cost savings to £100m since the scheme began in mid-2003. The programme is set to close 20% of the group's factories and shed 10% of the workforce. Cadbury Schweppes employs more than 50,000 people worldwide, with about 7,000 in the UK.
| Cadbury said its underlying sales were up by 4% in 2004.Cadbury said it was confident it would hit its targets for 2005.Growth was helped by its confectionery brands - including Cadbury, Trident and Halls - which enjoyed a "successful" year, with like-for-like sales up 6%.The modest profit rise had been expected by analysts after the company said in December that the poor summer weather had hit soft drink sales in Europe.Cadbury Schweppes employs more than 50,000 people worldwide, with about 7,000 in the UK. |
Green reports shun supply chain
Nearly 20% more UK top 250 firms produced non-financial reports on social and environment issues than last year.
But of the 145 companies reporting, 76% didn't examine their supply chains, says the annual Directions survey. Green groups say putting pressure on supply chains is a major way companies can reduce their environmental impact. The survey is published by corporate social responsibility firm Context and branding firm SalterBaxter.
Blake Lee-Harwood, campaigns director at Greenpeace in the UK, said: "It's fairly meaningless to talk about your company's direction in terms of sustainability without having detailed knowledge of your supply chain. "It's also important to get some kind of independent assessment of your reporting."
Less than a quarter of companies (24%) get their corporate social responsibility (CSR) reports independently verified to provide assurances they are accurate and complete, says the survey. To date there are no set standards for non-financial reporting, although the Global Reporting Initiative, an independent pro-sustainability institution, is planning to establish some. The reports surveyed by Directions are published voluntarily. They are usually called corporate social responsibility (CSR) reports, sustainability reports, or social and environmental reports.
Peter Knight, director of Context, says 24 UK top 250 companies reported for the first time this year and, in general, the quality of reports has improved. "The corporate lexicon of homilies, generalities and soft assurances - fluff - is on its way out. There are less pictures of smiling children and butterflies." The UK government will soon require all quoted companies to report their social and environmental risks in a chapter in their annual reports, called the Operating and Financial Review. The regulation is not expected until 2005 and the first reports under this scheme will not be published before 2006. The US seems to lag Europe in producing corporate social responsibility reports. The majority of European top 50 companies (44) publish them and only 27 of the US top 50.
| Less than a quarter of companies (24%) get their corporate social responsibility (CSR) reports independently verified to provide assurances they are accurate and complete, says the survey.The UK government will soon require all quoted companies to report their social and environmental risks in a chapter in their annual reports, called the Operating and Financial Review.They are usually called corporate social responsibility (CSR) reports, sustainability reports, or social and environmental reports.Nearly 20% more UK top 250 firms produced non-financial reports on social and environment issues than last year.Peter Knight, director of Context, says 24 UK top 250 companies reported for the first time this year and, in general, the quality of reports has improved.But of the 145 companies reporting, 76% didn't examine their supply chains, says the annual Directions survey.The survey is published by corporate social responsibility firm Context and branding firm SalterBaxter. |
German business confidence slides
German business confidence fell in February knocking hopes of a speedy recovery in Europe's largest economy.
Munich-based research institute Ifo said that its confidence index fell to 95.5 in February from 97.5 in January, its first decline in three months. The study found that the outlook in both the manufacturing and retail sectors had worsened. Observers had been hoping that a more confident business sector would signal that economic activity was picking up.
"We're surprised that the Ifo index has taken such a knock," said DZ bank economist Bernd Weidensteiner. "The main reason is probably that the domestic economy is still weak, particularly in the retail trade." Economy and Labour Minister Wolfgang Clement called the dip in February's Ifo confidence figure "a very mild decline". He said that despite the retreat, the index remained at a relatively high level and that he expected "a modest economic upswing" to continue.
Germany's economy grew 1.6% last year after shrinking in 2003. However, the economy contracted by 0.2% during the last three months of 2004, mainly due to the reluctance of consumers to spend. Latest indications are that growth is still proving elusive and Ifo president Hans-Werner Sinn said any improvement in German domestic demand was sluggish. Exports had kept things going during the first half of 2004, but demand for exports was then hit as the value of the euro hit record levels making German products less competitive overseas. On top of that, the unemployment rate has been stuck at close to 10% and manufacturing firms, including DaimlerChrysler, Siemens and Volkswagen, have been negotiating with unions over cost cutting measures. Analysts said that the Ifo figures and Germany's continuing problems may delay an interest rate rise by the European Central Bank. Eurozone interest rates are at 2%, but comments from senior officials have recently focused on the threat of inflation, prompting fears that interest rates may rise.
| Analysts said that the Ifo figures and Germany's continuing problems may delay an interest rate rise by the European Central Bank.Munich-based research institute Ifo said that its confidence index fell to 95.5 in February from 97.5 in January, its first decline in three months.Latest indications are that growth is still proving elusive and Ifo president Hans-Werner Sinn said any improvement in German domestic demand was sluggish.Economy and Labour Minister Wolfgang Clement called the dip in February's Ifo confidence figure "a very mild decline".German business confidence fell in February knocking hopes of a speedy recovery in Europe's largest economy."We're surprised that the Ifo index has taken such a knock," said DZ bank economist Bernd Weidensteiner. |
Disney settles disclosure charges
Walt Disney has settled charges from US federal regulators that it failed to disclose how family members of directors were employed by the company.
The media giant was not fined by the Securities and Exchange Commission, but has agreed to refrain from any future violations of securities law. Disney failed to tell investors that between 1999 and 2001 it employed three adult children of three then directors. The firm has neither admitted nor denied wrongdoing in the settlement.
The three Disney directors in question in the central matter of the SEC's investigation - Reveta Bowers, Stanley Gold and Raymond Watson - have all since left the company, with Ms Bowers and Mr Watson both retiring, and Mr Gold quitting in 2003. Their children were paid between $60,000 (£30,800) and $150,000 a year, with shareholders not being informed. The SEC also found that Disney did not disclose that a 50% Disney-owned subsidiary company - Lifetime - employed the wife of current Disney director John Bryson, and that she earned more than $1m a year. Louise Bryson remains with Lifetime.
Disney also failed to disclose payments to Air Shamrock, an airline owned by Mr Gold and fellow former Disney directors Roy Disney. Finally, Disney also did not reveal that it provided more than $200,000 annually for office space, secretarial services, and a leased car and driver to former director Thomas Murphy. "Shareholders have a significant interest in information regarding relationships between the company and its directors," said SEC deputy enforcement director Linda Thomsen. "Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors."
| The SEC also found that Disney did not disclose that a 50% Disney-owned subsidiary company - Lifetime - employed the wife of current Disney director John Bryson, and that she earned more than $1m a year.Disney also failed to disclose payments to Air Shamrock, an airline owned by Mr Gold and fellow former Disney directors Roy Disney.Walt Disney has settled charges from US federal regulators that it failed to disclose how family members of directors were employed by the company.Disney failed to tell investors that between 1999 and 2001 it employed three adult children of three then directors.The three Disney directors in question in the central matter of the SEC's investigation - Reveta Bowers, Stanley Gold and Raymond Watson - have all since left the company, with Ms Bowers and Mr Watson both retiring, and Mr Gold quitting in 2003. |
German bidder in talks with LSE
Deutsche Boerse bosses have held "constructive, professional and friendly" talks with the London Stock Exchange (LSE), its chief has said.
Werner Seifert met LSE chief executive Clara Furse amid rumours the German group may raise its bid to £1.5bn ($2.9bn) from its initial £1.3bn offer. However, rival suitor Euronext also upped the ante in the bid battle. Ahead of talks with the LSE on Friday, the pan-European bourse said it may be prepared to make its offer in cash. The Paris-based exchange, owner of Liffe in London, is reported to be ready to raise £1.4bn to fund a bid.
The news came as Deutsche Boerse held its third meeting with the LSE since its bid approach in December which was turned down by the London exchange for undervaluing the business. However, the LSE did agree to leave the door open for talks to find out whether a "significantly-improved proposal" would be in the interests of LSE's shareholders and customers. In the meantime, Euronext, which combines the Paris, Amsterdam and Lisbon stock exchanges, also began talks with the LSE. In a statement on Thursday, Euronext said any offer was likely to be solely in cash, but added that: "There can be no assurances at this stage that any offer will be made." A deal with either bidder would create the biggest stock market operator in Europe and the second biggest in the world after the New York Stock Exchange. However, neither side has made a formal offer for the LSE, with sources claiming such a step may still be weeks away.
Deutsche Boerse could also face mounting opposition to a bid at home. Among sweeteners reported to have been discussed by Mr Seifert with Ms Furse were plans to move the management of its cash and Eurex derivatives market to London, as well as two members of its executive board. But, Hans Reckers, a board member of Germany's central bank, the Bundesbank, said that cash trading should also remain in Frankfurt, something Deutsche Boerse could move to the UK. "It is not just the headquarters of the Boerse but also important market segments that must stay permanently in Frankfurt. This has special importance for the business activities of the banks and the consultants," he said. Local government officials in Frankfurt's state of Hessen have also spoken out against the move. "It is our wish that the headquarters stay here to maintain Frankfurt's standing as the number one financial centre in continental Europe," Alois Rhiel, its minister for economic affairs added.
| Deutsche Boerse bosses have held "constructive, professional and friendly" talks with the London Stock Exchange (LSE), its chief has said.But, Hans Reckers, a board member of Germany's central bank, the Bundesbank, said that cash trading should also remain in Frankfurt, something Deutsche Boerse could move to the UK.The news came as Deutsche Boerse held its third meeting with the LSE since its bid approach in December which was turned down by the London exchange for undervaluing the business.Ahead of talks with the LSE on Friday, the pan-European bourse said it may be prepared to make its offer in cash.Deutsche Boerse could also face mounting opposition to a bid at home.In the meantime, Euronext, which combines the Paris, Amsterdam and Lisbon stock exchanges, also began talks with the LSE.Werner Seifert met LSE chief executive Clara Furse amid rumours the German group may raise its bid to £1.5bn ($2.9bn) from its initial £1.3bn offer."It is not just the headquarters of the Boerse but also important market segments that must stay permanently in Frankfurt. |
Manufacturing recovery 'slowing'
UK manufacturing grew at its slowest pace in one-and-a-half years in January, according to a survey.
The Chartered Institute of Purchasing and Supply (CIPS) said its purchasing manager index (PMI) fell to 51.8 from a revised 53.3 in December. But, despite missing forecasts of 53.7, the PMI number remained above 50 - indicating expansion in the sector. The CIPS said that the strong pound had dented exports while rising oil and metals prices had kept costs high.
The survey added that rising input prices and cooling demand had deterred factory managers from hiring new workers in an effort to cut costs. That triggered the second successive monthly fall in the CIPS employment index to 48.3 - its lowest level since June 2003. The survey is more upbeat than official figures - which suggest that manufacturing is in recession - but analysts said the survey did suggest that the manufacturing recovery was running out of steam. "It appears that the UK is in a two-tier economy again," said Prebon Yamane economist Lena Komileva. "You have weakness in manufacturing, which I think would concern policymakers at the Bank of England."
| The survey is more upbeat than official figures - which suggest that manufacturing is in recession - but analysts said the survey did suggest that the manufacturing recovery was running out of steam.The Chartered Institute of Purchasing and Supply (CIPS) said its purchasing manager index (PMI) fell to 51.8 from a revised 53.3 in December.UK manufacturing grew at its slowest pace in one-and-a-half years in January, according to a survey.The CIPS said that the strong pound had dented exports while rising oil and metals prices had kept costs high. |
Japan turns to beer alternatives
Japanese brewers are increasingly making money from beer-flavoured drinks rather than beer itself
Beer and spirits are heavily taxed in Japan, driving breweries to search for alternatives. Japan's long economic downturn helped drive the trend, as drinkers looked for cheaper opportunities to drown their sorrows. Now, according to Asahi Breweries, the market for so-called "beer-like" drinks is set to grow 84% this year.
Asahi is predicting profits to rise 50% in 2005 as it launches a drink based on soybean peptides rather than malt. The chosen name, "Shinnama" or "new draft", disguises its non-beer nature. But despite a record profit in 2004 of 30.6bn yen ($291m; £154m), up 31.8% on the previous year, Asahi is coming late to the market. Key rival Sapporo is already well-established with the beer-flavoured "Draft One". Suntory, meanwhile, is doing well with "Super Blue", which combines happoshu - an existing low-cost beer alternative made with malt and seawater - and shochu, a distilled alcohol derived from sweet potatoes or barley. Happoshu has been a mainstay of brewery profits for years, taking over from beer thanks to its low tax and therefore low cost. Kirin, the fourth big name, is launching its own "third-type" drink in April.
| Asahi is predicting profits to rise 50% in 2005 as it launches a drink based on soybean peptides rather than malt.Japanese brewers are increasingly making money from beer-flavoured drinks rather than beer itself Beer and spirits are heavily taxed in Japan, driving breweries to search for alternatives.Now, according to Asahi Breweries, the market for so-called "beer-like" drinks is set to grow 84% this year.But despite a record profit in 2004 of 30.6bn yen ($291m; £154m), up 31.8% on the previous year, Asahi is coming late to the market. |
US interest rate rise expected
US interest rates are expected to rise for the fifth time since June following the US Federal Reserve's latest rate-setting meeting later on Tuesday.
Borrowing costs are tipped to rise by a quarter of a percentage point to 2.25%. The move comes as a recovery in the US economy, the world's biggest, shows signs of robustness and sustainability. The dollar's record-breaking decline, meanwhile, has spooked markets and along with high oil prices has raised concerns about the pace of inflation. "We are seeing evidence that inflation is moving higher," said Ken Kim, an analyst at Stone & McCarthy Research. "It's not a risk, it's actually happening." Mr Kim added that borrowing costs could rise further.
The Fed has said that it will move in a "measured" way to combat price growth and lift interest rates from their 40-year lows that were prompted by sluggish US and global growth.
With the economic picture now looking more rosy, the Fed has implemented quarter percentage point rises in June, August, September and November. Although the US economy grew at an annual rate of 3.9% in the three months to September, analysts warn that Fed has to be careful not to move too aggressively and take the wind out of the recovery's sails. Earlier this month figures showed that job creation is still weak, while consumer confidence is subdued. "I think the Fed feels it has a fair amount of flexibility," said David Berson, chief economist at Fannie Mae. "While inflation has moved up, it hasn't moved up a lot." "If economic growth should subside... the Fed would feel it has the flexibility to pause in its tightening. "But if economic growth picked up and caused core inflation to rise a little more quickly, I think the Fed would be prepared to tighten more quickly as well."
| With the economic picture now looking more rosy, the Fed has implemented quarter percentage point rises in June, August, September and November.The Fed has said that it will move in a "measured" way to combat price growth and lift interest rates from their 40-year lows that were prompted by sluggish US and global growth.Although the US economy grew at an annual rate of 3.9% in the three months to September, analysts warn that Fed has to be careful not to move too aggressively and take the wind out of the recovery's sails."If economic growth should subside... the Fed would feel it has the flexibility to pause in its tightening."But if economic growth picked up and caused core inflation to rise a little more quickly, I think the Fed would be prepared to tighten more quickly as well.""I think the Fed feels it has a fair amount of flexibility," said David Berson, chief economist at Fannie Mae. |
Buyers snap up Jet Airways' shares
Investors have snapped up shares in Jet Airways, India's biggest airline, following the launch of its much anticipated initial public offer (IPO).
The IPO for 17.3 million shares was fully sold within 10 minutes of opening, on Friday. Analysts expect Jet to raise at least 16.4bn rupees ($375m; £198m) from the offering. Interest in Jet's IPO has been fuelled by hopes for robust growth in India's air travel market.
The share offer, representing about 20% of Jet's equity, was oversubscribed, news agency Reuters reported. Jet, which was founded by London-based travel agent Naresh Goyal, plans to use the cash to buy new planes and cut its debt. The company has grown rapidly since it launched operations in 1993, overtaking state-owned flag carrier Indian Airlines. However, it faces stiff competition from rivals and low-cost carriers. Jet's IPO is the first in a series of expected share offers from Indian companies this year, as they move to raise funds to help them do business in a rapidly-growing economy.
| Jet's IPO is the first in a series of expected share offers from Indian companies this year, as they move to raise funds to help them do business in a rapidly-growing economy.Investors have snapped up shares in Jet Airways, India's biggest airline, following the launch of its much anticipated initial public offer (IPO).The share offer, representing about 20% of Jet's equity, was oversubscribed, news agency Reuters reported.The IPO for 17.3 million shares was fully sold within 10 minutes of opening, on Friday. |
Asia quake increases poverty risk
Nearly two million people across Asia could be thrown into poverty because of the Indian Ocean tsunami, the Asian Development Bank (ADB) has said.
In its first overview of the disaster, the ADB said the impact on economic growth would be slight because major cities and factories escaped damage. But the blow to many low-income people could be "enormous". The Paris Club of rich creditor nations on Wednesday offered to freeze debts owed by tsunami-hit countries.
The move was aimed at helping South Asian governments find budgets to rebuild devastated coastal areas, though so far only Sri Lanka, Indonesia and the Seychelles have indicated that they will take it up.
Other countries believe their economies are strong enough to cope or wish to avoid being viewed as credit risks. "Poverty is potentially the most important impact of this natural disaster," said ADB chief economist Ifzal Ali. Donor nations have promised to give $717m (£379m) in disaster relief over the next six months, according to the United Nations.
Mr Ali added his voice to those warning that aid pledges must be promptly delivered, saying the number of people at risk of poverty hinged on "concerns over sanitation and health conditions, and other basic needs" being "properly and quickly addressed".
There are 1.9 billion people in Asia living on less than $2 a day. The ADB fears that 1 million Indonesians could join them, while in India just over half a million people - 645,000 - are at risk of falling into poverty. A quarter of a million Sri Lankans and 23,500 people in the Maldives are also facing poverty. In the Maldives, where 43% of the population already lives on less than $2 a day, this could rise to half. Sri Lanka and the Maldives are the two countries the ADB fears are most at risk of suffering lasting economic damage from the tsunami. Sri Lanka's government has estimated reconstruction costs at nearly $3bn. A government task force held meetings to discuss an emergency rebuilding plan with the ADB, World Bank and Japanese aid agencies on Wednesday, and promised to publish the plan within 10 days.
Indonesia, Malaysia, Thailand and India have enjoyed strong economic growth in recent years, which should cushion them against reconstruction costs. Although Indonesia's northern province of Aceh suffered the worst death toll, the region's oil and natural gas production facilities "have survived intact", the report said. However, it remains too soon to asses the damage to poor people's livelihoods in Aceh because it would depend on how much farm land had been flooded by seawater. "This is a profoundly tragic event for the region and for the millions who are suffering. But the economies of the affected countries except Sri Lanka and the Maldives should emerge with minimal damage," the ADB report said. Some businesses may even gain from the reconstruction efforts, thereby creating jobs. At a meeting in Thailand, ABD president Thadao Chino said he was confident of the country's "own capabilities to restore normalcy to the affected areas and meet the rehabilitation requirements". Thailand has said it does not wish to opt for a debt repayment freeze, while India has also rejected international aid, saying it can cope on its own resources. Debt repayment holidays carry the risk of credit ratings downgrades, making it more expensive to borrow money in future. Indonesia, however, is pressing for greater help with its debts than the current freeze would bring. It is one of the world's most indebted countries.
| Nearly two million people across Asia could be thrown into poverty because of the Indian Ocean tsunami, the Asian Development Bank (ADB) has said.The ADB fears that 1 million Indonesians could join them, while in India just over half a million people - 645,000 - are at risk of falling into poverty.Sri Lanka and the Maldives are the two countries the ADB fears are most at risk of suffering lasting economic damage from the tsunami.But the economies of the affected countries except Sri Lanka and the Maldives should emerge with minimal damage," the ADB report said.A quarter of a million Sri Lankans and 23,500 people in the Maldives are also facing poverty.Thailand has said it does not wish to opt for a debt repayment freeze, while India has also rejected international aid, saying it can cope on its own resources.In its first overview of the disaster, the ADB said the impact on economic growth would be slight because major cities and factories escaped damage."Poverty is potentially the most important impact of this natural disaster," said ADB chief economist Ifzal Ali.Sri Lanka's government has estimated reconstruction costs at nearly $3bn.Indonesia, Malaysia, Thailand and India have enjoyed strong economic growth in recent years, which should cushion them against reconstruction costs.The Paris Club of rich creditor nations on Wednesday offered to freeze debts owed by tsunami-hit countries. |
Mystery surrounds new Yukos owner
The fate of Russia's Yuganskneftegas - the oil firm sold to a little-known buyer on Sunday - is the subject of frantic speculation in Moscow.
Baikal Finance Group emerged as the auction winner, agreeing to pay 260.75bn roubles (£4.8bn; $9.4bn). Russia's newspapers claimed that Baikal was a front for gas monopoly Gazprom, which had been expected to win. The sale has destroyed Yukos, once the owner of Yuganskneftegas, said founder Mikhail Khodorkovsky. "Yuganskneftegas has been sold in the best traditions of the 90s. The authorities have made themselves a wonderful Christmas present - Russia's most efficient oil company has been destroyed," the Interfax news agency quoted Mr Khodorkovsky as saying via his lawyers.
Gazprom had been expected to win the auction but is thought to have failed to get finance for the deal after a US court injunction barred it from taking part. Last week, Yukos filed for Chapter 11 bankruptcy protection in the US in a last-ditch attempt to hang on to Yuganskneftegas, which accounts for 60% of its output. A US judge banned Gazprom from taking part in the auction and barred international banks from providing the firm with cash. "They screwed up the financing," said Ronald Smith, an analyst at Renaissance Capital in Moscow. "And Gazprom doesn't have this sort of money lying around."
Gazprom has denied that it is behind the purchase. "It is a front for somebody but not necessarily for Gazprom," said Oleg Maximov, an analyst at Troika Dialog in Moscow. "We don't know if this company is linked 100% to Gazprom.
"We tried to find it, but we couldn't and as far as I know, the papers had the same result." The sale has however bought time for Gazprom to raise the money needed for the purchase, analysts said. One scenario is that Baikal will not pay when it is supposed to in two weeks time, putting Yuganskneftegas back in the hands of bailiffs and back within the reach of Gazprom. Yukos is not planning on letting go of its unit without a fight and has threatened legal action against any buyer. Menatep, Yukos main shareholders' group, has also threatened legal action. Yukos claims that it is being punished for the political ambitions of its founder, Mikhail Khodorkovsky, who is now in jail facing separate fraud charges. It has been hit with more than $27bn in taxes and fines and many observers now say that the break up of the firm that accounts for 20% of Russia's oil output is inevitable.
| The sale has however bought time for Gazprom to raise the money needed for the purchase, analysts said.The sale has destroyed Yukos, once the owner of Yuganskneftegas, said founder Mikhail Khodorkovsky.Gazprom has denied that it is behind the purchase."It is a front for somebody but not necessarily for Gazprom," said Oleg Maximov, an analyst at Troika Dialog in Moscow."We don't know if this company is linked 100% to Gazprom."Yuganskneftegas has been sold in the best traditions of the 90s.Russia's newspapers claimed that Baikal was a front for gas monopoly Gazprom, which had been expected to win.Gazprom had been expected to win the auction but is thought to have failed to get finance for the deal after a US court injunction barred it from taking part.It has been hit with more than $27bn in taxes and fines and many observers now say that the break up of the firm that accounts for 20% of Russia's oil output is inevitable. |
WMC says Xstrata bid is too low
Australian mining firm WMC Resources has said it is worth up to 30% more than a hostile 7.4bn Australian dollar ($5.8bn; £3bn) bid by rival Xstrata.
There is now pressure on Swiss-based Xstrata to increase its takeover offer. A report from investment firm Grant Samuel in WMC defence documents values WMC shares at A$7.17 to A$8.24, against Xstrata's bid of A$6.35 a share. Analysts said the defence documents provided more details on WMC, and may trigger a possible rival bid. "If a bid is going to emerge it is probably likely in the next one to two weeks," said Daiwa Securities analyst Mark Pervan. He said the valuation would put increased pressure on Xstrata to look at "sweetening" its offer. Marc Gonsalves, an executive at Xstrata, said: "We will review the information contained in the target's statement over the next week or so." He added: "While we will review the assumptions made by Grant Samuel in detail, we are extremely sceptical of their conclusion, and suggest that WMC shareholders take extreme care in presuming that these optimistic assumptions are capable of being realised."
Last month Australia's competition watchdog said it would not oppose the purchase of WMC by Zurich and London-based Xstrata. On Tuesday, WMC chairman Tommie Bergman said in a statement the directors believed it was in shareholders' best interest to reject the offer. He said WMC would pursue "value-creating options" provided by a portfolio of "world class assets". And WMC chief executive Andrew Michelmore claimed the Xstrata offer was aimed at creating value for Xstrata's shareholders, and was not being made for the benefit of WMC's shareholders. Grant Samuel said its valuation of WMC was based on lower average prices for nickel, copper and uranium than current market levels. "Any longer term commodity price improvements would only improve our outlook," Mr Michelmore said.
In 2003 Xstrata acquired Australia's largest copper miner - MIM Holdings. WMC Resources is the world's third-largest producer of concentrated nickel, and also a miner of copper and uranium. It owns the Olympic Dam mine in South Australia, which contains about one-third of the world's known uranium resources and is also the world's fourth largest copper mine. Xstrata is a global mining giant with operations in Australia, South Africa, Spain, Germany, Argentina and the UK. Its core products are copper, coking coal, thermal coal, ferrochrome, vanadium and zinc. It also has growing businesses in gold, lead and silver.
| Grant Samuel said its valuation of WMC was based on lower average prices for nickel, copper and uranium than current market levels.Last month Australia's competition watchdog said it would not oppose the purchase of WMC by Zurich and London-based Xstrata.He said the valuation would put increased pressure on Xstrata to look at "sweetening" its offer.WMC Resources is the world's third-largest producer of concentrated nickel, and also a miner of copper and uranium.Australian mining firm WMC Resources has said it is worth up to 30% more than a hostile 7.4bn Australian dollar ($5.8bn; £3bn) bid by rival Xstrata.Analysts said the defence documents provided more details on WMC, and may trigger a possible rival bid.On Tuesday, WMC chairman Tommie Bergman said in a statement the directors believed it was in shareholders' best interest to reject the offer.He said WMC would pursue "value-creating options" provided by a portfolio of "world class assets". |
Turkey knocks six zeros off lira
Turkey is to relaunch its currency on Saturday, knocking six zeros off the lira in the hope of boosting trade and powering its growing economy.
The change will see the end of such dizzyingly-high denominations as five million lira - enough for a short taxi ride - and the 20m note, worth $15. These valuations were the product of decades of inflation which, as recently as 2001, was as high as 70%. Inflation has since been tamed and economic prospects are improving.
The currency - officially to be known as the new lira - will be launched at midnight on 1 January. From that point, the one-million lira note will become the new one-lira coin. The government hopes the change will be seen as a promise of growing economic stability as Turkey embarks on the long process of trying to join the European Union.
On an everyday level, it is hoped the change will stimulate more international trade and end confusion among foreign investors and Turks alike. "The transition to the new Turkish lira shows clearly that our economy has broken the vicious circle that it was imprisoned in for long years," said Sureyya Serdengecti, head of the Turkish Central Bank. "The new lira is also the symbol of the stable economy that we dreamed of for long years."
The Turkish economy teetered on the brink of collapse in 2001 when the lira plunged in value and two million people lost their jobs.
Turkey had to turn to the International Monetary Fund for financial assistance, accepting a $18bn loan in return for pushing through a wide-ranging austerity programme. These tough measures have borne fruit. Inflation fell below 10% earlier this year for the first time in decades while exports are up 30% this year. Meanwhile, the economy is expanding at a healthy rate, with 7.9% growth expected in 2004. The government hopes that the new currency will cement the country's economic progress, two weeks after EU leaders set a date for the start of Turkey's accession talks.
The slimmed-down lira is likely to be widely welcomed by the business community.
"The Turkish lira has been like funny money," Tevfik Aksoy, chief Turkish economist for Deutsche Bank, told Associated Press. "Now at least in cosmetic terms it will look like real currency." However, some do not feel quite so happy about seeing the nominal value of their investments reduced. "If a person has 10 billion lira in investments this will suddenly decrease," shop owner Hayriye Evren, told Associated Press. "This will definitely affect people psychologically."
| "The transition to the new Turkish lira shows clearly that our economy has broken the vicious circle that it was imprisoned in for long years," said Sureyya Serdengecti, head of the Turkish Central Bank.The Turkish economy teetered on the brink of collapse in 2001 when the lira plunged in value and two million people lost their jobs."The new lira is also the symbol of the stable economy that we dreamed of for long years."Turkey is to relaunch its currency on Saturday, knocking six zeros off the lira in the hope of boosting trade and powering its growing economy.The currency - officially to be known as the new lira - will be launched at midnight on 1 January."The Turkish lira has been like funny money," Tevfik Aksoy, chief Turkish economist for Deutsche Bank, told Associated Press.From that point, the one-million lira note will become the new one-lira coin."If a person has 10 billion lira in investments this will suddenly decrease," shop owner Hayriye Evren, told Associated Press.The change will see the end of such dizzyingly-high denominations as five million lira - enough for a short taxi ride - and the 20m note, worth $15. |
Khodorkovsky ally denies charges
A close associate of former Yukos boss Mikhail Khodorkovsky has told a court that fraud charges levelled against him are "false".
Platon Lebedev has been on trial alongside Mr Khodorkovsky since June in a case centring around the privatisation of a fertiliser firm. The pair claim they are being punished by the authorities for the political ambitions of Mr Khodorkovsky. Mr Lebedev said there were "absurd contradictions" in the case. Opening his defence, he said he could not see the legal basis of the charges he faced, which also include allegations of tax evasion. "To my embarrassment, I could not understand the file of complaints against me," he told a Moscow court. Mr Lebedev headed the Menatep group, the parent company of Yukos.
Mr Lebedev and Mr Khodorkovsky, who each face a possible 10 year jail sentence if convicted, will be questioned by a judge over the next few days. Mr Khodorkovsky began his testimony last week, telling the court that he objected to the way that the "running of a normal business has been presented as a work of criminal fiction". The charges are seen by supporters as politically motivated and part of a drive by Russian President Vladimir Putin to rein in the country's super-rich business leaders, the so-called oligarchs. Yukos has been presented with a $27.5bn (£13bn) tax demand by the Russian authorities and its key Yugansk division was auctioned off to part settle the bill. The company's effort to gain bankruptcy protection in the US - in a bid to win damages for the sale - were dismissed by a court in Texas.
| Mr Khodorkovsky began his testimony last week, telling the court that he objected to the way that the "running of a normal business has been presented as a work of criminal fiction".Platon Lebedev has been on trial alongside Mr Khodorkovsky since June in a case centring around the privatisation of a fertiliser firm.Mr Lebedev and Mr Khodorkovsky, who each face a possible 10 year jail sentence if convicted, will be questioned by a judge over the next few days.A close associate of former Yukos boss Mikhail Khodorkovsky has told a court that fraud charges levelled against him are "false".Mr Lebedev said there were "absurd contradictions" in the case. |
Karachi stocks hit historic high
The Karachi Stock Exchange (KSE) has recorded its largest single day gain, surging 3.5% to a new high.
The index rose 225.79 points in four hours of furious trading, with many investors optimistic that political stability could bring an economic boom. The KSE index closed at 6709.93 - an overall gain of nearly 400 points in the first two trading days of the week. Energy and telecommunication stocks performed particularly well, recording an 8%-10% rise since Monday morning.
In 2002, the KSE was the world's best performing stock market, with the index rising 112%.
Pakistani investors are expecting the KSE to repeat, if not improve on, its 2002 performance. Jubilant investors danced on the streets as the market closed for the day on Tuesday, confident that the boom will continue at least until the public holiday on 22 January. Others, however, who had stayed out fearing an imminent collapse because of prices overheating, continued to warn that the "bubble may burst any time". "That's rubbish," KSE chairman Yaseen Lakhani told the BBC News website. "Whenever the market reflects Pakistan's true economic reality, it is described as a bubble." Mr Lakhani feels that the market has risen on the basis of solid economic growth and its current level rests on sound foundations.
Market analysts are inclined to agree with Mr Lakhani, arguing that there are a number of major factors behind the KSE's performance. Analysts argue that a steady improvement in Pakistan's credit ratings by international credit rating agencies has finally begun to register in the market. Standard & Poor's upgraded Pakistan a few weeks ago. There are indications of yet another upgrade by the end of February.
Then, say analysts, there is corporate profitability in the current fiscal year, which has gone up by 27% from last year. "Coupled with the 7% GDP growth expected by June this year, I am least surprised at the market's performance," says Mr Lakhani. One leading Karachi broker said the real reasons may be political. "If you file a $1.3 trillion case against Saudi money after 9/11, Arab money will not go to the US any more." A lot of Arab money, he says, has already gone to Malaysia and Indonesia. Pakistanis are now hoping that energy and telecoms, two of the strongest sectors in Pakistan, draw some of the Arab money to the KSE.
Locally, too, say analysts, recent political developments have worked to the market's advantage.
An anti-Musharraf campaign threatened by the MMA, a countrywide alliance of religious parties, has fizzled out. The release of Asif Zardari, former Prime Minister Benazir Bhutto's husband, has eased political tensions between the military-backed government and the opposition Pakistan People's Party. Most importantly, say analysts, the failure of talks between India and Pakistan on the Baglihar dam in Indian-administered Kashmir has not automatically led to heightened tensions. This, they say, indicates that neither country is interested in raising the temperature at this stage, irrespective of the state of their disagreements. The market is abuzz with speculation that substantial investment may now start to flow in from the US, a country seen locally as deeply interested in defusing tensions between the South Asian neighbours. "You can call it a peace dividend," smiles one broker. "Let us see how long one can reap its benefits."
| Mr Lakhani feels that the market has risen on the basis of solid economic growth and its current level rests on sound foundations.The Karachi Stock Exchange (KSE) has recorded its largest single day gain, surging 3.5% to a new high.In 2002, the KSE was the world's best performing stock market, with the index rising 112%.Pakistanis are now hoping that energy and telecoms, two of the strongest sectors in Pakistan, draw some of the Arab money to the KSE.Then, say analysts, there is corporate profitability in the current fiscal year, which has gone up by 27% from last year.The KSE index closed at 6709.93 - an overall gain of nearly 400 points in the first two trading days of the week."Coupled with the 7% GDP growth expected by June this year, I am least surprised at the market's performance," says Mr Lakhani.One leading Karachi broker said the real reasons may be political.Most importantly, say analysts, the failure of talks between India and Pakistan on the Baglihar dam in Indian-administered Kashmir has not automatically led to heightened tensions.A lot of Arab money, he says, has already gone to Malaysia and Indonesia.Locally, too, say analysts, recent political developments have worked to the market's advantage.Analysts argue that a steady improvement in Pakistan's credit ratings by international credit rating agencies has finally begun to register in the market. |
J&J agrees $25bn Guidant deal
Pharmaceutical giant Johnson & Johnson has agreed to buy medical technology firm Guidant for $25.4bn (£13bn).
Guidant is a key producer of equipment that combats heart problems such as implant defibrillators and pacemakers. Analysts said that the deal is aimed at offsetting Johnson & Johnson's reliance on a slowing drug business. They also pointed out that more mergers are likely because the drug and healthcare industries are fragmented and are under pressure to cut costs. A number of Johnson & Johnson's products are facing patent expirations, while the company is also battling fierce competition from generic products. Meanwhile, demand for defibrillators, which give the heart a small electric shock when an irregular heartbeat or rhythm is detected, is expected to increase, analysts said. The move by Johnson & Johnson has been widely expected and the firm will pay $76 for each Guidant share, 6% more than Wednesday's closing price. Analysts say that US antitrust regulators could force the firms to shed some overlapping stent operations. Stents are tubes that are used to keep an artery open after it has been unblocked.
| The move by Johnson & Johnson has been widely expected and the firm will pay $76 for each Guidant share, 6% more than Wednesday's closing price.Pharmaceutical giant Johnson & Johnson has agreed to buy medical technology firm Guidant for $25.4bn (£13bn).Analysts said that the deal is aimed at offsetting Johnson & Johnson's reliance on a slowing drug business.A number of Johnson & Johnson's products are facing patent expirations, while the company is also battling fierce competition from generic products. |
Stormy year for property insurers
A string of storms, typhoons and earthquakes has made 2004 the most expensive year on record for property insurers, according to Swiss Re.
The world's second biggest insurer said disasters around the globe have seen property claims reach $42bn (£21.5bn). "2004 reinforces the trend towards higher losses," said Swiss Re. Tightly packed populations in the areas involved in natural and man-made disasters were to partly to blame for the rise in claims, it said. Some 95% of insurance claims were for natural catastrophes, with the rest attributed to made-made events.
The largest claims came from the US, which was struck by four hurricanes, and Japan, which suffered the highest concentration of typhoons for decades plus a major earthquake.
Europe suffered fewer natural disasters, but 191 people were killed and more than 2,000 injured in March after the terrorist attack on train stations in Madrid. The damages claimed in 2004 eclipsed previous years, including 2001 when the 11 September attacks pushed claims up to $37bn. Swiss Re said it had registered about 300 natural and man-made disasters around the world in 2004. Twenty-one thousand people lost their lives in the catastrophes with a cost to the global economy of around $105bn (£54bn).
| Swiss Re said it had registered about 300 natural and man-made disasters around the world in 2004.The world's second biggest insurer said disasters around the globe have seen property claims reach $42bn (£21.5bn).Tightly packed populations in the areas involved in natural and man-made disasters were to partly to blame for the rise in claims, it said.The damages claimed in 2004 eclipsed previous years, including 2001 when the 11 September attacks pushed claims up to $37bn. |
Further rise in UK jobless total
The UK's jobless total rose for the second month in a row in December, official figures show.
The number of people out of work rose 32,000 to 1.41 million in the last three months of 2004, even as 90,000 more people were in employment. Average earnings rose by 4.3% in the year to December up from November's 4.2%, the Office for National Statistics (ONS) added. Meanwhile, the benefit claimant total fell 11,000 to 813,200 last month. Throughout 2004, the number of people in work increased by 296,000 to 28.52 million - the highest figure since records began in 1971.
The apparent discrepancy between rising unemployment and record numbers in work can be explained by an increase in the working population and a fall in those who are economically inactive. While the UK's jobless rate rose to 4.7% from 4.6% in the previous quarter, the rate still remains one of the lowest in the world, compared with 12.1% in Germany, 10.4% in Spain and 9.7% in France. But, despite more people being in work, the manufacturing sector continued to suffer, with 104,000 workers axed during the last quarter of 2004 - pushing employment in the sector to a record low of 3.24 million by the end of last year. The figures prompted some analysts to forecast that the Bank of England will almost certainly raise rates this year. Marc Ostwald, a strategist at Monument Securities told Reuters that while no immediate market impact could be expected, "it is enough to underline that they (the BoE) will be more hawkish on rates".
| The number of people out of work rose 32,000 to 1.41 million in the last three months of 2004, even as 90,000 more people were in employment.Throughout 2004, the number of people in work increased by 296,000 to 28.52 million - the highest figure since records began in 1971.But, despite more people being in work, the manufacturing sector continued to suffer, with 104,000 workers axed during the last quarter of 2004 - pushing employment in the sector to a record low of 3.24 million by the end of last year.The UK's jobless total rose for the second month in a row in December, official figures show. |
G7 backs Africa debt relief plan
G7 finance ministers have backed plans to write off up to 100% of the debts of some of the world's poorest countries.
UK chancellor Gordon Brown said the London meeting of the world's seven richest nations would be remembered as "the 100% debt relief summit". Some 37 countries could benefit after a case-by-case review by bodies including the World Bank and the IMF, he said. But the US says it cannot support Mr Brown's International Finance Facility to boost aid to developing countries. BBC correspondents said the meeting had produced some movement towards the UK's ambitions, but much work was needed. Mr Brown said it was a major breakthrough for the international organisations to offer up to 100% multilateral debt relief - "the vast bulk" of money owed by the poorest countries.
"We could be at the beginning of the final stage of the process where the debts that were owed by the poorest countries, built up over 20 or 30 years, debts that are simply unpayable in the real world, are finally taken care of," he said. He added: "It is the richest countries hearing the voices of the poor." But he said they would insist on government reforms and the need for transparency, tackling corruption and openness from both the poorest and richest nations. BBC correspondent Patrick Bartlett said while it was an agreement in principle, the organisations involved now have to look at how it would work in practice. Oxfam senior policy adviser Max Lawson welcomed the statement and said G7 ministers had "passed the first hurdle of 2005".
But he added: "They need to move quickly to turn their proposals into real change for the world's poorest. "Two million children will die needlessly between now and the next meeting in April. If rich countries are going to keep their promises to tackle obscene poverty they need deliver - and deliver quickly." Talks are continuing on how to finance increased overseas development assistance. The International Monetary Fund (IMF) is to look at a proposal to use its gold supplies to help the debt relief effort when it meets in April. Mr Brown said G7 ministers had agreed to defer debt interest payments and repayments for some countries affected by the tsunami until the end of 2005. But UK plans for an International Finance Facility (IFF) to help deal with debt in the developing world have not been agreed. Mr Brown wanted to provide $10bn (£5.38bn) a year over a decade, using G7 backing so the money could be borrowed up front on financial markets.
It is a key element of his proposals for a modern version of the Marshall Plan, which brought US aid to rebuild Europe after World War II, for the developing world. Mr Brown said it was "winning support every day" and said a programme had been agreed to draw up more details in time for the G8 summit in July. But US Treasury Under-Secretary John Taylor said the US could not support the IFF because of its "legislative process". "The US is completely committed to poverty reduction and providing financing to do that," he said. "But this particular mechanism does not work for the United States. It works for other countries, and that is fine." Earlier, he told BBC Radio 4's Today programme the US had increased support for Africa in the past four years from $1.1bn per year to $4.6bn per year. But South Africa Finance Minister Trevor Manuel told the BBC's Talking Point programme what was needed was one approach, with all wealthy nations on board. He said much of the money pledged by the US had not yet been dispensed.
The UK has made poverty in the poorest nations a key theme for its 2005 presidency of the Group of Eight (G8), which comprises the G7 and Russia. The G8 countries will meet at Gleneagles in Scotland. At a dinner on Friday night, former South African president Nelson Mandela backed Mr Brown's plan when he urged the finance chiefs to write-off African debt and provide an extra $50bn (£26.69bn) a year in aid for the next decade. Talks also centred on the impact of the rising economies of China and India, the US budget and trade deficits, how the US, Europe and Japan can act to boost global economic growth, and HIV/Aids. G7 ministers called for more flexibility in international exchange rates and said "excess volatility" would impede economic growth. Representatives from China, India, Russia, South Africa and Brazil were invited to attend some of the sessions. A G8 summit is set to take place in July.
| Mr Brown said it was "winning support every day" and said a programme had been agreed to draw up more details in time for the G8 summit in July.G7 finance ministers have backed plans to write off up to 100% of the debts of some of the world's poorest countries.Mr Brown said G7 ministers had agreed to defer debt interest payments and repayments for some countries affected by the tsunami until the end of 2005.Mr Brown said it was a major breakthrough for the international organisations to offer up to 100% multilateral debt relief - "the vast bulk" of money owed by the poorest countries.UK chancellor Gordon Brown said the London meeting of the world's seven richest nations would be remembered as "the 100% debt relief summit"."We could be at the beginning of the final stage of the process where the debts that were owed by the poorest countries, built up over 20 or 30 years, debts that are simply unpayable in the real world, are finally taken care of," he said.But the US says it cannot support Mr Brown's International Finance Facility to boost aid to developing countries.G7 ministers called for more flexibility in international exchange rates and said "excess volatility" would impede economic growth.But US Treasury Under-Secretary John Taylor said the US could not support the IFF because of its "legislative process".But UK plans for an International Finance Facility (IFF) to help deal with debt in the developing world have not been agreed.He said much of the money pledged by the US had not yet been dispensed.BBC correspondents said the meeting had produced some movement towards the UK's ambitions, but much work was needed.BBC correspondent Patrick Bartlett said while it was an agreement in principle, the organisations involved now have to look at how it would work in practice."The US is completely committed to poverty reduction and providing financing to do that," he said. |
Watchdog probes Vivendi bond sale
French stock market regulator AMF has filed complaints against media giant Vivendi Universal, its boss and another top executive.
It believes the prospectus for a bond issue was unclear and that executives may have had privileged information. AMF has begun proceedings against Vivendi, its chief executive Jean-Rene Fourtou and chief operating officer Jean-Bernard Levy. Vivendi advisor Deutsche Bank was also the subject of a complaint filing. Deutsche Bank, which was responsible for selling the convertible bonds to investors, could face penalties if the complaint is upheld.
Vivendi has said it believes there is "no legal basis" for the complaints. The watchdog is said to believe the executive pair were party to "privileged information" surrounding the issue of the bonds. Both men bought some of the bonds, the Associated Press news agency reported. AMF is investigating claims that the duo were aware of an interest in Vivendi's US assets from investor Marvin Davis, at the time of the bond sale. Vivendi, however, has said that the information was public knowledge as Mr Davis' offer for the US assets had already been rejected by Vivendi's board. AMF is also looking into whether the executives knew that Vivendi was considering exercising its right to buy British Telecom's shares in Cegetel. Vivendi has rejected the charge, saying the decision to buy the Cegetel shares was "no more than a possibility, of which the public was perfectly aware" at the time of the bond issue. Back in December, Vivendi and its former chief executive Jean-Marie Messier were each fined 1m euros ($1.3m; £690,000) by AMF. The fines came after a 15-month probe into allegations that the media giant misled investors after a costly acquisition programme went wrong.
| Vivendi has rejected the charge, saying the decision to buy the Cegetel shares was "no more than a possibility, of which the public was perfectly aware" at the time of the bond issue.Vivendi, however, has said that the information was public knowledge as Mr Davis' offer for the US assets had already been rejected by Vivendi's board.French stock market regulator AMF has filed complaints against media giant Vivendi Universal, its boss and another top executive.AMF is also looking into whether the executives knew that Vivendi was considering exercising its right to buy British Telecom's shares in Cegetel.It believes the prospectus for a bond issue was unclear and that executives may have had privileged information.Vivendi advisor Deutsche Bank was also the subject of a complaint filing. |
House prices suffer festive fall
UK house prices fell 0.7% in December, according to figures from the Office of the Deputy Prime Minister.
Nationally, house prices rose at an annual rate of 10.7% in December, less than the 13.7% rise the previous month. The average UK house price fell from £180,126 in November to £178,906, reflecting recent Land Registry figures confirming a slowdown in late 2004. All major UK regions, apart from Northern Ireland, experienced a fall in annual growth during December.
December is traditionally a quiet month for the housing market because of Christmas celebrations. However, recent figures from the Land Registry - showing a big drop in sales between the last quarter of 2004 and the previous year - suggested the slowdown could be more than a seasonal blip. The volume of sales between October and December dropped by nearly a quarter from the same period in 2003, the Land Registry said. Although both the Office of the Deputy Prime Minister (ODPM) and the Land Registry figures point to a slowdown in the market, the most recent surveys from Nationwide and Halifax have indicated the market may be undergoing a revival. After registering falls at the back-end of 2004, Halifax said house prices rose by 0.8% in January and Nationwide reported a rise of 0.4% in the first month of the year.
| UK house prices fell 0.7% in December, according to figures from the Office of the Deputy Prime Minister.The average UK house price fell from £180,126 in November to £178,906, reflecting recent Land Registry figures confirming a slowdown in late 2004.Nationally, house prices rose at an annual rate of 10.7% in December, less than the 13.7% rise the previous month.Although both the Office of the Deputy Prime Minister (ODPM) and the Land Registry figures point to a slowdown in the market, the most recent surveys from Nationwide and Halifax have indicated the market may be undergoing a revival. |
Shares hit by MS drug suspension
Shares in Elan and Biogen Idec plunged on Monday as the firms suspended sales of new multiple sclerosis drug Tysabri after a patient's death in the US.
On the New York Stock Exchange, shares in Ireland-based Elan lost 70% while US partner Biogen Idec shed 43%. The firms took action after the death from a central nervous system disease and a suspected case of the condition. The cases cited involved the use of both Tysabri and Avonex, Biogen Idec's existing multiple sclerosis drug. The companies said they have no reports of the rare condition - progressive multifocal leukoencephalopathy (PML) - in patients taking either Tysabri or Avonex alone. Tysabri was approved for use in the US last November and was widely tipped to become the world's leading multiple sclerosis treatment.
"The companies will work with clinical investigators to evaluate Tysabri-treated patients and will consult with leading experts to better understand the possible risk of PML," the two firms said in a statement. "The outcome of these evaluations will be used to determine possible re-initiation of dosing in clinical trials and future commercial availability."
Analysts had believed the product would provide a new growth opportunity for Biogen Idec, which had faced increased competition from rivals to Avonex. Elan, once the biggest firm on the Irish stock exchange, was also expected to receive a boost, from the new product. An inquiry into Elan's accounts in 2002 brought the group close to bankruptcy but the firm has been rebuilding itself since, with its share price increasing by almost four-fold last year. "Most of the value in the company was in Tysabri," said Ian Hunter at Goodbody Stockbrokers in Dublin. "Now there's a question mark over it." Elan finished down $18.90 at $8, while Biogen fell $28.63 to $38.65.
- Shares in UK pharmaceutical firm Phytopharm closed down 19.84% at 151.5 pence on the London Stock Exchange on Monday, after it said a partner was set to pull out of a deal on an experimental Alzheimer's disease treatment. Phytopharm said Japan's Yamanouchi Pharmaceutical was likely to end a licensing agreement, prompting analysts to raise questions over the level of its future cash reserves.
| Shares in Elan and Biogen Idec plunged on Monday as the firms suspended sales of new multiple sclerosis drug Tysabri after a patient's death in the US.Elan, once the biggest firm on the Irish stock exchange, was also expected to receive a boost, from the new product.On the New York Stock Exchange, shares in Ireland-based Elan lost 70% while US partner Biogen Idec shed 43%.- Shares in UK pharmaceutical firm Phytopharm closed down 19.84% at 151.5 pence on the London Stock Exchange on Monday, after it said a partner was set to pull out of a deal on an experimental Alzheimer's disease treatment.Tysabri was approved for use in the US last November and was widely tipped to become the world's leading multiple sclerosis treatment.The cases cited involved the use of both Tysabri and Avonex, Biogen Idec's existing multiple sclerosis drug."Most of the value in the company was in Tysabri," said Ian Hunter at Goodbody Stockbrokers in Dublin. |
Deadline nears for Fiat-GM deal
Fiat and General Motors (GM) have until midnight on 1 February to settle a disagreement over a potential takeover.
The deadline marks the point at which Fiat will gain the right to sell its car division to GM, part of an alliance agreed in 2000. GM, whose own European operations are losing money, no longer wants to own the unprofitable Fiat unit. Reports of deadlocked talks sent Fiat shares down 1.2% on Tuesday, after Monday's 4% gain on hopes of a payoff. The US firm is thought to be offering about $2bn (£1.06bn) to extricate itself from the arrangement. It has argued the deal was voided by Fiat's decision to sell off Fiat's finance arm and halve GM's stake via a capital-raising effort.
The 2000 deal resulted from a race between GM and DaimlerChrysler to ally with Fiat. The German firm wanted to buy Fiat outright. But Gianni Agnelli, the godfather of the group, wanted to keep control, and preferred GM's offer to buy a 20% stake and give Fiat the right to sell in the future, known as a "put option". Since then, however, Fiat cars have lost market share and the firm has piled up losses, while a plan to raise new money in 2003 cut GM's stake in half to 10%. For its part, GM's European units Opel and Saab have both had trouble, with Opel management threatening to cut 12,000 jobs. "The last thing they need is additional production capacity in Europe," said Patrick Juchemich, auto analyst at Sal Oppenheim Bank.
| Since then, however, Fiat cars have lost market share and the firm has piled up losses, while a plan to raise new money in 2003 cut GM's stake in half to 10%.The German firm wanted to buy Fiat outright.The deadline marks the point at which Fiat will gain the right to sell its car division to GM, part of an alliance agreed in 2000.The 2000 deal resulted from a race between GM and DaimlerChrysler to ally with Fiat.GM, whose own European operations are losing money, no longer wants to own the unprofitable Fiat unit. |
Deutsche attacks Yukos case
German investment bank Deutsche Bank has challenged the right of Yukos to claim bankruptcy protection in the US.
In a court filing on Tuesday, it said the Russian oil giant has few Texas ties beyond bank accounts and a Texas-based finance chief. Deutsche Bank claimed Yukos had artificially manufactured a legal case to stop the sale of its main asset. It had wanted to help fund Gazprom's plans for a $10bn (£5.18bn) bid for Yukos unit Yuganskneftegas.
Deutsche Bank would have earned large fees from the deal, which could not be carried out because US chapter 11 bankruptcy rules made the Kremlin's auction of Yuganskneftegas on 19 December illegal under US law.
But the US bankruptcy court judge in Texas granted Yukos an injunction that barred Gazprom and its lenders from taking part. Yuganskneftegas will ultimately end up with Gazprom. The winning bidder at the auction was a previously unknown firm, Baikal Finance Group, which was snapped up days later by Rosneft, a Russian oil firm that is in the process of merging with Gazprom. The effect of these transactions is to renationalise Yuganskneftegas. Deutsche Bank contends Yukos filed for bankruptcy earlier this month in Texas in a desperate and unsuccessful bid to stave off the 19 December auction of its top unit by the Russian government, which was in a tax dispute with Yukos.
"This blatant attempt to artificially manufacture a basis for jurisdiction constitutes cause to dismiss this case," Deutsche Bank said in its court filing. Mike Lake, a spokesman for Yukos' lawyers, said on Tuesday that the company stands by its legal action. Yukos is confident of its right to US bankruptcy protection, and "we are prepared to be back in court defending that position again," he said. Yukos has said it intends to seek $20bn in damages from the buyer of Yuganskneftegas once the sale finally goes through. In its filing, Deutsche Bank said Houston was "a jurisdiction in which Yukos owns no real or personal property and conducts no business operations."
It also said the US bankruptcy court should not become involved in "a tax dispute between the Federation and one of its corporate citizens". It suggested the European Court or an international arbitration tribunal were more appropriate jurisdictions for the legal fight between Russia and Yukos. The next hearing in the bankruptcy is expected on 6 January. Analysts believe the tax dispute between the Russian government and Yukos is partly driven by Russian president Vladimir Putin's hostility hostility to the political ambitions of ex-Yukos boss Mikhail Khordokovsky. Mr Khodorkovsky is in jail, and on trial for fraud and tax evasion.
| Deutsche Bank contends Yukos filed for bankruptcy earlier this month in Texas in a desperate and unsuccessful bid to stave off the 19 December auction of its top unit by the Russian government, which was in a tax dispute with Yukos.German investment bank Deutsche Bank has challenged the right of Yukos to claim bankruptcy protection in the US.Yukos is confident of its right to US bankruptcy protection, and "we are prepared to be back in court defending that position again," he said.But the US bankruptcy court judge in Texas granted Yukos an injunction that barred Gazprom and its lenders from taking part.In its filing, Deutsche Bank said Houston was "a jurisdiction in which Yukos owns no real or personal property and conducts no business operations."Yukos has said it intends to seek $20bn in damages from the buyer of Yuganskneftegas once the sale finally goes through.It also said the US bankruptcy court should not become involved in "a tax dispute between the Federation and one of its corporate citizens".Deutsche Bank claimed Yukos had artificially manufactured a legal case to stop the sale of its main asset. |
S Korea spending boost to economy
South Korea will boost state spending next year in an effort to create jobs and kick start its sputtering economy.
It has earmarked 100 trillion won ($96bn) for the first six months of 2005, 60% of its total annual budget. The government's main problems are "slumping consumption and a contraction in the construction industry". It aims to create 400,000 jobs and will focus on infrastructure and home building, as well as providing public firms with money to hire new workers.
The government has set an economic growth rate target of 5% for next year and hinted that would be in danger unless it took action. "Internal and external economic conditions are likely to remain unfavourable in 2005," the Finance and Economy Ministry said in a statement.
It blamed "continuing uncertainties such as fluctuating oil prices and foreign exchange rates and stagnant domestic demand that has shown few signs of a quick rebound". In 2004, growth will be between 4.7% and 4.8%, the ministry said. Not everyone is convinced the plan will work. "Our primary worry centres on the what we believe is the government's overly optimistic view that its front loading of the budget will be enough to turn the economy around," consultancy 4Cast said in a report.
The problem facing South Korea is that many consumers are reeling from the effects of a credit bubble that only recently burst. Millions of South Koreans are defaulting on their credit card bills, and the country's biggest card lender has been hovering on the verge of bankruptcy for months. As part of its spending plans, the government said it will ask firms to "roll over mortgage loans that come due in the first half of 2005" . It also pledged to look at ways of helping families on low incomes.
The government voiced concern about the effect of redundancies in the building trade. "Given the economic spill over and employment effect in the construction sector, a sharp downturn in the construction industry could have other adverse effects," the ministry said.
As a result, South Korea will give private companies also will be given the chance to build schools, hospitals, houses and other public buildings. It also will look at real estate tax system. Other plans on the table include promoting new industries such as bio-technology and nano-technology, as well as offering increased support to small and medium sized businesses. "The focus will be on job creation and economic recovery, given that unfavourable domestic and global conditions are likely to dog the Korean economy in 2005," the ministry said.
| "The focus will be on job creation and economic recovery, given that unfavourable domestic and global conditions are likely to dog the Korean economy in 2005," the ministry said."Given the economic spill over and employment effect in the construction sector, a sharp downturn in the construction industry could have other adverse effects," the ministry said."Internal and external economic conditions are likely to remain unfavourable in 2005," the Finance and Economy Ministry said in a statement.In 2004, growth will be between 4.7% and 4.8%, the ministry said.South Korea will boost state spending next year in an effort to create jobs and kick start its sputtering economy.The government has set an economic growth rate target of 5% for next year and hinted that would be in danger unless it took action.As a result, South Korea will give private companies also will be given the chance to build schools, hospitals, houses and other public buildings.As part of its spending plans, the government said it will ask firms to "roll over mortgage loans that come due in the first half of 2005" . |
Salary scandal in Cameroon
Cameroon says widespread corruption in its finance ministry has cost it 1bn CFA francs ($2m; £1m) a month.
About 500 officials are accused of either awarding themselves extra money or claiming salaries for "non-existent" workers. Prime Minister Ephraim Inoni, who vowed to tackle corruption when he came to office last year, said those found guilty would face tough punishments. The scam is believed to have begun in 1994.
The prime minister's office said the alleged fraud was uncovered during an investigation into the payroll at the ministry. In certain cases, staff are said to have lied about their rank and delayed their retirement in order to boost their earnings. The prime minister's office said auditors had found "irregularities in the career structure of certain civil servants". It added that the staff in question "appear to have received unearned salaries, boosting the payroll".
Fidelis Nanga, a journalist based in the Cameroon capital Yaounde, said the government was considering taking criminal action against those found guilty and forcing them to repay any money owed. "The prime minister has given instructions for exemplary penalties to be meted out against the accused and their accomplices if found guilty," he told the BBC's Network Africa programme.
Mr Inoni launched an anti-corruption drive in December after foreign investors criticised a lack of transparency in the country's public finances. In one initiative designed to improve efficiency, civil servants who arrived late for work were locked out of their offices. The government now intends to carry out an audit of payrolls at all other government ministries. In a report compiled by anti-corruption body Transparency International in 2003, graft was said to be "pervasive" in Cameroon.
| The prime minister's office said the alleged fraud was uncovered during an investigation into the payroll at the ministry.The prime minister's office said auditors had found "irregularities in the career structure of certain civil servants".Prime Minister Ephraim Inoni, who vowed to tackle corruption when he came to office last year, said those found guilty would face tough punishments.Fidelis Nanga, a journalist based in the Cameroon capital Yaounde, said the government was considering taking criminal action against those found guilty and forcing them to repay any money owed.In a report compiled by anti-corruption body Transparency International in 2003, graft was said to be "pervasive" in Cameroon."The prime minister has given instructions for exemplary penalties to be meted out against the accused and their accomplices if found guilty," he told the BBC's Network Africa programme. |
Turkey-Iran mobile deal 'at risk'
Turkey's investment in Iran's mobile industry looks set to be scrapped after its biggest mobile firm saw its investment there slashed by MPs.
Iran's parliament voted by a large majority to cut Turkcell's stake in a new mobile network from 70% to 49%. The move, which was justified on national security grounds, follows an earlier vote by MPs to give themselves a veto over foreign investments. Turkcell said the decision "increases the risks" attached to the project. Although the company's statement said it would continue to monitor developments, observers said they thought Turkcell was set to pull out of the $3bn deal. "The possibility of carrying out this project is next to zero," said Atinc Ozkan, analyst at Finans Investment in Istanbul. If Turkcell does back out, MTN - the South African firm which lost out in the original tender - may well be back in the running. The company has said it is prepared to accept a minority stake if Iran will award it the mobile deal.
Turkcell's mobile deal is the second Turkish investment in Iran to run into trouble. Turkish-Austrian consortium TAV was chosen to build and run Tehran's new Imam Khomeini International Airport - but the army closed it just hours after it opened in May 2004. In both cases, the justification has been national security, amid allegations that the Turkish firms are too close to Israel. The hardline posture taken by parliament, which is dominated by religious conservatives, could yet impact other inward investments.
| Turkcell's mobile deal is the second Turkish investment in Iran to run into trouble.The company has said it is prepared to accept a minority stake if Iran will award it the mobile deal.Turkey's investment in Iran's mobile industry looks set to be scrapped after its biggest mobile firm saw its investment there slashed by MPs.Although the company's statement said it would continue to monitor developments, observers said they thought Turkcell was set to pull out of the $3bn deal.Iran's parliament voted by a large majority to cut Turkcell's stake in a new mobile network from 70% to 49%. |
SBC plans post-takeover job cuts
US phone company SBC Communications said it expects to cut around 12,800 jobs following its $16bn (£8.5bn) takeover of former parent AT&T.
SBC said 5,125 positions would go as a result of network efficiencies. Another 1,700 will go from its sales department, 3,400 from business operations and 2,600 across legal, advertising and public relations. SBC currently employs 163,000 people while AT&T employs 47,000. The takeover was announced on Monday. The deal will be financed with $15bn of shares as well as a $1bn special dividend paid to AT&T shareholders.
It effectively marks the end of AT&T, which was founded in 1875 by telephone pioneer Alexander Graham Bell and is one of the US's best-known companies. SBC and AT&T said estimated cost savings of at least $2bn from 2008 were a main driver for the merger. AT&T is a long-distance telecoms firm, while SBC is mainly focused on the local market in the western US. Both also have data network businesses. The takeover is subject to approval by AT&T's shareholders and regulators. The companies said they expected to complete the agreement during the first half of 2006.
| US phone company SBC Communications said it expects to cut around 12,800 jobs following its $16bn (£8.5bn) takeover of former parent AT&T.SBC and AT&T said estimated cost savings of at least $2bn from 2008 were a main driver for the merger.SBC said 5,125 positions would go as a result of network efficiencies.SBC currently employs 163,000 people while AT&T employs 47,000.AT&T is a long-distance telecoms firm, while SBC is mainly focused on the local market in the western US. |
Brazil buy boosts Belgium's Inbev
Belgian brewing giant Inbev has seen its profits soar thanks to its acquisition of Brazil's biggest beer firm Ambev last year.
Inbev, which makes Stella Artois, said pre-tax profits for 2004 rose 56% to 1.16bn euros ($1.5bn; £800m), and said it expected solid growth in 2005. The performance comes on sales up 21% at 8.6bn euros. The firm, formerly Interbrew, became the world's biggest brewer by volume when it bought Ambev in August 2004. The acquisition meant its sales by volume grew 57% in 2004, with four months of Ambev sales accounting for almost all of the increase. US beermaker Anheuser-Busch sells less beer by volume than Inbev but is bigger in terms of the value of its sales. Continuing demand for Inbev's products in the South American markets where its Brazilian arm is most popular means it expects to keep boosting its turnover. "It's the Brazil business that's doing it," said ING analyst Gerard Rijk of Inbev's strong performance. Ambev boosted its share of Brazil's beer market from 62% at the end of 2003 to more than 68% by December 2004, Inbev reported. In contrast, Inbev's European business saw volume sales fall 2.5%, although Central and Eastern European sales rose 12%. Overall, net profits were up 42% to 719m euros.
| Belgian brewing giant Inbev has seen its profits soar thanks to its acquisition of Brazil's biggest beer firm Ambev last year.The performance comes on sales up 21% at 8.6bn euros.The acquisition meant its sales by volume grew 57% in 2004, with four months of Ambev sales accounting for almost all of the increase.In contrast, Inbev's European business saw volume sales fall 2.5%, although Central and Eastern European sales rose 12%.Ambev boosted its share of Brazil's beer market from 62% at the end of 2003 to more than 68% by December 2004, Inbev reported. |
Japan narrowly escapes recession
Japan's economy teetered on the brink of a technical recession in the three months to September, figures show.
Revised figures indicated growth of just 0.1% - and a similar-sized contraction in the previous quarter. On an annual basis, the data suggests annual growth of just 0.2%, suggesting a much more hesitant recovery than had previously been thought. A common technical definition of a recession is two successive quarters of negative growth.
The government was keen to play down the worrying implications of the data. "I maintain the view that Japan's economy remains in a minor adjustment phase in an upward climb, and we will monitor developments carefully," said economy minister Heizo Takenaka. But in the face of the strengthening yen making exports less competitive and indications of weakening economic conditions ahead, observers were less sanguine. "It's painting a picture of a recovery... much patchier than previously thought," said Paul Sheard, economist at Lehman Brothers in Tokyo. Improvements in the job market apparently have yet to feed through to domestic demand, with private consumption up just 0.2% in the third quarter.
| On an annual basis, the data suggests annual growth of just 0.2%, suggesting a much more hesitant recovery than had previously been thought.A common technical definition of a recession is two successive quarters of negative growth.Revised figures indicated growth of just 0.1% - and a similar-sized contraction in the previous quarter.Japan's economy teetered on the brink of a technical recession in the three months to September, figures show. |
US bank boss hails 'genius' Smith
US Federal Reserve chairman Alan Greenspan has given a speech at a Scottish church in honour of the pioneering economist, Adam Smith.
He delivered the 14th Adam Smith Lecture in Kirkcaldy, Fife. The Adam Smith Lecture celebrates the author of 1776's Wealth of Nations, which became a bible of capitalism. Dr Greenspan was invited by Chancellor Gordon Brown, whose minister father John used to preach at the St Bryce Kirk church. Mr Brown introduced Dr Greenspan to the 400 invited guests as the "the world's greatest economist". Dr Greenspan, 79, who has been in the UK to attend the G7 meeting in London, said the world could never repay the debt of gratitude it owed to Smith, whose genius he compared to that of Mozart.
He said the philosopher was a "towering contributor to the modern world". "Kirkcaldy, the birthplace in 1723 of Adam Smith and, by extension, of modern economics, is also of course, where your chancellor was reared. "I am led to ponder to what extent the chancellor's renowned economic and financial skills are the result of exposure to the subliminal intellect-enhancing emanation in this area." He continued: "Smith reached far beyond the insights of his predecessors to frame a global view of how market economics, just then emerging, worked. "In so doing he supported changes in societal organisation that were to measurably enhance standards of living."
Dr Greenspan said Smith's revolutionary philosophy on human self-interest, laissez-faire economics and competition had been a force for good in the world. "The incredible insights of a handful of intellectuals of the Enlightenment - especially with Smith toiling in the environs of Kirkcaldy - created the modern vision of people free to choose and to act according to their individual self-interest," he said. Following his lecture, Dr Greenspan - who received an honorary knighthood from the Queen at Balmoral in 2002 - was awarded an honorary fellowship of the Royal Society of Edinburgh. He later opened an exhibition dedicated to Smith in the atrium of Fife College of Further and Higher Education. Joyce Johnston, principal of the college, said: "It is very fitting that the world's premier economist delivered this lecture in tribute to the world's first economist." Dr Greenspan - who became chairman of the Federal Reserve for an unprecedented fifth term in June 2004 - will step down in January next year. He has served under Presidents George W Bush, Bill Clinton, George Bush, and Ronald Reagan. He was also chairman of the council of economic advisors to Gerald Ford.
| "Kirkcaldy, the birthplace in 1723 of Adam Smith and, by extension, of modern economics, is also of course, where your chancellor was reared.US Federal Reserve chairman Alan Greenspan has given a speech at a Scottish church in honour of the pioneering economist, Adam Smith.He delivered the 14th Adam Smith Lecture in Kirkcaldy, Fife.Dr Greenspan, 79, who has been in the UK to attend the G7 meeting in London, said the world could never repay the debt of gratitude it owed to Smith, whose genius he compared to that of Mozart.Dr Greenspan said Smith's revolutionary philosophy on human self-interest, laissez-faire economics and competition had been a force for good in the world.Mr Brown introduced Dr Greenspan to the 400 invited guests as the "the world's greatest economist".Dr Greenspan was invited by Chancellor Gordon Brown, whose minister father John used to preach at the St Bryce Kirk church.The Adam Smith Lecture celebrates the author of 1776's Wealth of Nations, which became a bible of capitalism. |
India and Russia in energy talks
India and Russia are to work together in a series of energy deals, part of a pact which could see India invest up to $20bn in oil and gas projects.
On the agenda are oil and gas extraction as well as transportation deals, to be led by Russian energy giant Gazprom and India's ONGC. The Indian firm is also expected to hold talks on Tuesday about buying a stake in assets once owned by Yukos. It is reported to be keen on buying a 15% stake in oil unit Yuganskneftegas. The former Yukos subsidiary was controversially sold off last year and eventually acquired by state-owned energy giant Rosneft.
Russian media reported that India and Russia signed a memorandum of understanding on energy co-operation on Tuesday during a meeting between Oil and Natural Gas Corporation chairman Subir Raha, Gazprom chairman Aleksey Miller and India's petroleum minister Mani Shankar Aiyar.
The agreement is likely to see the two companies develop refining facilities in Russia, India and elsewhere and organise delivery of oil, gas and petrochemicals from Russia to India and other countries across Asia. ONGC could invest in gas and oil fields in Sakhalin, in the far east of Russia, and may also take part in joint tender bids for projects in eastern Siberia and the Caspian Sea.
India is urgently searching for fresh energy supplies - particularly liquefied natural gas - as domestic demand is growing at more than 5% a year.
ONGC's Mr Raha said the two could work together on joint bids from next year. "At current oil and gas prices, our cash flow situation is good," he told Reuters. "What we are saying is - Gazprom has a huge amount of gas and we have the money. "The investment may go up to $20bn or more for a period of five years or so."
Russian news agencies reported that India's petroleum minister Mr Aiyar and Russian energy minister Viktor Khristenko would discuss the future of Yugansk at a meeting on Tuesday. ONGC's Mr Raha declined to be drawn on his firm's reported interest in the company. However, he stressed that ONGC was not interested in a 'loan-for-oil deal' in connection to Yugansk, similar to that concluded recently between Rosneft and China's National Petroleum Corporation. "China's problem is it has immediate demand and they needed the oil for their coastal refineries. We do not. We would like long-term security through equity participation." It is thought that any decision over Yugansk will be delayed until a US court has decided whether to grant Yukos bankruptcy protection. Yukos is suing a host of companies involved in the sale of Yugansk, auctioned off to pay a huge back-tax bill. It has also threatened legal action against any business which has future commercial dealings with its former subsidiary.
| Russian media reported that India and Russia signed a memorandum of understanding on energy co-operation on Tuesday during a meeting between Oil and Natural Gas Corporation chairman Subir Raha, Gazprom chairman Aleksey Miller and India's petroleum minister Mani Shankar Aiyar.India and Russia are to work together in a series of energy deals, part of a pact which could see India invest up to $20bn in oil and gas projects.On the agenda are oil and gas extraction as well as transportation deals, to be led by Russian energy giant Gazprom and India's ONGC.Russian news agencies reported that India's petroleum minister Mr Aiyar and Russian energy minister Viktor Khristenko would discuss the future of Yugansk at a meeting on Tuesday.ONGC could invest in gas and oil fields in Sakhalin, in the far east of Russia, and may also take part in joint tender bids for projects in eastern Siberia and the Caspian Sea.The agreement is likely to see the two companies develop refining facilities in Russia, India and elsewhere and organise delivery of oil, gas and petrochemicals from Russia to India and other countries across Asia.India is urgently searching for fresh energy supplies - particularly liquefied natural gas - as domestic demand is growing at more than 5% a year."What we are saying is - Gazprom has a huge amount of gas and we have the money.The former Yukos subsidiary was controversially sold off last year and eventually acquired by state-owned energy giant Rosneft. |
Why few targets are better than many
The economic targets set out at the Lisbon summit of European Union leaders in 2000 were meant to help Europe leapfrog its way past the United States to become the world's leading economy by 2010.
But the Lisbon targets are about much more than just economic prestige. For many economists and analysts they are about ensuring Europe doesn't become a global economic laggard. They are also about ensuring Europe can continue to compete as an equal with the growing economic giants of Asia, India and China, as well as with the economic might of the United States. That's why there was a tone of urgency in the report, out on Wednesday, by the former Dutch prime minister Wim Kok. Mr Kok was commissioned by the European Commission in March this year to assess how far the EU has come towards meeting the Lisbon targets, five years on from their inception. His conclusion was simple: too many of the targets will be seriously missed.
Lisbon risks becoming a "synonym for missed objectives and failed promises", his report said. "The status quo is not an option."
At risk in the medium to long run is nothing less than the sustainability of the society Europe has built, it said. The report comes at a time when Europe's competitive position is waning. The EU's economic growth rate is projected to be 2% this year and 2.4% next. While there has been growth in overall employment rates in Europe, productivity lags behind that of the US. But meeting the Lisbon targets requires a political commitment that no EU member state has volunteered so far. That has in part been due to the state of the global economy in the past few years.
As Mr Kok's report noted: "The ink had scarcely dried on the [Lisbon] agreement before the worldwide stock market bubble imploded." "The US suffered two years of economic slowdown and recession and the European economy followed suit."
The circumstances weren't conducive to creating the 20 million new jobs promised by EU leaders in Lisbon in 2000. Neither were they conducive to getting governments to spend more on research and development, money needed if the EU was to meet its target of becoming a so-called "knowledge-based economy". "The [Lisbon] vision is a compelling one, but in order to do it society has to change," said Paul Hofheinz of the Lisbon Council, a Brussels-based citizen action group. "What you find is that a lot of people have been fighting change. You find trade unions fighting change. But also the employers' associations. "Even though they tell you they're in favour of change, many are actually pushing for less competition, more subsidy and less free market activity."
But part of the problem was also linked to the original targets set out in Lisbon five years ago. Targets have a habit of coming back to haunt you and in the Lisbon case, they covered too much, according to the Wim report. Economic growth and job creation were linked to issues ranging from environmental protection to social inclusion, and even safety at sea. The agenda was just too broad and as a result nothing was prioritised.
"Lisbon is about everything and thus about nothing," the Kok report said. "Everybody is responsible and thus no one." That's why the Kok report recommends that the Lisbon targets be narrowed down to 14 key indicators, with an emphasis on creating jobs and economic growth. It also recommends that the European Commission draw up a league table which ranks countries according to the steps they're taking towards meeting the targets, effectively "naming, shaming and faming". "Rhetoric and delivery don't necessarily go hand in hand," Mr Kok said in a press conference alongside the publication of his report. "We don't have the luxury anymore just to exchange politeness with one another."
On one point Mr Kok was very clear: The European Union should not try to emulate the US economy. The European economic and social model needs to change, but not so much so that social and environmental issues take a backseat to economic growth. In that sense, the Lisbon agenda is sailing into unchartered waters. The Kok report tries to do away with a belief that jobs need to be sacrificed at the altar of economic growth. "It's very ambitious," said John Palmer, political director at the European Policy Centre, a Brussels-based think-tank. "This is something that no advanced economy in the world has tried to do. It's going to require quite new and innovative policies." But some analysts believe that the Kok report doesn't come up with the sort of innovative policies and thinking needed to make the Lisbon targets a reality. For example, it recommends putting in place policies which encourage women and older people to remain in the workforce. But it doesn't say how companies should be convinced to do this. It will be up to the incoming president of the European Commission, Jose Manuel Barroso, to adopt Mr Kok's recommendations and press them on EU governments. Mr Barroso has said that the EU's competitiveness will be his top priority. He expects his five-year term in office to be judged on Europe's success in meeting the Lisbon agenda.
| That's why the Kok report recommends that the Lisbon targets be narrowed down to 14 key indicators, with an emphasis on creating jobs and economic growth."Lisbon is about everything and thus about nothing," the Kok report said.Mr Kok was commissioned by the European Commission in March this year to assess how far the EU has come towards meeting the Lisbon targets, five years on from their inception.But the Lisbon targets are about much more than just economic prestige.But some analysts believe that the Kok report doesn't come up with the sort of innovative policies and thinking needed to make the Lisbon targets a reality.The economic targets set out at the Lisbon summit of European Union leaders in 2000 were meant to help Europe leapfrog its way past the United States to become the world's leading economy by 2010."The [Lisbon] vision is a compelling one, but in order to do it society has to change," said Paul Hofheinz of the Lisbon Council, a Brussels-based citizen action group.On one point Mr Kok was very clear: The European Union should not try to emulate the US economy.But part of the problem was also linked to the original targets set out in Lisbon five years ago.But meeting the Lisbon targets requires a political commitment that no EU member state has volunteered so far.The Kok report tries to do away with a belief that jobs need to be sacrificed at the altar of economic growth.The European economic and social model needs to change, but not so much so that social and environmental issues take a backseat to economic growth.Lisbon risks becoming a "synonym for missed objectives and failed promises", his report said.Targets have a habit of coming back to haunt you and in the Lisbon case, they covered too much, according to the Wim report."The US suffered two years of economic slowdown and recession and the European economy followed suit."As Mr Kok's report noted: "The ink had scarcely dried on the [Lisbon] agreement before the worldwide stock market bubble imploded."The circumstances weren't conducive to creating the 20 million new jobs promised by EU leaders in Lisbon in 2000.The EU's economic growth rate is projected to be 2% this year and 2.4% next.For many economists and analysts they are about ensuring Europe doesn't become a global economic laggard. |
Industrial revival hope for Japan
Japanese industry is growing faster than expected, boosting hopes that the country's retreat back into recession is over.
Industrial output rose 2.1% - adjusted for the time of year - in January from a month earlier. At the same time, retail sales picked up faster than at any time since 1997. The news sent Tokyo shares to an eight-month high, as investors hoped for a recovery from the three quarters of contraction seen from April 2004 on. The Nikkei 225 index ended the day up 0.7% at 11,740.60 points, with the yen strengthening 0.7% against the dollar to 104.53 yen. Weaker exports, normally the engine for Japan's economy in the face of weak domestic demand, had helped trigger a 0.1% contraction in the final three months of last year after two previous quarters of shrinking GDP. Only an exceptionally strong performance in the early months of 2004 kept the year as a whole from showing a decline. The output figures brought a cautiously optimistic response from economic officials. "Overall I see a low risk of the economy falling into serious recession," said Bank of Japan chief Toshihiko Fukui, despite warning that other indicators - such as the growth numbers - had been worrying.
Within the overall industrial output figure, there were signs of a pullback from the export slowdown. Among the best-performing sectors were key overseas sales areas such as cars, chemicals and electronic goods. With US growth doing better than expected the picture for exports in early 2005 could also be one of sustained demand. Electronics were also one of the keys to the improved domestic market, with products such as flat-screen TVs in high demand during January.
| Industrial output rose 2.1% - adjusted for the time of year - in January from a month earlier.Weaker exports, normally the engine for Japan's economy in the face of weak domestic demand, had helped trigger a 0.1% contraction in the final three months of last year after two previous quarters of shrinking GDP.With US growth doing better than expected the picture for exports in early 2005 could also be one of sustained demand.Electronics were also one of the keys to the improved domestic market, with products such as flat-screen TVs in high demand during January.Within the overall industrial output figure, there were signs of a pullback from the export slowdown.At the same time, retail sales picked up faster than at any time since 1997. |
BMW drives record sales in Asia
BMW has forecast sales growth of at least 10% in Asia this year after registering record sales there in 2004.
The luxury carmaker saw strong sales of its three marques - BMW, Mini and Rolls-Royce - in Asia last year after the launch of three new models. The company, which is vying with Mercedes-Benz for the title of leading premium carmaker, is confident about its prospects for the region in 2005. It is launching a revamped version of its 3-Series saloon class next month.
BMW sold nearly 95,000 cars in Asia last year, up 2.6% on 2003.
BMW-brand sales rose 2.3% to 80,600 while sales of Mini models rose 3.6% to 14,800. There was also a significant increase in sales of Rolls-Royces on the continent. BMW sold more than 100 of the iconic models compared with just ten the previous year. The German carmaker is aiming to boost annual sales in Asia to 150,000 by 2008. "Here in Asia, we consider a double-digit increase in retail on the order of 10 to 15% to be realistic on the basis of current features," said Helmut Panke, BMW's group chief executive.
China remains the main area of concern for BMW after sales there fell 16% last year. However, BMW is hopeful of a much better year in 2005 as its direct investment in China begins to pay dividends. The company only began assembling luxury high-powered sedans in China in 2003. 2004 was generally a good year for BMW, which saw revenues from its core car-making operations rise 11%.
| BMW has forecast sales growth of at least 10% in Asia this year after registering record sales there in 2004.The luxury carmaker saw strong sales of its three marques - BMW, Mini and Rolls-Royce - in Asia last year after the launch of three new models.China remains the main area of concern for BMW after sales there fell 16% last year.BMW sold nearly 95,000 cars in Asia last year, up 2.6% on 2003.The German carmaker is aiming to boost annual sales in Asia to 150,000 by 2008.BMW sold more than 100 of the iconic models compared with just ten the previous year. |
India calls for fair trade rules
India, which attends the G7 meeting of seven leading industrialised nations on Friday, is unlikely to be cowed by its newcomer status.
In London on Thursday ahead of the meeting, India's finance minister, lashed out at the restrictive trade policies of the G7 nations. He objected to subsidies on agriculture that make it hard for developing nations like India to compete. He also called for reform of the United Nations, the World Bank and the IMF.
Palaniappan Chidambaram, India's finance minister, argued that these organisations need to take into account the changing world order, given India and China's integration into the global economy. He said the issue is not globalisation but "the terms of engagement in globalisation." Mr Chidambaram is attending the G7 meeting as part of the G20 group of nations, which account for two thirds of the world's population. At a conference on developing enterprise hosted by UK finance minister Gordon Brown on Friday, he said that he was in favour of floating exchange rates because they help countries cope with economic shocks. "A flexible exchange rate is one more channel for absorbing both positive and negative shocks," he told the conference. India, along with China, Brazil, South Africa and Russia, has been invited to take part in the G7 meeting taking place in London on Friday and Saturday. China is expected to face renewed pressure to abandon its fixed exchange rate, which G7 nations, in particular the US, have blamed for a surge in cheap Chinese exports. "Some countries have tried to use fixed exchange rates. I do not wish to make any judgements," Mr Chidambaram said. Separately, the IMF warned on Thursday that India's budget deficit was too large and would hamper the country's economic growth, which it forecast to be around 6.5% in the year to March 2005. In the year to March 2004, the Indian economy grew by 8.5%.
| At a conference on developing enterprise hosted by UK finance minister Gordon Brown on Friday, he said that he was in favour of floating exchange rates because they help countries cope with economic shocks.In London on Thursday ahead of the meeting, India's finance minister, lashed out at the restrictive trade policies of the G7 nations.Mr Chidambaram is attending the G7 meeting as part of the G20 group of nations, which account for two thirds of the world's population.China is expected to face renewed pressure to abandon its fixed exchange rate, which G7 nations, in particular the US, have blamed for a surge in cheap Chinese exports.Palaniappan Chidambaram, India's finance minister, argued that these organisations need to take into account the changing world order, given India and China's integration into the global economy.India, along with China, Brazil, South Africa and Russia, has been invited to take part in the G7 meeting taking place in London on Friday and Saturday. |
Chinese exports rise 25% in 2004
Exports from China leapt during 2004 over the previous year as the country continued to show breakneck growth.
The spurt put China's trade surplus - a sore point with some of its trading partners - at a six-year high. It may also increase pressure on China to relax the peg joining its currency, the yuan, with the weakening dollar. The figures released by the Ministry of Commerce come as China's tax chief confirmed that growth had topped 9% in 2004 for the second year in a row. State Administration of Taxation head Xie Xuren said a tightening of controls on tax evasion had combined with the rapid expansion to produce a 25.7% rise in tax revenues to 2.572 trillion yuan ($311bn; £165bn).
According to the Ministry of Commerce, China's exports totalled $63.8bn in December, taking the annual total up 35.4% to $593.4bn. With imports rising a similar amount, the deficit rose to $43.4bn. The increased tax take comes despite healthy tax rebates for many exporters totalling 420bn yuan in 2004, according to Mr Xie. China's exporting success has made the trade deficit of the United States soar even further and made trade with China a sensitive political issue in Washington. The peg keeping the yuan around 8.30 to the dollar is often blamed by US lawmakers for job losses at home. A US report issued on Tuesday on behalf of a Congressionally-mandated panel said almost 1.5 million posts disappeared between 1989 and 2003. The pace accelerated in the final three years of the period, said the report for the US-China Economic and Security Review Commission, moving out of labour-intensive industries and into more hi-tech sectors. The US's overall trade deficit with China was $124bn in 2003, and is expected to rise to about $150bn for 2004.
| The US's overall trade deficit with China was $124bn in 2003, and is expected to rise to about $150bn for 2004.State Administration of Taxation head Xie Xuren said a tightening of controls on tax evasion had combined with the rapid expansion to produce a 25.7% rise in tax revenues to 2.572 trillion yuan ($311bn; £165bn).According to the Ministry of Commerce, China's exports totalled $63.8bn in December, taking the annual total up 35.4% to $593.4bn.The increased tax take comes despite healthy tax rebates for many exporters totalling 420bn yuan in 2004, according to Mr Xie.The figures released by the Ministry of Commerce come as China's tax chief confirmed that growth had topped 9% in 2004 for the second year in a row.With imports rising a similar amount, the deficit rose to $43.4bn. |
Italy to get economic action plan
Italian Prime Minister Silvio Berlusconi will unveil plans aimed at kickstarting the country's sputtering economy on Thursday night in Rome.
He will present an "Action Plan for the Development of Italy" in a meeting with industrialists and trade union leaders. Mr Berlusconi is expected to table reforms aimed at boosting research and development (R&D) spending, and the competitiveness of small firms. Also in focus will be bankruptcy laws and the slow pace of the legal system. The prime minister is scheduled to start the meeting at 1830 GMT.
The government has been accused of underfunding R&D, making it harder for Italy to compete with other European nations and leading to a "brain-drain" of the country's brightest talents. Analysts say that hiring and firing staff is still too difficult and expensive, hampering the development of small- and medium-sized businesses. As a result, they say, Italy's corporate landscape is filled with numerous smaller companies that are often reluctant to become bigger because of all the extra hassle that would accompany the running of a larger firm. At the same time, bankruptcy laws make it difficult for failed company directors to set up new businesses and emerge from their debts, a situation that is hampering Italy's entrepreneurial spirit.
The government says that it has set about tackling the problems, adding that getting growth going was the responsibility of all of Italy's 60 million population. According to Il Sole 24 Ore, Italy's business newspaper, the government will focus on "opening up markets, infrastructure, research, making more incentives available, bankruptcy law, the slow pace of the justice system".
Mr Berlusconi has previously promised to cut taxes by 6.5bn euros ($8.6bn; £4.5bn) this year in an effort to get people and companies to spend. He has also promised to cap spending on transport, education and health so as to trim the ballooning budget deficit. Italy plans to raise as much as 25bn euros from privatisations in 2005, including a partial flotation of the post office and utility Enel. Critics argue that these moves do not go far enough and could make Italy's problems worse. Limiting government spending will lead to job losses, they counter, while the income tax cuts will have a negligible effect on sentiment and ultimately favour the wealthy.
The country has been one of the eurozone's worst economic performers in recent years. Growth was 1.1% in 2004, up from just 0.3% in 2003 and 0.4% in 2002 - an improvement but still a long way from ideal. At the same time, business and consumer confidence has dipped and analysts have raised concerns that what little spending there is stems from Italians dipping into their savings accounts or using credit cards. Without a pick up in national growth, they say, the money could eventually run out, bringing Italy's economy to a juddering halt. Consumer spending accounts for about two-thirds of Italy's economy.
| The government says that it has set about tackling the problems, adding that getting growth going was the responsibility of all of Italy's 60 million population.Consumer spending accounts for about two-thirds of Italy's economy.According to Il Sole 24 Ore, Italy's business newspaper, the government will focus on "opening up markets, infrastructure, research, making more incentives available, bankruptcy law, the slow pace of the justice system".At the same time, bankruptcy laws make it difficult for failed company directors to set up new businesses and emerge from their debts, a situation that is hampering Italy's entrepreneurial spirit.Without a pick up in national growth, they say, the money could eventually run out, bringing Italy's economy to a juddering halt.Mr Berlusconi has previously promised to cut taxes by 6.5bn euros ($8.6bn; £4.5bn) this year in an effort to get people and companies to spend.Mr Berlusconi is expected to table reforms aimed at boosting research and development (R&D) spending, and the competitiveness of small firms.At the same time, business and consumer confidence has dipped and analysts have raised concerns that what little spending there is stems from Italians dipping into their savings accounts or using credit cards.Italian Prime Minister Silvio Berlusconi will unveil plans aimed at kickstarting the country's sputtering economy on Thursday night in Rome. |
AstraZeneca hit by drug failure
Shares in Anglo-Swedish drug have closed down 8% in UK trade after the failure of its Iressa drug in a major clinical trial.
The lung cancer drug did not significantly prolong survival in patients with the disease. This setback for the group follows the rejection by the US in October of its anti-coagulant pill Exanta. Meanwhile, another of its major money spinners - cholesterol drug Crestor - is facing mounting safety concerns. "This would be two of the three blockbuster drugs that were meant to power the company forward failing... and we've got risks on Crestor," said Nick Turner, analyst at brokers Jefferies.
AstraZeneca had hoped to pitch its Iressa drug against rival medicine Tarceva. But Iressa proved no better than a placebo in extending lives in the trial involving 1,692 patients. Tarceva - made by OSI Pharmaceuticals, Genentech and Roche - has already proved to be successful in helping prolong the life of lung cancer patients. AztraZeneca has now appointed a new executive director to the board. John Patterson will be in charge of drug development. The company said Mr Patterson would make "substantial changes to the clinical organisation and its processes". "I am determined to improve our development and regulatory performance, restore confidence in the company and value to shareholders," said chief executive Tom McKillop.
| Shares in Anglo-Swedish drug have closed down 8% in UK trade after the failure of its Iressa drug in a major clinical trial.John Patterson will be in charge of drug development.AstraZeneca had hoped to pitch its Iressa drug against rival medicine Tarceva.The lung cancer drug did not significantly prolong survival in patients with the disease."This would be two of the three blockbuster drugs that were meant to power the company forward failing... and we've got risks on Crestor," said Nick Turner, analyst at brokers Jefferies. |
Executive trio leave Aer Lingus
Three senior executives of Ireland's state-owned airline, Aer Lingus, are set to leave early on 28 January after accusations of a conflict of interest.
The trio are chief executive Willie Walsh, chief financial officer Brian Dunne and chief operations officer Seamus Kearney. The three have refused to confirm reports they plan to launch a private airline in competition with Aer Lingus. They announced in November they would quit in May, but did not give a reason. That decision had followed an announcement by Irish Prime Minister Bertie Ahern - who is still considering the future of the airline - which ruled out a proposed management buy-out of Aer Lingus. Mr Walsh denied they had been forced out early because of the reports claiming they were set to launch a competitor airline.
"What I do after I leave Aer Lingus is still too early to say," Mr Walsh told AP news agency on Wednesday. "I have opportunities open to me. Brian and Seamus are in the equally fortunate position." He said he had received more than 40 business proposals, mostly aviation-related, since the trio announced their resignations two months ago. Mr Walsh said there was no conflict of interest, and, if he was to launch a rival airline or join an existing competitor, "this thing happens in every business". "There's absolutely no question of a conflict of interest. I've been completely focused on my responsibilities at Aer Lingus," he told AP.
This week opposition politicians had called on the Irish government to make an urgent decision on the future of the airline. On Wednesday Irish Transport Minister Martin Cullen said in a statement: "A conflict of interest cannot, should not and will not be allowed to arise between their current roles at Aer Lingus and their future career intentions." Last Friday the minister had announced he was to advertise for three senior executives for Aer Lingus. Mr Walsh, who took charge in 2000, and his team have earned praise for turning Aer Lingus around, by cutting air fares and staff, and re-positioning it as a low-fare airline to rival Ryanair. The company is 85% owned by the government and 15% by its staff.
| Three senior executives of Ireland's state-owned airline, Aer Lingus, are set to leave early on 28 January after accusations of a conflict of interest.Last Friday the minister had announced he was to advertise for three senior executives for Aer Lingus."What I do after I leave Aer Lingus is still too early to say," Mr Walsh told AP news agency on Wednesday.The three have refused to confirm reports they plan to launch a private airline in competition with Aer Lingus.Mr Walsh said there was no conflict of interest, and, if he was to launch a rival airline or join an existing competitor, "this thing happens in every business".Mr Walsh, who took charge in 2000, and his team have earned praise for turning Aer Lingus around, by cutting air fares and staff, and re-positioning it as a low-fare airline to rival Ryanair.On Wednesday Irish Transport Minister Martin Cullen said in a statement: "A conflict of interest cannot, should not and will not be allowed to arise between their current roles at Aer Lingus and their future career intentions."That decision had followed an announcement by Irish Prime Minister Bertie Ahern - who is still considering the future of the airline - which ruled out a proposed management buy-out of Aer Lingus. |
Russian oil merger excludes Yukos
The merger of Russian gas giant Gazprom and oil firm Rosneft is to go ahead, but will not include Yugansk, which was controversially bought last year.
The merger, backed by Russian authorities, will allow foreigners to trade in Gazprom shares. Gazprom chief Alexei Miller confirmed Rosneft-owned Yugansk was not part of the deal and will instead be spun off. Under the agreement, the state will get a controlling share of Gazprom in exchange for Rosneft. The state wanted to control Gazprom before allowing foreigners to trade. Speaking on NTV television, which is controlled by Gazprom, Mr Miller added that Yugansk, which was swallowed up by Rosneft late last year, will operate as a separate, state-owned oil firm headed by current Rosneft chief Sergei Bogdanchikov. According to reports from Russian News Agency Interfax, the deal should go through in the next two to three months.
"Obtaining majority control over Gazprom is the beginning of the liberalisation of the market in Gazprom shares," Mr Miller added. By opening up trading in Gazprom to foreigners, the firm will become a top emerging market play for traders. Currently, foreigners can only trade in Gazprom via a small issue of London-listed proxy shares. "This is positive news for the international investment community," Global Asset Management investment chief David Smith said. "The majority of investors are going to be happy," he added.
However, analysts were disappointed that Yugansk would not be included in the deal. "Yugansk is a heavy cashflow generator and would have been a much better asset for Gazprom," Renaissance Capital energy analyst Adam Landes told Reuters news agency. But he said the latest development was simply an interim step to allow foreigners to trade in Gazprom. "Ultimately and industrially, Gazprom needs Yugansk," he added. Analysts said the deal would give Gazprom control of 8% of Russia's total oil production, an improvement on its current 2.5%, but still far less than the 20% share it would have gained had it also taken over Yugansk. However, the merged group will still remain outside Russia's top five oil producers - led by Lukoil with 11% of the market , followed by TNK-BP which is half owned by BP, and Surgutneftegaz. Instead, the merged Gazprom-Rosneft group will rank alongside Sibneft with 7% of the market. Yugansk was sold to a little-known shell company in a disputed auction in December, following what many thought was a politically-motivated attack on Yukos. The shell company was then snapped up by Rosneft. Yukos unsuccessfully sought to halt the auction by applying for bankruptcy through the US courts. The unit was auctioned by Russian authorities to help pay off a $27.5bn back-tax bill.
| "Obtaining majority control over Gazprom is the beginning of the liberalisation of the market in Gazprom shares," Mr Miller added.The merger of Russian gas giant Gazprom and oil firm Rosneft is to go ahead, but will not include Yugansk, which was controversially bought last year.Gazprom chief Alexei Miller confirmed Rosneft-owned Yugansk was not part of the deal and will instead be spun off.Speaking on NTV television, which is controlled by Gazprom, Mr Miller added that Yugansk, which was swallowed up by Rosneft late last year, will operate as a separate, state-owned oil firm headed by current Rosneft chief Sergei Bogdanchikov."Ultimately and industrially, Gazprom needs Yugansk," he added.But he said the latest development was simply an interim step to allow foreigners to trade in Gazprom.The merger, backed by Russian authorities, will allow foreigners to trade in Gazprom shares.The state wanted to control Gazprom before allowing foreigners to trade.Analysts said the deal would give Gazprom control of 8% of Russia's total oil production, an improvement on its current 2.5%, but still far less than the 20% share it would have gained had it also taken over Yugansk.Yugansk was sold to a little-known shell company in a disputed auction in December, following what many thought was a politically-motivated attack on Yukos. |
Honda wins China copyright ruling
Japan's Honda has won a copyright case in Beijing, further evidence that China is taking a tougher line on protecting intellectual property rights.
A court ruled that Chongqing Lifan Industry Group must stop selling Honda brand motorbikes and said it must pay 1.47m yuan ($177,600) in compensation. Internationally recognized regulation is now a key part of China's plans for developing its economy, analysts said. Beijing also has been threatened with sanctions if it fails to clamp down.
Chinese firms copy products ranging from computer software and spark plugs to baby milk and compact discs. Despite the fact that product piracy is a major problem, foreign companies have only occasionally won cases and the compensation awarded has usually been small. Still, recent rulings and announcements will have boosted optimism that attitudes are changing. Earlier this week China said that in future it will punish violators of intellectual property rights with up to seven years in jail. And on Tuesday, Paws Incorporated - the owner of the rights to Garfield the cat - won a court battle against a publishing house that violated its copyright. Other firms that have taken legal action in China, with varying degrees of success, include Yamaha, General Motors and Toyota.
The problem of piracy is not limited to China, however, and the potential for profit is huge. The European Union estimates that the global trade in pirated wares is worth more than 200bn euros a year (£140bn; $258bn), or about 5% of total world trade. And it is growing. Between 1998 and 2002, the number of counterfeit or pirated goods intercepted at the EU's external borders increased by more than 800%, it said. Last month the EU said it will start monitoring China, Ukraine and Russia to ensure they are going after pirated goods. Other countries on the EU's hit list include Thailand, Brazil, South Korea and Indonesia. Any countries that are not making enough of an effort could be dragged to the World Trade Organisation (WTO), a step that could trigger economic sanctions, the EU warned.
| Japan's Honda has won a copyright case in Beijing, further evidence that China is taking a tougher line on protecting intellectual property rights.Earlier this week China said that in future it will punish violators of intellectual property rights with up to seven years in jail.Last month the EU said it will start monitoring China, Ukraine and Russia to ensure they are going after pirated goods.Between 1998 and 2002, the number of counterfeit or pirated goods intercepted at the EU's external borders increased by more than 800%, it said.Despite the fact that product piracy is a major problem, foreign companies have only occasionally won cases and the compensation awarded has usually been small.The problem of piracy is not limited to China, however, and the potential for profit is huge.Other firms that have taken legal action in China, with varying degrees of success, include Yamaha, General Motors and Toyota. |
Ukraine strikes Turkmen gas deal
Ukraine has agreed to pay 30% more for natural gas supplied by Turkmenistan.
The deal was sealed three days after Turkmenistan cut off gas supplies in a price dispute that threatened the Ukrainian economy. Supplies from Turkmenistan account for 45% of all natural gas imported by Ukraine, which has large coal deposits but no gas fields. Turkmenistan is also trying to strike a similar deal with Russia, which is not so dependent on its gas. Turkmen President Saparmurat Niyazov, who signed the contract, said the Turkmen side agreed to lower the price demanded by $2 per 1,000 cubic metres, bringing it down to $58. But the new price is still $14 higher than the price fixed in the contract for 2004. The head of the Ukrainian state-owned Naftohaz company, Yury Boyko, said he was "fully happy" with the deal. On Friday, Turkmenistan acted on a threat and shut off gas supplies to Ukraine in attempt to bring the price dispute to a head. Mr Niyazov said that his government would insist on the same price for supplies to Russia. Analysts say thay may not happen as Russia, the world's leading gas producer, needs the cheap Turkmen gas only to relieve is state-owned Gazprom from costly investment in the exploration of oil fields in Siberia. Turkmenistan is the second-largest gas producer in the world.
| The deal was sealed three days after Turkmenistan cut off gas supplies in a price dispute that threatened the Ukrainian economy.On Friday, Turkmenistan acted on a threat and shut off gas supplies to Ukraine in attempt to bring the price dispute to a head.Supplies from Turkmenistan account for 45% of all natural gas imported by Ukraine, which has large coal deposits but no gas fields.Ukraine has agreed to pay 30% more for natural gas supplied by Turkmenistan.Turkmenistan is the second-largest gas producer in the world. |
Lloyd's of London head chides FSA
The head of Lloyd's of London, the insurance market, has criticised Britain's financial watchdog, the Financial Services Authority (FSA).
In a speech on Monday, Mr Prettejohn urged the FSA to force brokers to disclose the size of their commissions. "The FSA should change, and change now" said Mr Prettejohn, who wants it to move from "disclosure on request" to mandatory disclosure. The call came in a speech on improving the London insurance market.
"The FSA should not bide their time and 'wait and see'. They should seize the moment," Mr Prettejohn, Lloyd's chief executive said. The FSA took over regulation of the general insurance sector in January, but it sidestepped calls to require brokers to disclose the commissions they earn from insurers to their clients. Last week, the City watchdog gave brokers and insurers guidance on managing conflicts of interest. Brokers must give information on their commissions if, and only if, their customers request it, the FSA said.
In the US, lack of transparency about brokers' commissions has led to problems. The world's biggest insurance broker Marsh & McLennan said last week it would pay $850m to settle charges, raised by New York Attorney General Eliot Spitzer in October, that it sought to rig bids in conjunction with insurers. The probe centred around so-called contingent commissions, whereby brokers were rewarded according to how much business they brought to an insurer, an arrangement that did not always benefit brokers' customers. All of the insurance business written in the Lloyd's market is placed via brokers.
| The FSA took over regulation of the general insurance sector in January, but it sidestepped calls to require brokers to disclose the commissions they earn from insurers to their clients.In a speech on Monday, Mr Prettejohn urged the FSA to force brokers to disclose the size of their commissions.Brokers must give information on their commissions if, and only if, their customers request it, the FSA said.The head of Lloyd's of London, the insurance market, has criticised Britain's financial watchdog, the Financial Services Authority (FSA).All of the insurance business written in the Lloyd's market is placed via brokers."The FSA should change, and change now" said Mr Prettejohn, who wants it to move from "disclosure on request" to mandatory disclosure. |
Criminal probe on Citigroup deals
Traders at US banking giant Citigroup are facing a criminal investigation in Germany over a controversial bond deal.
The deal saw the sale of 11bn euros ($14.4bn; £7.6bn) of government bonds in a few minutes on 2 August, with 4bn euros-worth then bought back later. The move was widely criticised at the time, and now the German regulator has said it has found evidence of possible market manipulation. Citigroup said it would continue to co-operate fully with the authorities. "We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved," Citigroup said. If the traders are found guilty, they could face a five-year jail term or a fine, Reuters reported BaFin as saying. However, under German criminal law, prosecutors cannot pursue Citigroup itself.
Germany's financial watchdog BaFin told BBC News it had now transferred the investigation to the public prosecutor. "I can confirm that BaFin has passed through the case to the public prosecutor," a BaFin spokeswoman said. "It is now a criminal investigation." "We found clues of possible market manipulation," the spokeswoman said, which included signs of linked bond trading ahead of the main trades on 2 August. "Germany's Securities Trading Act says that if BaFin finds such clues, it has to put the case in the hands of the prosecutor." Regulatory investigations are still going on in France, the UK and elsewhere. Some Citigroup operations elsewhere in the world came under regulatory criticism in 2004. Its private banking operation in Japan was closed down by regulators in Tokyo after an "aggressive sales culture" led the bank to flout anti-money laundering rules.
| "I can confirm that BaFin has passed through the case to the public prosecutor," a BaFin spokeswoman said."We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved," Citigroup said.Traders at US banking giant Citigroup are facing a criminal investigation in Germany over a controversial bond deal.Germany's financial watchdog BaFin told BBC News it had now transferred the investigation to the public prosecutor.However, under German criminal law, prosecutors cannot pursue Citigroup itself.The move was widely criticised at the time, and now the German regulator has said it has found evidence of possible market manipulation. |
ECB holds rates amid growth fears
The European Central Bank has left its key interest rate unchanged at 2% for the 19th month in succession.
Borrowing costs have remained on hold amid concerns about the strength of economic growth in the 12 nations sharing the euro, analysts said. Despite signs of pick-up, labour markets and consumer demand remain sluggish, while firms are eyeing cost cutting measures such as redundancies. High oil prices, meanwhile, have put upward pressure on the inflation rate.
Surveys of economists have shown that the majority expect borrowing costs to stay at 2% in coming months, with an increase of a quarter of a percentage point predicted some time in the second half of the year. If anything, there may be greater calls for an interest rate cut, especially with the euro continuing to strengthen against the dollar. "The euro land economy is still struggling with this recovery," said economist Dirk Schumacher. The ECB "may sound rather hawkish but once the data allows them to cut again, they will." Data coming out of Germany on Thursday underlined the problems facing European policy makers. While Germany's economy expanded by 1.7% in 2004, growth was driven by export sales and lost some of its momentum in the last three months of the year.
The strength of the euro is threatening to dampen that foreign demand in 2005, and domestic consumption currently is not strong enough to take up the slack. Inflation in the eurozone, however, is estimated at about 2.3% in December, above ECB guidelines of 2%. ECB President Jean-Claude Trichet has remained upbeat about prospects for the region, and inflation is expected to drop below 2% later in 2005. The ECB has forecast economic growth in the eurozone of 1.9% in 2005.
| The ECB has forecast economic growth in the eurozone of 1.9% in 2005.Borrowing costs have remained on hold amid concerns about the strength of economic growth in the 12 nations sharing the euro, analysts said.ECB President Jean-Claude Trichet has remained upbeat about prospects for the region, and inflation is expected to drop below 2% later in 2005.If anything, there may be greater calls for an interest rate cut, especially with the euro continuing to strengthen against the dollar.Inflation in the eurozone, however, is estimated at about 2.3% in December, above ECB guidelines of 2%.The ECB "may sound rather hawkish but once the data allows them to cut again, they will." |
Cairn shares slump on oil setback
Shares in Cairn Energy, a UK oil firm, have closed down 18% after a disappointing drilling update and a warning over possible tax demands.
The company said tests had shown no significant finds in one of its Indian oil fields, but was upbeat about the potential of other areas. It also said the Indian government had told it to pay a production tax, for which Cairn argues it is not liable. Cairn's shares have jumped by almost 400% this year. Investors had piled into Cairn after the company announced significant oil finds in India this year. Chief executive Bill Gammell said on Friday he was "disappointed" with exploration in the so-called N-C extension area in Rajasthan. Investors had held high hopes of major oil finds in this area. But Cairn said estimates had been revised in what was a "significant downgrade of the initial expectation".
Cairn also said that the government believed the company was liable to pay taxes under its production-sharing contract. The company said the rate would be about 900 rupees ($20.40; £10.50) per tonne, or seven barrels, of oil. A spokesman for the firm said that the tax would wipe 5% of the field's current value.
"Cairn refutes the government's position," Mr Gammell said. He insisted that the contract made it clear that the tax should be shouldered by the licensee - India's state-run Oil & Natural Gas Corp (ONGC) - and not the contractor. "We have a pretty strong legal case here," he added, saying it would only become an issue once the firm started production. Investors took a dim view of the statements though. The shares closed down 247p, or 18%, at 1115 pence. "I think people were slightly over-ambitious for how quickly Cairn would be able to develop and potentially offload these reserves," said analyst Jason Kenney at ING.
The disappointments overshadowed increased production targets for Cairn's existing oilfields. The company raised targets for its Mangala and Aishwariya fields in India from 60,000 barrels a day to between 80,000 and 100,000 barrels a day. Its Mangala field, thought to contain a billion barrels, is its biggest find to date. "These two fields will provide the core of the future developments in Rajasthan," Mr Gammell said. Cairn added that it would be appraising another field early next year. Mr Gammell set up the company in the 1980s and has successfully switched its focus to South Asia from interests in the US and Europe. Cairn, which also operates in Nepal and Bangladesh, was catapulted into the FTSE 100 index of leading UK shares earlier this year after the sharp rise in its share price.
| Cairn also said that the government believed the company was liable to pay taxes under its production-sharing contract.Investors had piled into Cairn after the company announced significant oil finds in India this year.It also said the Indian government had told it to pay a production tax, for which Cairn argues it is not liable.The company said tests had shown no significant finds in one of its Indian oil fields, but was upbeat about the potential of other areas."Cairn refutes the government's position," Mr Gammell said.The company said the rate would be about 900 rupees ($20.40; £10.50) per tonne, or seven barrels, of oil.But Cairn said estimates had been revised in what was a "significant downgrade of the initial expectation".Cairn added that it would be appraising another field early next year.A spokesman for the firm said that the tax would wipe 5% of the field's current value.Cairn, which also operates in Nepal and Bangladesh, was catapulted into the FTSE 100 index of leading UK shares earlier this year after the sharp rise in its share price. |
Unilever shake up as profit slips
Anglo-Dutch consumer goods giant Unilever is to merge its two management boards after reporting "unsatisfactory" earnings for 2004.
It blamed the poor results on sluggish decision making, a rise in discounted retailers and a wet European summer. The company also cited difficult trading conditions and a lack of demand for goods such as its Slimfast range. Unilever, which owns brands including Dove soap, said annual pre-tax profit fell 36% to 2.9bn euros (£1.99bn). Shares fell 1% to 510.75 pence in London, and dropped by 1.2% to 50.50 euros in Amsterdam.
Under the restructuring plans, Patrick Cescau, the UK-based co-chairman, will become group chief executive. Dutch co-chairman Antony Burgmans will take on the role of non-executive chairman.
"We have recognised the need for greater clarity of leadership and we are moving to a simpler leadership structure that will provide a sharper operational focus," Mr Burgmans said. "We are leaving behind one of the key features of Unilever's governance but this is a natural development following the changes introduced last year." The company, which has had dual headquarters in Rotterdam and London since 1930, will announce the location of its head office at a later date. Unilever is not alone in trying to simplify its business. Oil giant Shell last year dismantled its dual-ownership structure, after a series of problems relating to the size of its oil reserves that hammered its share price and led to the resignation of key board members. "The best part of the news this morning was that the company announced a structure simplification," said Arjan Sweere, an analyst at Petercam.
The company said the organizational changes would speed decision making, and it also may make further changes.
The company said its main focus will be on improving profits, and it is planning to accelerate and increase investment in its 400 main brands. "While it is certainly the case that markets have been tougher in the past eighteen months than we had expected, we have also lost some market share," said Mr Cescau. "We let a range of targets limit our ability flexibility and did not adjust our plans quickly enough to a more difficult business environment." "Our objective is to reverse the share loss that we experienced in some markets in 2004 and return to growth."
Unilever said European sales fell 2.8% last year, dragged down by below part sales at its beverage division, where revenues dipped by almost 4%.
Sales of ice cream and frozen food dipped by 3.4% In the US last year, revenue grew by 1.5% "despite disappointing sales in Slimfast", the company said. In Asia, leading products came under "attack" from rivals such as Procter & Gamble. Unilever took a 1.5bn euro one-time charge in the fourth quarter, including a 650m euro write-down on Slimfast diet foods. Sales of Slimfast products have been hit in recent years by the popularity of the Atkins diet. But looking ahead, Unilever said it was optimistic about prospects for its slimming products saying that demand is on the wane for rival low-carbohydrate diets. The company also said it planned to spend 500m euros this year buying back shares.
| The company also said it planned to spend 500m euros this year buying back shares.Sales of ice cream and frozen food dipped by 3.4% In the US last year, revenue grew by 1.5% "despite disappointing sales in Slimfast", the company said.Unilever said European sales fell 2.8% last year, dragged down by below part sales at its beverage division, where revenues dipped by almost 4%.The company said the organizational changes would speed decision making, and it also may make further changes.Unilever, which owns brands including Dove soap, said annual pre-tax profit fell 36% to 2.9bn euros (£1.99bn).But looking ahead, Unilever said it was optimistic about prospects for its slimming products saying that demand is on the wane for rival low-carbohydrate diets."While it is certainly the case that markets have been tougher in the past eighteen months than we had expected, we have also lost some market share," said Mr Cescau.The company also cited difficult trading conditions and a lack of demand for goods such as its Slimfast range."The best part of the news this morning was that the company announced a structure simplification," said Arjan Sweere, an analyst at Petercam.Unilever took a 1.5bn euro one-time charge in the fourth quarter, including a 650m euro write-down on Slimfast diet foods. |
Irish company hit by Iraqi report
Shares in Irish oil company Petrel Resources have lost more than 50% of their value on a report that the firm has failed to win a contract in Iraq.
Reuters news agency reported that Iraq's Oil Ministry has awarded the first post-war oilfield contracts to a Canadian and a Turkish company. By 1700 GMT, Petrel's shares fell from 97p ($1.87) to 44p ($0.85). Petrel said that it has not received any information from Iraqi authorities to confirm or deny the report.
Iraq is seeking to award contracts for three projects, valued at $500m (£258.5m). Turkey's Everasia is reported by Reuters to have won a contract to develop the Khurmala Dome field in the north of the country. A Canadian company, named IOG, is reported to have won the contract to run the Himrin field. Ironhorse Oil and Gas has denied to Reuters that it is the company in question. These two projects aim to develop Khurmala field to produce 100,000 barrels per day and raise the output of Himrin. The winners of the contract are to build new flow lines and build gas separation stations. The contract to develop the Suba-Luhais field has not yet been awarded as Iraq's Oil Ministry is studying the offers. If Iraq's cabinet approves the oil ministry's choice of companies, then this will be the first deal that Iraq has signed with a foreign oil company. Iraq is still trying to boost its production capacity to match levels last seen in the eighties, before the war with Iran. Oil officials hope to double Iraq's output by the end of the decade.
| Reuters news agency reported that Iraq's Oil Ministry has awarded the first post-war oilfield contracts to a Canadian and a Turkish company.The contract to develop the Suba-Luhais field has not yet been awarded as Iraq's Oil Ministry is studying the offers.Shares in Irish oil company Petrel Resources have lost more than 50% of their value on a report that the firm has failed to win a contract in Iraq.If Iraq's cabinet approves the oil ministry's choice of companies, then this will be the first deal that Iraq has signed with a foreign oil company.Ironhorse Oil and Gas has denied to Reuters that it is the company in question.A Canadian company, named IOG, is reported to have won the contract to run the Himrin field. |
Bat spit drug firm goes to market
A German firm whose main product is derived from the saliva of the vampire bat is looking to raise more than 70m euros ($91m; £49m) on the stock market.
The firm, Paion, said that it hoped to sell 5 million shares - a third of the firm - for 11-14 euros a share. Its main drug, desmoteplase, is based on a protein in the bat's saliva. The protein stops blood from clotting - which helps the bat to drink from its victims, but could also be used to help stroke sufferers. The company's shares go on sale later this week, and are scheduled to start trading on the Frankfurt Stock Exchange on 10 February. If the final price is at the top of the range, the company could be valued at as much as 200m euros. The money raised will be spent largely on developing the company's other drugs, since desmoteplase has already been licensed to one manufacturer, Forest Laboratories.
| A German firm whose main product is derived from the saliva of the vampire bat is looking to raise more than 70m euros ($91m; £49m) on the stock market.Its main drug, desmoteplase, is based on a protein in the bat's saliva.The firm, Paion, said that it hoped to sell 5 million shares - a third of the firm - for 11-14 euros a share. |
Jarvis sells Tube stake to Spain
Shares in engineering group Jarvis have soared more than 16% on news that it is offloading its stake in London underground consortium Tube Lines.
The sale of the 33% stake to Spain's Ferrovial for £146m ($281m) is a lifeline to Jarvis, which was weighed down by debts of more than £230m. The company recently warned it could go under if it did not secure a refinancing deal by mid-January 2005. But now its banks have agreed to extend its credit facilities until March 2006.
The company also said it had agreed terms over the completion of 14 of its biggest construction projects under the government's Private Finance Initiative (PFI).
Jarvis wants to scale back the division, which has proved too costly and has been blamed for many of its problems. Instead, it plans to focus on UK rail renewal, roads and plant hire work. Madrid-based Ferrovial already holds a 33% stake in Tube Lines, which maintains the Jubilee, Northern and Piccadilly lines. The Spanish group has been keen to snap up more UK infrastructure assets, having bought Amey in 2003. Jarvis said the sale, which raked in more than the £100m analysts had expected, would "substantially" enhance its financial position. "I am now confident that we can now move forward in 2005 towards rebuilding Jarvis and return it to growth as a profitable business," said chief executive Alan Lovell. Shares in Jarvis were up more than 16% to 18 pence by the close of trade on Friday.
| Shares in engineering group Jarvis have soared more than 16% on news that it is offloading its stake in London underground consortium Tube Lines.The sale of the 33% stake to Spain's Ferrovial for £146m ($281m) is a lifeline to Jarvis, which was weighed down by debts of more than £230m.Jarvis said the sale, which raked in more than the £100m analysts had expected, would "substantially" enhance its financial position.Shares in Jarvis were up more than 16% to 18 pence by the close of trade on Friday.Jarvis wants to scale back the division, which has proved too costly and has been blamed for many of its problems. |
Golden rule 'intact' says ex-aide
Chancellor Gordon Brown will meet his golden economic rule "with a margin to spare", according to his former chief economic adviser.
Formerly one of Mr Brown's closest Treasury aides, Ed Balls hinted at a Budget giveaway on 16 March. He said he hoped more would be done to build on current tax credit rules. Any rate rise ahead of an expected May election would not affect the Labour Party's chances of winning, he added. Last July, Mr Balls won the right to step down from his Treasury position and run for parliament, defending the Labour stronghold of Normanton in West Yorkshire.
Mr Balls rejected the allegation that Mr Brown had been sidelined in the election campaign, saying he was playing a "different" role to the one he played in the last two elections. He rejected speculation that Mr Brown was considering becoming Foreign Secretary, saying his recent travels had been linked to efforts to boost international development. Gordon Brown's decision to announce the date of the Budget while on a trip to China was a "sensible thing to do", since he was talking about skills and investment at the time, Mr Balls told the BBC. Commenting on speculation of an interest rate rise, he said it was not within the remit of the Bank of England's Monetary Policy Committee (MPC) to factor a potential election into its rate decisions. Expectations of a rate rise have gathered pace after figures showed that house prices are still rising. Consumer borrowing rose at a near-record pace in January. "I don't believe it would be a big election issue in Britain or a problem for Labour," Mr Balls said. Prime Minister Tony Blair has yet to name the date of the election, but most pundits are betting on 5 May as the likely day.
| Mr Balls rejected the allegation that Mr Brown had been sidelined in the election campaign, saying he was playing a "different" role to the one he played in the last two elections."I don't believe it would be a big election issue in Britain or a problem for Labour," Mr Balls said.Any rate rise ahead of an expected May election would not affect the Labour Party's chances of winning, he added.Commenting on speculation of an interest rate rise, he said it was not within the remit of the Bank of England's Monetary Policy Committee (MPC) to factor a potential election into its rate decisions.Gordon Brown's decision to announce the date of the Budget while on a trip to China was a "sensible thing to do", since he was talking about skills and investment at the time, Mr Balls told the BBC.Formerly one of Mr Brown's closest Treasury aides, Ed Balls hinted at a Budget giveaway on 16 March. |
Insurance bosses plead guilty
Another three US insurance executives have pleaded guilty to fraud charges stemming from an ongoing investigation into industry malpractice.
Two executives from American International Group (AIG) and one from Marsh & McLennan were the latest. The investigation by New York attorney general Eliot Spitzer has now obtained nine guilty pleas. The highest ranking executive pleading guilty on Tuesday was former Marsh senior vice president Joshua Bewlay.
He admitted one felony count of scheming to defraud and faces up to four years in prison. A Marsh spokeswoman said Mr Bewlay was no longer with the company. Mr Spitzer's investigation of the US insurance industry looked at whether companies rigged bids and fixed prices. Last month Marsh agreed to pay $850m (£415m) to settle a lawsuit filed by Mr Spitzer, but under the settlement it "neither admits nor denies the allegations".
| A Marsh spokeswoman said Mr Bewlay was no longer with the company.The highest ranking executive pleading guilty on Tuesday was former Marsh senior vice president Joshua Bewlay.Another three US insurance executives have pleaded guilty to fraud charges stemming from an ongoing investigation into industry malpractice.Mr Spitzer's investigation of the US insurance industry looked at whether companies rigged bids and fixed prices. |
Wipro beats forecasts once again
Wipro, India's third-biggest software firm, has reported a 60% rise in profit, topping market expectations.
Net income in the last quarter was 4.3bn rupees ($98m; £52m), against 2.7bn a year earlier. Profit had been forecast to be 4.1bn rupees. Wipro offers services such as call centres to foreign clients and has worked for more than half of the companies on the Fortune 500 list. Wipro said demand was strong, allowing it to increase the prices it charged.
"On the face of it, the results don't look very exciting," said Apurva Shah, an analyst at ASK-Raymond James. "But the guidance is positive and pricing going up is good news." Third-quarter sales rose 34% to 20.9bn rupees. One problem identified by Wipro was the high turnover of its staff. It said that 90% of employees at its business process outsourcing operations had had to be replaced. "We have to get that under control," said vice-chairman Vivek Paul. Wipro is majority owned by India's richest man Azim Premji.
| Wipro said demand was strong, allowing it to increase the prices it charged.Profit had been forecast to be 4.1bn rupees.Wipro, India's third-biggest software firm, has reported a 60% rise in profit, topping market expectations.Net income in the last quarter was 4.3bn rupees ($98m; £52m), against 2.7bn a year earlier.One problem identified by Wipro was the high turnover of its staff. |
BA to suspend two Saudi services
British Airways is to halt its flights from London Heathrow to Jeddah and Riyadh in Saudi Arabia from 27 March.
The airline said the decision was a commercial one due to reduced passenger demand for the services. BA currently operates four flights per week from Heathrow to Jeddah, and three weekly journeys to Riyadh. It suspended flights to Saudi Arabia for three weeks in autumn 2003 after a government warning about a "threat to UK aviation interests in Saudi Arabia".
BA will now suspend the Saudi flights - which it says will remain "under constant review" - from 27 March. "The decision to suspend flights between the UK and Saudi Arabia is a difficult one to make as we have enjoyed a long history of flying between the two countries," said BA director of commercial planning, Robert Boyle. "However, the routes don't currently make a profitable contribution to our business and we are unable to sustain them while this remains the case." Passengers with flights booked after the suspension date will be contacted by BA for alternative arrangements to be made.
| "The decision to suspend flights between the UK and Saudi Arabia is a difficult one to make as we have enjoyed a long history of flying between the two countries," said BA director of commercial planning, Robert Boyle.British Airways is to halt its flights from London Heathrow to Jeddah and Riyadh in Saudi Arabia from 27 March.BA will now suspend the Saudi flights - which it says will remain "under constant review" - from 27 March.BA currently operates four flights per week from Heathrow to Jeddah, and three weekly journeys to Riyadh. |
Rescue hope for Borussia Dortmund
Shares in struggling German football club Borussia Dortmund slipped on Monday despite the club agreeing a rescue plan with creditors on Friday.
The club, which has posted record losses and racked up debts, said last week that it was in "a life-threatening profitability and financial situation". Creditors agreed on Friday to suspend interest payments until 2007. News of the deal had boosted shares in the club on Friday, but the stock slipped back 7% during Monday morning.
In addition to the interest-payment freeze, Borussia Dortmund also will get short-term loans to help pay salaries. It estimated that it needs almost 30m euros ($39m; £21m) until the end of June if it is to pay its bills. The football club is hoping that all its creditors will agree to defer rent payments on its Westfalen stadium. Borussia officials met with almost all the banks involved in its financing on Friday and over the weekend. Three creditors have yet to agree to the deal struck last week. On 14 March, one of these creditors - property investment fund Molsiris which owns the club's stadium - holds its AGM at which it will discuss the rescue plan. Chief executive Gerd Niebaum stepped down last week and creditors have been pushing for a greater say in how the club is run. Borussia Dortmund also is facing calls to appoint executives from outside the club. The club posted a record loss of 68m euros in the 12 months through June. Adding to its woes, Borussia Dortmund was beaten 5-0 by Bayern Munich on Saturday.
| Shares in struggling German football club Borussia Dortmund slipped on Monday despite the club agreeing a rescue plan with creditors on Friday.Borussia Dortmund also is facing calls to appoint executives from outside the club.The football club is hoping that all its creditors will agree to defer rent payments on its Westfalen stadium.The club posted a record loss of 68m euros in the 12 months through June.Chief executive Gerd Niebaum stepped down last week and creditors have been pushing for a greater say in how the club is run.The club, which has posted record losses and racked up debts, said last week that it was in "a life-threatening profitability and financial situation". |
Oil prices fall back from highs
Oil prices retreated from four-month highs in early trading on Tuesday after producers' cartel Opec said it was now unlikely to cut production.
Following the comments by acting Opec secretary general Adnan Shihab-Eldin, US light crude fell 32 cents to $51.43 a barrel. He said that high oil prices meant Opec was unlikely to stick to its plan to cut output in the second quarter. In London, Brent crude fell 32 cents to $49.74 a barrel.
Opec members are next meeting to discuss production levels on 16 March. On Monday, oil prices rose for a sixth straight session, reaching a four-month high as cold weather in the US threatened stocks of heating oil. US demand for heating oil was predicted to be about 14% above normal this week, while stocks were currently about 7.5% below the levels of a year ago. Cold weather across Europe has also put upward pressure on crude prices.
| Oil prices retreated from four-month highs in early trading on Tuesday after producers' cartel Opec said it was now unlikely to cut production.He said that high oil prices meant Opec was unlikely to stick to its plan to cut output in the second quarter.On Monday, oil prices rose for a sixth straight session, reaching a four-month high as cold weather in the US threatened stocks of heating oil.Following the comments by acting Opec secretary general Adnan Shihab-Eldin, US light crude fell 32 cents to $51.43 a barrel. |
Laura Ashley chief stepping down
Laura Ashley is parting company with its chief executive Ainum Mohd-Saaid.
The clothing and home furnishing retailer said Ms Mohd-Saaid had resigned for personal reasons. Her departure will come into effect on 1 February and follows the departure of co-chief executive Rebecca Navarednam on 1 January. Ms Mohd-Saaid is to be replaced by Lillian Tan, presently a non-executive director of the company and head of a Malaysian retailer.
In a statement issued on Thursday, Laura Ashley thanked Ms Mohd-Saaid for her services to the company. Its shares were down 8.51% to 10.75p in late Thursday morning trading on the London Stock Exchange.
Since 2002, Ms Tan has been managing director and chief executive of Metrojaya, one of the largest retail groups in Malaysia. Laura Ashley, which is due to issue its next trading statement in the next few weeks, has in recent months been hit by reports of poor sales. In October last year, it announced the closure of one of its two Welsh factories. In September, the company had said that its half-year clothing sales had been "below expectations". In recent times, it has put renewed focus on home furnishings rather than clothing, but last September it reported that interim six month losses had risen from £1m to £1.2m, while sales had fallen from £138m to £118m.
Laura Ashley, which floated on the London Stock Exchange for £200m ($376m) in 1995, is majority-owned by Malaysia entrepreneur Dr Khoo Kay Peng. In 1996, its share price was more than 200p. It has long been reported that Dr Khoo intends to take the company private, but he has always denied this. "Laura Ashley is a bit of a shrivelled husk of a company," said retail analyst Nick Bubb of Evolution Securities. "It is all pretty odd with its Malaysian owners seemingly just shuffling the deckchairs." Laura Ashley was founded by its late namesake in Kent in 1955, before moving to Mid Wales in 1961 where it still has its main UK factory.
| Laura Ashley is parting company with its chief executive Ainum Mohd-Saaid.In a statement issued on Thursday, Laura Ashley thanked Ms Mohd-Saaid for her services to the company.Ms Mohd-Saaid is to be replaced by Lillian Tan, presently a non-executive director of the company and head of a Malaysian retailer."Laura Ashley is a bit of a shrivelled husk of a company," said retail analyst Nick Bubb of Evolution Securities.Since 2002, Ms Tan has been managing director and chief executive of Metrojaya, one of the largest retail groups in Malaysia.Laura Ashley was founded by its late namesake in Kent in 1955, before moving to Mid Wales in 1961 where it still has its main UK factory.Laura Ashley, which floated on the London Stock Exchange for £200m ($376m) in 1995, is majority-owned by Malaysia entrepreneur Dr Khoo Kay Peng. |
Oil prices reach three-month low
Oil prices have fallen heavily for a second day, closing at three-month lows after news that US crude stocks have improved ahead of winter.
London Brent crude closed at $40.15 on Thursday - a drop of 5.1% - having dived below $40 a barrel for the first time since mid-September. US light crude traded in New York lost more than $2 to $43.25, its lowest close since 10 September. The price of both benchmark crudes has dropped 12% in two days. The falls were triggered when the Energy Information Administration (EIA) said on Wednesday that US crude stocks were 3.5% higher than a year ago. The news calmed worries about winter shortages. Weak US fuel and heating oil stocks have been a persistent factor in pushing up oil prices. "It's amazing how quickly sentiment changed," said Rick Mueller, an analyst at Energy Security Analysis. Analysts also attributed the fall to mild early-winter weather, which has tempered demand for heating oil.
The stronger fuel inventories helped boost US stock markets to nine-month highs on Wednesday, though only the Nasdaq index had hung onto those gains by the end of Thursday.
In London, the FTSE 100 index closed 15 points higher at 4,751. The long-awaited drop in oil prices helped to ease persistent investor jitters over the impact of energy costs on company profits and economic growth. However, traders warned that the fall could be short-lived if there is a cold snap in North America this winter or any major supply problems in other parts of the world.
The price of crude is still up about 30% on the start of 2004, but has fallen from the record of $55.67 set in late October. Opec nations have increased production to 25-year highs to meet global demand and this has helped rebuild US stocks hit by supply disruptions after Hurricane Ivan in September. Traders were also encouraged by comments on Wednesday from the energy minister of Opec member Algeria. Chakib Khelil said the cartel was likely to keep output unchanged when it meets next week. However, some analysts believe the sharp fall in crude prices may harden Opec's attitude to over-production, leading to a scaling back of oil output.
Fears still remain over the level of US heating oil stocks, which are rising but remain down on 2004 levels. A cold spell in north America would start to deplete supplies and could spark further price rises. Analysts, however, say prices will fall further if inventories continue to rise. "Mother Nature is going to be huge in the next several weeks," said Kyle Cooper, at Citigroup Global Markets. "Long term I think we're headed to $30-35 but I don't think we're doing that yet. We have a lot of winter left." John Person, president of National Futures Advisory Services, said the EIA data indicated there should be adequate supplies for the next three months in the US. .
| Oil prices have fallen heavily for a second day, closing at three-month lows after news that US crude stocks have improved ahead of winter.The falls were triggered when the Energy Information Administration (EIA) said on Wednesday that US crude stocks were 3.5% higher than a year ago.However, some analysts believe the sharp fall in crude prices may harden Opec's attitude to over-production, leading to a scaling back of oil output.Weak US fuel and heating oil stocks have been a persistent factor in pushing up oil prices.Opec nations have increased production to 25-year highs to meet global demand and this has helped rebuild US stocks hit by supply disruptions after Hurricane Ivan in September.The price of crude is still up about 30% on the start of 2004, but has fallen from the record of $55.67 set in late October.The price of both benchmark crudes has dropped 12% in two days.Analysts also attributed the fall to mild early-winter weather, which has tempered demand for heating oil.The long-awaited drop in oil prices helped to ease persistent investor jitters over the impact of energy costs on company profits and economic growth.Analysts, however, say prices will fall further if inventories continue to rise.However, traders warned that the fall could be short-lived if there is a cold snap in North America this winter or any major supply problems in other parts of the world. |
WorldCom bosses' $54m payout
Ten former directors at WorldCom have agreed to pay $54m (£28.85m), including $18m from their own pockets, to settle a class action lawsuit, reports say.
James Wareham, a lawyer representing one of the directors, told Reuters the 10 had agreed to pay those who lost billions when the firm collapsed. The remaining $36m will be paid by the directors' insurers. But, a spokesman for the prosecutor, New York State Comptroller Alan Hevesi, said no formal agreement had been made.
Corporate governance experts said that if the directors do dip into their own pockets for the settlement, it will set a new standard for the accountability of bosses, when the firms they oversee face problems.
"Directors very rarely pay," said Charles Elson, chairman of the Center for Corporate Governance at the University of Delaware. He added that the settlement "sends a pretty strong shockwave through the director world". A formal agreement on the payout is expected to be signed on Thursday in a US district court in Manhattan. Earlier, the New York Times had reported that the personal payments were required as part of any deal at the start of negotiations. The ten former outside directors are James Allen, Judith Areen, Carl Aycock, Max Bobbitt, Clifford Alexander, Stiles Kellett, Gordon Macklin, John Porter, Lawrence Tucker and the estate of John Sidgmore, who died last year. It has not yet been determined how much each director will have to pay. "None of the 10 former directors was a direct participant in the accounting machinations of the WorldCom fraud," said the Wall Street Journal (WSJ).
Two other outside former directors, Bert Roberts and Francesco Galesi, remain defendants in the lawsuit, said the newspaper. According to the WSJ, which cites people familiar to the case, the settling directors are expected to deny wrongdoing and state they are settling the case to eliminate the uncertainties and expense of further litigations. The second-largest US long-distance telecoms operator filed for bankruptcy in 2002 when an $11bn accounting scandal was unearthed. The company emerged from Chapter 11 protection last year and changed its name to MCI Inc. Former WorldCom chief executive Bernard Ebbers is to face trial this month on criminal charges that he oversaw the fraud.
| "None of the 10 former directors was a direct participant in the accounting machinations of the WorldCom fraud," said the Wall Street Journal (WSJ).Ten former directors at WorldCom have agreed to pay $54m (£28.85m), including $18m from their own pockets, to settle a class action lawsuit, reports say.Corporate governance experts said that if the directors do dip into their own pockets for the settlement, it will set a new standard for the accountability of bosses, when the firms they oversee face problems."Directors very rarely pay," said Charles Elson, chairman of the Center for Corporate Governance at the University of Delaware.Two other outside former directors, Bert Roberts and Francesco Galesi, remain defendants in the lawsuit, said the newspaper.It has not yet been determined how much each director will have to pay.But, a spokesman for the prosecutor, New York State Comptroller Alan Hevesi, said no formal agreement had been made. |
Profits slide at India's Dr Reddy
Profits at Indian drugmaker Dr Reddy's fell 93% as research costs rose and sales flagged.
The firm said its profits were 40m rupees ($915,000; £486,000) for the three months to December on sales which fell 8% to 4.7bn rupees. Dr Reddy's has built its reputation on producing generic versions of big-name pharmaceutical products. But competition has intensified and the firm and the company is short on new product launches. The most recent was the annoucement in December 2000 that it had won exclusive marketing rights for a generic version of the famous anti-depressant Prozac from its maker, Eli Lilly. It also lost a key court case in March 2004, banning it from selling a version of Pfizer's popular hypertension drug Norvasc in the US. Research and development of new drugs is continuing apace, with R&D spending rising 37% to 705m rupees - a key cause of the decrease in profits alongside the fall in sales. Patents on a number of well-known products are due to run out in the near future, representing an opportunity for Dr Reddy, whose shares are listed in New York, and other Indian generics manufacturers.
Sales in Dr Reddy's generics business fell 8.6% to 966m rupees. Another staple of the the firm's business, the sale of ingredients for drugs, also performed poorly. Sales were down more than 25% from the previous year to 1.4bn rupees in the face of strong competition both at home, and in the US and Europe. Dr Reddy's Indian competitors are gathering strength although they too face heavy competitive pressures.
| Sales in Dr Reddy's generics business fell 8.6% to 966m rupees.Profits at Indian drugmaker Dr Reddy's fell 93% as research costs rose and sales flagged.Dr Reddy's has built its reputation on producing generic versions of big-name pharmaceutical products.The firm said its profits were 40m rupees ($915,000; £486,000) for the three months to December on sales which fell 8% to 4.7bn rupees.Dr Reddy's Indian competitors are gathering strength although they too face heavy competitive pressures. |
Standard Life cuts policy bonuses
Standard Life, Europe's largest mutual life insurer, has cut bonuses for with-profit policyholders.
Annual bonus rates on its with-profits life policies were cut from 2.5% to 2%, while bonuses on pension policies were reduced from 3.25% to 2.5%. It is the sixth time in three years Standard Life has made cuts to bonus rates, despite an 8.7% rise in the value of the with-profits fund in 2004. The insurer blamed the cuts on poor share returns and low interest rates.
With-profits policies are designed to smooth out the peaks and troughs of stock market volatility. Profits made in good years are kept in reserve to pay investors an annual bonus even when the stock market performs badly. Slumping share prices throughout 2001 and 2002 forced most firms to trim bonus rates on their policies. Standard Life came in for criticism for sticking with stock market investments during 2001 and 2002. The insurer argued that shares outperformed other investments over the long term and that policyholders would feel the benefit when the stock market recovered. Recently, Norwich Union and Axa Sun Life both cut their with-profit bonus rates.
John Gill, managing director of the insurer's life and pensions division, said that a strong stock market recovery in the past two years had only "partly compensated for losses during 2001 and 2002". In addition, low interest rates meant that "long-term investment returns are well below historic levels", Mr Gill added. However, Mr Gill maintained that with-profits continued to perform well over the long term. "Our payouts continue to stand up well against other types of long-term investments over similar periods," he said. Standard Life has an estimated 2.4 million with-profits policyholders. Last year, the company announced that it was looking to float on the stock market in 2006.
| Standard Life, Europe's largest mutual life insurer, has cut bonuses for with-profit policyholders.It is the sixth time in three years Standard Life has made cuts to bonus rates, despite an 8.7% rise in the value of the with-profits fund in 2004.Standard Life came in for criticism for sticking with stock market investments during 2001 and 2002.Annual bonus rates on its with-profits life policies were cut from 2.5% to 2%, while bonuses on pension policies were reduced from 3.25% to 2.5%.Standard Life has an estimated 2.4 million with-profits policyholders.Recently, Norwich Union and Axa Sun Life both cut their with-profit bonus rates.John Gill, managing director of the insurer's life and pensions division, said that a strong stock market recovery in the past two years had only "partly compensated for losses during 2001 and 2002". |
Jobs growth still slow in the US
The US created fewer jobs than expected in January, but a fall in jobseekers pushed the unemployment rate to its lowest level in three years.
According to Labor Department figures, US firms added only 146,000 jobs in January. The gain in non-farm payrolls was below market expectations of 190,000 new jobs. Nevertheless it was enough to push down the unemployment rate to 5.2%, its lowest level since September 2001. The job gains mean that President Bush can celebrate - albeit by a very fine margin - a net growth in jobs in the US economy in his first term in office. He presided over a net fall in jobs up to last November's Presidential election - the first President to do so since Herbert Hoover. As a result, job creation became a key issue in last year's election. However, when adding December and January's figures, the administration's first term jobs record ended in positive territory.
The Labor Department also said it had revised down the jobs gains in December 2004, from 157,000 to 133,000.
Analysts said the growth in new jobs was not as strong as could be expected given the favourable economic conditions. "It suggests that employment is continuing to expand at a moderate pace," said Rick Egelton, deputy chief economist at BMO Financial Group. "We are not getting the boost to employment that we would have got given the low value of the dollar and the still relatively low interest rate environment." "The economy is producing a moderate but not a satisfying amount of job growth," said Ken Mayland, president of ClearView Economics. "That means there are a limited number of new opportunities for workers."
| The job gains mean that President Bush can celebrate - albeit by a very fine margin - a net growth in jobs in the US economy in his first term in office.Analysts said the growth in new jobs was not as strong as could be expected given the favourable economic conditions.The Labor Department also said it had revised down the jobs gains in December 2004, from 157,000 to 133,000.The US created fewer jobs than expected in January, but a fall in jobseekers pushed the unemployment rate to its lowest level in three years."The economy is producing a moderate but not a satisfying amount of job growth," said Ken Mayland, president of ClearView Economics.He presided over a net fall in jobs up to last November's Presidential election - the first President to do so since Herbert Hoover. |
Police detain Chinese milk bosses
Chinese police have detained three top executives at milk firm Yili, with reports suggesting that they are being investigated for embezzlement.
Yili - full name Inner Mongolia Yili Industrial - confirmed its chairman, chief financial officer and securities representative were all in custody. The company, China's third-largest milk producer, is to hold an emergency meeting to debate the issue. A Yili spokesman said it may now move to oust chairman Zheng Junhuai. The spokesman did not say why the three had been detained by the police. The official Xinhua News Agency said the arrest was linked to alleged embezzlement.
Yili has recently been the subject of intense media speculation over its financial operations. Executives are suspected of wrongly using 417m yuan ($50.4m; £26m) of company funds to support a management buyout back in July 2003. Yili's shares were suspended on Tuesday, having fallen by 10% on Monday. The company and its two main rivals - market leader Mengniu Dairy and second place Bright Dairy - dominate a Chinese milk market that has grown by almost 30% over the past five years. Analysts wondered if the scandal at Yili - the latest to befall Chinese companies this year - could be followed by further revelations of corporate wrongdoing. "Investors wonder if Yili's scandal, one of a slew to be uncovered this year, isn't just the tip of the iceberg," said Chen Huiqin, an analyst at Huatai Securities.
| Chinese police have detained three top executives at milk firm Yili, with reports suggesting that they are being investigated for embezzlement.Analysts wondered if the scandal at Yili - the latest to befall Chinese companies this year - could be followed by further revelations of corporate wrongdoing.A Yili spokesman said it may now move to oust chairman Zheng Junhuai.Yili - full name Inner Mongolia Yili Industrial - confirmed its chairman, chief financial officer and securities representative were all in custody.Yili has recently been the subject of intense media speculation over its financial operations. |
Libya takes $1bn in unfrozen funds
Libya has withdrawn $1bn in assets from the US, assets which had previously been frozen for almost 20 years, the Libyan central bank has said.
The move came after the US lifted a trade ban to reward Tripoli for giving up weapons of mass destruction and vowing to compensate Lockerbie victims. The original size of Libya's funds was $400m, the central bank told Reuters. However, the withdrawal did not mean that Libya had cut its ties with the US, he added.
"We are in the process of opening accounts in banks in the United States," the central bank's vice president Farhat Omar Ben Gadaravice said. The previously frozen assets had been invested in various countries and are believed to have included equity holdings in banks. The US ban on trade and economic activity with Tripoli - imposed by then president Ronald Regan in 1986 after a series of what the US deemed terrorist acts, including the 1988 Lockerbie air crash - was suspended in April. Bankers from the two country's had been working on how to unfreeze Libya's assets.
| Libya has withdrawn $1bn in assets from the US, assets which had previously been frozen for almost 20 years, the Libyan central bank has said.The US ban on trade and economic activity with Tripoli - imposed by then president Ronald Regan in 1986 after a series of what the US deemed terrorist acts, including the 1988 Lockerbie air crash - was suspended in April.The original size of Libya's funds was $400m, the central bank told Reuters."We are in the process of opening accounts in banks in the United States," the central bank's vice president Farhat Omar Ben Gadaravice said. |
Winemaker rejects Foster's offer
Australian winemaker Southcorp has rejected a takeover offer worth 3.1bn Australian dollars ($2.3bn; £1.8bn) from brewing giant Foster's Group.
Southcorp, whose brands include Penfolds, Rosemount and Lindemans, dismissed the offer as inadequate. The two companies held four days of talks after Foster's bought an 18.8% stake in Southcorp on 13 January. A merger would create a global player with worldwide annual sales of 39m cases and revenues of A$2.6bn.
Southcorp said Foster's A$4.17-a-share takeover proposal offered a "excellent strategic fit" but undervalued the company. "Southcorp's board has informed Foster's that it is not prepared to recommend the offer as it does not adequately reflect the strategic value of the company," said Southcorp chairman Brian Finn.
Southcorp said Foster's takeover offer was "opportunistic". However, it said that the offer may represent an 'opening bid', opening up the possibility of Foster's returning with an improved offer.
Foster's said a combination of the two companies would create a global player with an "unrivalled" collection of premium wine brands. Despite being best known for brewing Foster's Lager, Foster's is already one of Australia's largest wine producers, owning the Beringer and Wolf Blass brands among others. "The combination of Foster's and Southcorp will transform the global wine industry and significantly enhance Australia's competitive position on the global stage," said Trevor O'Hoy, Foster's chief executive officer. Foster's spent A$584m on buying an 18.8% stake in Southcorp from the Oatley family, which founded the Rosemount Estates business and later merged it into Southcorp. Shares in both companies were suspended while the two held talks about a deal. Southcorp's shares rose 12% to A$4.76 on news of the offer but Foster's shares fell 3.7% to A$5.44.
| Southcorp said Foster's takeover offer was "opportunistic".The two companies held four days of talks after Foster's bought an 18.8% stake in Southcorp on 13 January.Foster's said a combination of the two companies would create a global player with an "unrivalled" collection of premium wine brands.Southcorp said Foster's A$4.17-a-share takeover proposal offered a "excellent strategic fit" but undervalued the company."Southcorp's board has informed Foster's that it is not prepared to recommend the offer as it does not adequately reflect the strategic value of the company," said Southcorp chairman Brian Finn."The combination of Foster's and Southcorp will transform the global wine industry and significantly enhance Australia's competitive position on the global stage," said Trevor O'Hoy, Foster's chief executive officer. |
Boeing secures giant Japan order
Boeing is to supply Japan Airlines with up to 50 of its forthcoming 7E7 planes in a deal that could be worth as much as $6bn (£3.1bn) for the US giant.
Japan Airlines has made a firm order for 30 of the aircraft, at $120m each, with the option to buy 20 more. Asia's biggest airline joins Japanese rival All Nippon as one of the first carriers to order the mid-size 7E7, which Boeing says is super-economical. Airbus this week announced the first pre-sale of its 7E7 rival - the A350. Boeing's great European competitor is to sell 10 of its forthcoming A350 to Spanish carrier Air Europe, which has the option to buy two more in a deal that could be worth more than $1.8bn. Both the 7E7 and the A350 are being designed to be as fuel-efficient as possible in the 200- to 300-seat sector, and each will be available in both short and long range versions.
Japan Airlines said it had looked at both aircraft before choosing the 7E7, also known as the Dreamliner. "We chose the 7E7 after carefully considering both it and Airbus' aircraft," said a Japan Airlines spokesman. "The 7E7 fits better for what we needed and it could be delivered when we hoped to get it." Boeing continues to enjoy a dominance over Airbus in Japan, and Japanese companies are taking key roles in building the 7E7. The first 7E7s will be delivered to Japan Airlines in April 2008. Boeing has set itself a target of getting 200 firm commitments for the 7E7 by the end of this year, and has orders for 56 so far. Airbus hopes to have 50 orders in place for the A350 by mid-2005.
| "We chose the 7E7 after carefully considering both it and Airbus' aircraft," said a Japan Airlines spokesman.Japan Airlines has made a firm order for 30 of the aircraft, at $120m each, with the option to buy 20 more.Boeing is to supply Japan Airlines with up to 50 of its forthcoming 7E7 planes in a deal that could be worth as much as $6bn (£3.1bn) for the US giant.Japan Airlines said it had looked at both aircraft before choosing the 7E7, also known as the Dreamliner.Boeing continues to enjoy a dominance over Airbus in Japan, and Japanese companies are taking key roles in building the 7E7.Airbus this week announced the first pre-sale of its 7E7 rival - the A350. |
JP Morgan admits US slavery links
Thousands of slaves were accepted as collateral for loans by two banks that later became part of JP Morgan Chase.
The admission is part of an apology sent to JP Morgan staff after the bank researched its links to slavery in order to meet legislation in Chicago. Citizens Bank and Canal Bank are the two lenders that were identified. They are now closed, but were linked to Bank One, which JP Morgan bought last year. About 13,000 slaves were used as loan collateral between 1831 and 1865.
Because of defaults by plantation owners, Citizens and Canal ended up owning about 1,250 slaves. "We all know slavery existed in our country, but it is quite different to see how our history and the institution of slavery were intertwined," JP Morgan chief executive William Harrison and chief operating officer James Dimon said in the letter. "Slavery was tragically ingrained in American society, but that is no excuse." "We apologise to the African-American community, particularly those who are descendants of slaves, and to the rest of the American public for the role that Citizens Bank and Canal Bank played." "The slavery era was a tragic time in US history and in our company's history." JP Morgan said that it was setting up a $5m scholarship programme for students living in Louisiana, the state where the events took place. The bank said that it is a "very different company than the Citizens and Canal Banks of the 1800s".
| Thousands of slaves were accepted as collateral for loans by two banks that later became part of JP Morgan Chase.Citizens Bank and Canal Bank are the two lenders that were identified.The bank said that it is a "very different company than the Citizens and Canal Banks of the 1800s"."We apologise to the African-American community, particularly those who are descendants of slaves, and to the rest of the American public for the role that Citizens Bank and Canal Bank played."The admission is part of an apology sent to JP Morgan staff after the bank researched its links to slavery in order to meet legislation in Chicago. |
Huge rush for Jet Airways shares
Indian airline Jet Airways' initial public offering was oversubscribed 16.2 times, bankers said on Friday.
Over 85% of the bids were at the higher end of the price range of 1,050-1,125 rupees ($24-$26). Jet Airways, a low-fare airline, was founded by London-based ex-travel agent Naresh Goya, and controls 45% of the Indian domestic airline market. It sold 20% of its equity or 17.2 million shares in a bid to raise up to $443m (£230.8m). The price at which its shares will begin trading will be agreed over the weekend, bankers said. "The demand for the IPO was impressive. We believe that over the next two years, the domestic aviation sector promises strong growth, even though fuel prices could be high," said Hiten Mehta, manager of merchant banking firm, Fortune Financial Services. India began to open up its domestic airline market - previously dominated by state-run carrier Indian Airlines - in the 1990s. Jet began flying in 1993 and now has competitors including Air Deccan and Air Sahara. Budget carriers Kingfisher Airlines and SpiceJet are planning to launch operations in May this year. Jet has 42 aircraft and runs 271 scheduled flights daily within India. It recently won government permission to fly to London, Singapore and Kuala Lumpur.
| Indian airline Jet Airways' initial public offering was oversubscribed 16.2 times, bankers said on Friday.Jet Airways, a low-fare airline, was founded by London-based ex-travel agent Naresh Goya, and controls 45% of the Indian domestic airline market.India began to open up its domestic airline market - previously dominated by state-run carrier Indian Airlines - in the 1990s.The price at which its shares will begin trading will be agreed over the weekend, bankers said.Over 85% of the bids were at the higher end of the price range of 1,050-1,125 rupees ($24-$26). |
DaimlerChrysler's 2004 sales rise
US-German carmaker DaimlerChrysler has sold 2.1% more cars in 2004 than in the previous year, as solid Chrysler sales offset a weak showing for Mercedes.
Sales totalled 3.9 million units worldwide during 2004, the company said at the Detroit Motor Show. A switch to new models hit luxury marque Mercedes-Benz, with sales down 3.1% at 1.06 million. Chrysler avoided the fate of US rivals Ford and General Motors, both of whom lost ground to Japanese firms. Its sales rose 3.5% to 2.7 million units.
Similarly on the up was the Smart brand of compact cars, with the division's sales jumping by 21.1% during 2004 to 136,000. The future of the brand - which is controlled by the Mercedes group within DaimlerChrysler - remains in question, however. Smart has consistently lost money since it started trading in 1998, and new model launches are now "on hold", said Mercedes chief executive Eckhard Cordes. In Europe, the Smart will now go on sale through regular Mercedes dealerships as well as its own dealer network, Mr Cordes said.
| In Europe, the Smart will now go on sale through regular Mercedes dealerships as well as its own dealer network, Mr Cordes said.Its sales rose 3.5% to 2.7 million units.A switch to new models hit luxury marque Mercedes-Benz, with sales down 3.1% at 1.06 million.Smart has consistently lost money since it started trading in 1998, and new model launches are now "on hold", said Mercedes chief executive Eckhard Cordes. |
Saudi investor picks up the Savoy
London's famous Savoy hotel has been sold to a group combining Saudi billionaire investor Prince Alwaleed bin Talal and a unit of HBOS bank.
Financial details of the deal, which includes the nearby Simpson's in the Strand restaurant, were not disclosed. The seller - Irish-based property firm Quinlan Private - bought the Savoy along with the Berkeley, Claridge's and the Connaught for £750m last year. Prince Alwaleed's hotel investments include the luxury George V in Paris. He also has substantial stakes in Fairmont Hotels & Resorts, which will manage the Savoy and Simpson's in the Strand, and Four Seasons. Fairmont said it planned to invest $48m (£26m) in renovating parts of the Savoy including the River Room and suites with views over the River Thames. Work was expected to be completed by summer 2006, Fairmont said.
| He also has substantial stakes in Fairmont Hotels & Resorts, which will manage the Savoy and Simpson's in the Strand, and Four Seasons.Fairmont said it planned to invest $48m (£26m) in renovating parts of the Savoy including the River Room and suites with views over the River Thames.London's famous Savoy hotel has been sold to a group combining Saudi billionaire investor Prince Alwaleed bin Talal and a unit of HBOS bank. |
BBC poll indicates economic gloom
Citizens in a majority of nations surveyed in a BBC World Service poll believe the world economy is worsening.
Most respondents also said their national economy was getting worse. But when asked about their own family's financial outlook, a majority in 14 countries said they were positive about the future. Almost 23,000 people in 22 countries were questioned for the poll, which was mostly conducted before the Asian tsunami disaster. The poll found that a majority or plurality of people in 13 countries believed the economy was going downhill, compared with respondents in nine countries who believed it was improving. Those surveyed in three countries were split. In percentage terms, an average of 44% of respondents in each country said the world economy was getting worse, compared to 34% who said it was improving. Similarly, 48% were pessimistic about their national economy, while 41% were optimistic. And 47% saw their family's economic conditions improving, as against 36% who said they were getting worse.
The poll of 22,953 people was conducted by the international polling firm GlobeScan, together with the Program on International Policy Attitudes (Pipa) at the University of Maryland. "While the world economy has picked up from difficult times just a few years ago, people seem to not have fully absorbed this development, though they are personally experiencing its effects," said Pipa director Steven Kull. "People around the world are saying: 'I'm OK, but the world isn't'." There may be a perception that war, terrorism and religious and political divisions are making the world a worse place, even though that has not so far been reflected in global economic performance, says the BBC's Elizabeth Blunt.
The countries where people were most optimistic, both for the world and for their own families, were two fast-growing developing economies, China and India, followed by Indonesia. China has seen two decades of blistering economic growth, which has led to wealth creation on a huge scale, says the BBC's Louisa Lim in Beijing. But the results also may reflect the untrammelled confidence of people who are subject to endless government propaganda about their country's rosy economic future, our correspondent says. South Korea was the most pessimistic, while respondents in Italy and Mexico were also quite gloomy. The BBC's David Willey in Rome says one reason for that result is the changeover from the lira to the euro in 2001, which is widely viewed as the biggest reason why their wages and salaries are worth less than they used to be. The Philippines was among the most upbeat countries on prospects for respondents' families, but one of the most pessimistic about the world economy. Pipa conducted the poll from 15 November 2004 to 3 January 2005 across 22 countries in face-to-face or telephone interviews. The interviews took place between 15 November 2004 and 5 January 2005. The margin of error is between 2.5 and 4 points, depending on the country. In eight of the countries, the sample was limited to major metropolitan areas.
| In percentage terms, an average of 44% of respondents in each country said the world economy was getting worse, compared to 34% who said it was improving.The poll found that a majority or plurality of people in 13 countries believed the economy was going downhill, compared with respondents in nine countries who believed it was improving.The Philippines was among the most upbeat countries on prospects for respondents' families, but one of the most pessimistic about the world economy.Most respondents also said their national economy was getting worse.Almost 23,000 people in 22 countries were questioned for the poll, which was mostly conducted before the Asian tsunami disaster.The countries where people were most optimistic, both for the world and for their own families, were two fast-growing developing economies, China and India, followed by Indonesia.Citizens in a majority of nations surveyed in a BBC World Service poll believe the world economy is worsening.Pipa conducted the poll from 15 November 2004 to 3 January 2005 across 22 countries in face-to-face or telephone interviews."While the world economy has picked up from difficult times just a few years ago, people seem to not have fully absorbed this development, though they are personally experiencing its effects," said Pipa director Steven Kull.But when asked about their own family's financial outlook, a majority in 14 countries said they were positive about the future. |
Markets fall on weak dollar fears
Rising oil prices and the sinking dollar hit shares on Monday after a finance ministers' meeting and stern words from Fed chief Alan Greenspan.
The London FTSE fell 0.8% while Tokyo's Nikkei 225 dropped 2.11%, its steepest fall in three months. G20 finance ministers said nothing about supporting the dollar, whose slide could further jeopardise growth in Japan and Europe. And Mr Greenspan warned Asian states could soon stop funding the US deficit.
On Monday afternoon, the euro was close to an all-time high against the dollar at above $1.30. Oil pushed higher too on Monday, as investors fretted about cold weather in the US and Europe and a potential output cut from oil producers' group Opec, although prices had cooled by the end of the day. In London, the benchmark Brent crude price closed down 51 cents at $44.38 a barrel, while New York light sweet crude closed down 25 cents at $48.64 a barrel. The slide comes as the US has been attempting to talk up the traditional "strong dollar" policy.
The latest to pitch in has been President George W Bush himself, who told the Asia Pacific Economic Co-operation (Apec) summit in Chile that he remained committed to halving the budget deficit. Together with a $500bn trade gap, the red ink spreading across America's public finances is widely seen as a key factor driving the dollar lower. And last week US Treasury Secretary John Snow told an audience in the UK that the policy remained unaltered. But he also said that the rate was entirely up to the markets - a signal which traders took as advice to sell the dollar. Some had looked to the G20 meeting for direction. But Mr Snow made clear exchange rates had not been on the agenda.
For the US government, letting the dollar drift is a useful short-term fix.
US exports get more affordable, helping perhaps to close the trade gap. In the meantime, the debt keeps getting bigger, with Congress authorising an $800bn rise in what the US can owe - taking the total to $8.2 trillion. But in a speech on Friday, Federal Reserve chairman Alan Greenspan warned that in the longer term things are likely to get tricky. At present, much of gap in both public debt is covered by selling bonds to Asian states such as Japan and China, since the dollar is seen as the world's reserve currency. Similarly, Asian investment helps bridge the gap in the current account - the deficit between what the US as a whole spends and what it earns. But already they are turning more cautious - an auction of debt in August found few takers. And Mr Greenspan said that could turn into a trend, if the fall of the dollar kept eating into the value of those investments. "It seems persuasive that, given the size of the US current account deficit, a diminished appetite for adding to dollar balances must occur at some point," he said.
| And Mr Greenspan warned Asian states could soon stop funding the US deficit.And Mr Greenspan said that could turn into a trend, if the fall of the dollar kept eating into the value of those investments.The slide comes as the US has been attempting to talk up the traditional "strong dollar" policy."It seems persuasive that, given the size of the US current account deficit, a diminished appetite for adding to dollar balances must occur at some point," he said.For the US government, letting the dollar drift is a useful short-term fix.Rising oil prices and the sinking dollar hit shares on Monday after a finance ministers' meeting and stern words from Fed chief Alan Greenspan.G20 finance ministers said nothing about supporting the dollar, whose slide could further jeopardise growth in Japan and Europe.At present, much of gap in both public debt is covered by selling bonds to Asian states such as Japan and China, since the dollar is seen as the world's reserve currency.Similarly, Asian investment helps bridge the gap in the current account - the deficit between what the US as a whole spends and what it earns.US exports get more affordable, helping perhaps to close the trade gap. |
Tsunami 'to hit Sri Lanka banks'
Sri Lanka's banks face hard times following December's tsunami disaster, officials have warned.
The Sri Lanka Banks Association said the waves which killed more than 30,000 people also washed away huge amounts of property which was securing loans. According to its estimate, as much as 13.6% of the loans made by private banks to clients in the disaster zone has been written off or damaged. State-owned lenders may be even worse hit, it said.
The association estimates that the private banking sector has 25bn rupees ($250m; £135m) of loans outstanding in the disaster zone. On one hand, banks are dealing with the death of their customers, along with damaged or destroyed collateral. On the other, most are extending cheap loans for rebuilding and recovery, as well as giving their clients more time to repay existing borrowing. The combination means a revenue shortfall during 2005, SLBA chairman - and Commercial Bank managing director - AL Gooneratne told a news conference. "Most banks have given moratoriums and will not be collecting interest, at least in this quarter," he said. In the public sector, more than one in ten of the state-owned People's Bank's customers in the south of Sri Lanka were affected, a bank spokesman told Reuters. He estimated the bank's loss at 3bn rupees.
| According to its estimate, as much as 13.6% of the loans made by private banks to clients in the disaster zone has been written off or damaged.In the public sector, more than one in ten of the state-owned People's Bank's customers in the south of Sri Lanka were affected, a bank spokesman told Reuters.The association estimates that the private banking sector has 25bn rupees ($250m; £135m) of loans outstanding in the disaster zone.Sri Lanka's banks face hard times following December's tsunami disaster, officials have warned."Most banks have given moratoriums and will not be collecting interest, at least in this quarter," he said. |
Diageo to buy US wine firm
Diageo, the world's biggest spirits company, has agreed to buy Californian wine company Chalone for $260m (£134m) in an all-cash deal.
Although Diageo's best-known brands include Smirnoff vodka and Guinness stout, it already has a US winemaking arm - Diageo Chateau & Estate Wines. Diageo said it expects to get US regulatory approval for the deal during the first quarter of 2005. It said Chalone would be integrated into its existing US wine business.
"The US wine market represents a growth opportunity for Diageo, with favourable demographic and consumption trends," said Diageo North America president Ivan Menezes. In July, Diageo, which is listed on the London Stock Exchange, reported an annual turnover of £8.89bn, down from £9.28bn a year earlier. It blamed a weaker dollar for its lower turnover. In the year ending 31 December 2003, Chalone reported revenues of $69.4m.
| "The US wine market represents a growth opportunity for Diageo, with favourable demographic and consumption trends," said Diageo North America president Ivan Menezes.Diageo said it expects to get US regulatory approval for the deal during the first quarter of 2005.It said Chalone would be integrated into its existing US wine business.Diageo, the world's biggest spirits company, has agreed to buy Californian wine company Chalone for $260m (£134m) in an all-cash deal. |
Deutsche Telekom sees mobile gain
German telecoms firm Deutsche Telekom saw strong fourth quarter profits on the back of upbeat US mobile earnings and better-than-expected asset sales.
Net profit came in at 1.4bn euros (£960m; $1.85bn), a dramatic change from the loss of 364m euros in 2003. Sales rose 2.8% to 14.96bn euros. Sales of stakes in firms including Russia's OAO Mobile Telesystems raised 1.17bn euros. This was more than expected and helped to bring debt down to 35.8bn euros.
A year ago, debt was more than 11bn euros higher. T-Mobile USA, the company's American mobile business, made a strong contribution to profits. "It's a seminal achievement that they cut debt so low. That gives them some head room to invest in growth now," said Hannes Wittig, telecoms analyst at Dresdner Kleinwort Wasserstein. The company also said it would resume paying a dividend, after two years in which it focused on cutting debt.
| A year ago, debt was more than 11bn euros higher.This was more than expected and helped to bring debt down to 35.8bn euros.Sales rose 2.8% to 14.96bn euros.Sales of stakes in firms including Russia's OAO Mobile Telesystems raised 1.17bn euros. |
Hariri killing hits Beirut shares
Shares in Solidere, the Lebanese company founded by assassinated former prime minister Rafik Hariri, fell 15% in renewed trading in Beirut.
The real estate firm, which dominates Lebanon's stock exchange, ended the day down at $8.08. Traders said there was some panic selling during Friday's session, the first since a three-day market closure to mourn the death of Mr Hariri. Beirut's benchmark BLOM stock index closed down 7.9% at 642.80.
Solidere, in which Mr Hariri was a major shareholder, was the major drag on the index. The company owns much of the property in central Beirut, which it restored and redeveloped following the end of Lebanon's bitter 15-year civil war. "Solidere should be above $10 but because of this disaster it is falling," said one trader. "If Solidere drops much lower I would consider it a buying opportunity. This is a very big company held by many Lebanese." Critics had accused Mr Hariri of using Lebanon's post-war reconstruction drive for his personal financial gain. But his assassination on Monday sent shudders through Lebanon's business community, which saw the billionaire tycoon as the country's best hope for economic revival. Solidere posted profits of $12.5m in the first half of 2004, and its shares had been gaining in recent months.
| Solidere, in which Mr Hariri was a major shareholder, was the major drag on the index.Shares in Solidere, the Lebanese company founded by assassinated former prime minister Rafik Hariri, fell 15% in renewed trading in Beirut.Critics had accused Mr Hariri of using Lebanon's post-war reconstruction drive for his personal financial gain.Traders said there was some panic selling during Friday's session, the first since a three-day market closure to mourn the death of Mr Hariri.The company owns much of the property in central Beirut, which it restored and redeveloped following the end of Lebanon's bitter 15-year civil war. |
Google shares fall as staff sell
Shares in Google have fallen 6.7% after employees and early investors in the web search took advantage of the first chance to sell their holdings.
Restrictions were imposed ahead of its flotation in August, to prevent shares being dumped quickly onto the market. In one of the most closely-watched initial public offerings in stock market history, the US-based company sold 19.6 million shares at $85 each. Google shares have risen since but fell $12.33 on Tuesday to close at $172.55. The restriction - known as a lockup - is being eased piecemeal: in all, some 227 million additional shares will become free to trade by February 2005. Selling the shares could turn many of Google's workers into millionaires.
There were fears that the potential increase of shares in circulation from Tuesday would ease demand for stock. However, analysts say they expected most shareholders would be holding back from selling all their shares immediately, as Google's good performance and future growth potential means demand will hold.
In its first earnings report since floating on the stock market, Google said it made a net profit of $52m in the three months ending 30 September. Sales surged to $805.9m in the third quarter, up from $393.9m a year earlier. Google's main service - its internet search - is free to users, so the firm makes much of its money from selling advertising space linked to the words for which its users search. It also sells the use of its technology to companies who need to make either their websites, or their internal information systems, searchable.
| Google shares have risen since but fell $12.33 on Tuesday to close at $172.55.There were fears that the potential increase of shares in circulation from Tuesday would ease demand for stock.In one of the most closely-watched initial public offerings in stock market history, the US-based company sold 19.6 million shares at $85 each.Selling the shares could turn many of Google's workers into millionaires.However, analysts say they expected most shareholders would be holding back from selling all their shares immediately, as Google's good performance and future growth potential means demand will hold. |
Ericsson sees earnings improve
Telecoms equipment supplier Ericsson has posted a rise in fourth quarter profits thanks to clients like Deutsche Telekom upgrade their networks.
Operating profit in the three months to 31 December was 9.5bn kronor (£722m; $1.3bn) against 6.3bn kronor last year. Shares tumbled, however, as the company reported a profit margin of 45.6%, less than the 47.3% forecast by analysts and down from 47.1% in the third quarter. Ericsson shares dropped 5.9% to 20.7 kronor in early trading on Thursday. However, the company remained optimistic about its earnings outlook after sales in the fourth quarter rose 9% to 39.4bn kronor. "Long-term growth drivers of the industry remain solid," Ericsson said in a statement.
Chief executive Carl-Henric Svanberg explained that about "27% of the world's population now has access to mobile communications". "This is exciting for a company with a vision of an all-communicating world," he added. Mr Svanberg, however, warned that the extra demand that had driven 2004 sales had already dissipated and it was "business as usual". He added that sales in the first three months of 2005 would be subject to "normal seasonality". For the whole of 2004, Ericsson returned a net profit of 19bn kronor, compared with a loss of 10.8bn kronor in 2003. Sales climbed to 131.9 billion kronor from 117.7bn kronor in 2003.
| For the whole of 2004, Ericsson returned a net profit of 19bn kronor, compared with a loss of 10.8bn kronor in 2003.Operating profit in the three months to 31 December was 9.5bn kronor (£722m; $1.3bn) against 6.3bn kronor last year.However, the company remained optimistic about its earnings outlook after sales in the fourth quarter rose 9% to 39.4bn kronor.Sales climbed to 131.9 billion kronor from 117.7bn kronor in 2003.Ericsson shares dropped 5.9% to 20.7 kronor in early trading on Thursday. |
Soros group warns of Kazakh close
The Open Society Institute (OSI), financed by billionaire George Soros, has accused Kazakhstan officials of trying to close down its local office.
A demand for unpaid taxes and fines of $600,000 (£425,000) is politically motivated, the OSI claimed, adding that it paid the money in October. The organisation has found itself in trouble after being accused of helping to topple Georgia's former president. It denies having any role, but offices have had to close across the region.
The OSI shut its office in Moscow last year and has withdrawn from Uzbekistan and Belarus. In the Ukraine earlier this year, Mr Soros - who took on the Bank of England in the 1990s - and won, was pelted by protestors. "This legal prosecution can be considered an attempt by the government to force Soros Foundation-Kazakhstan to cease its activities in Kazakhstan and shut its doors for Kazakh citizens and organisations," the OSI said.
The OSI aims to promote democratic and open, market-based societies. Since the break up of the Soviet Union in 1991, Kazakhstan has been dominated by its president Nursultan Abish-uly Nazarbayev. He has powers for life, while insulting the president and officials has been made a criminal offence. The government controls the printing presses and most radio and TV transmission facilities. It operates the country's national radio and TV networks. Recent elections were criticised as flawed and the opposition claimed there was widespread vote rigging. Supporters, however, say he brings much needed stability to a region where Islamic militancy is on the rise. They also credit him with promoting inter-ethnic accord and pushing through harsh reforms.
| The Open Society Institute (OSI), financed by billionaire George Soros, has accused Kazakhstan officials of trying to close down its local office.The OSI shut its office in Moscow last year and has withdrawn from Uzbekistan and Belarus.He has powers for life, while insulting the president and officials has been made a criminal offence."This legal prosecution can be considered an attempt by the government to force Soros Foundation-Kazakhstan to cease its activities in Kazakhstan and shut its doors for Kazakh citizens and organisations," the OSI said.Since the break up of the Soviet Union in 1991, Kazakhstan has been dominated by its president Nursultan Abish-uly Nazarbayev.The organisation has found itself in trouble after being accused of helping to topple Georgia's former president. |
European losses hit GM's profits
General Motors (GM) saw its net profits fall 37% in the last quarter of 2004, as it continued to be hit by losses at its European operations.
The US giant earned $630m (£481.5m) in the October-to-December period, down from $1bn in the fourth quarter of 2003. GM's revenues rose 4.7% to $51.2bn from $48.8bn a year earlier. The fourth-quarter losses at General Motors Europe totalled $345m, up from $66m during the same period in 2003. GM's main European brands are Opel and Vauxhall.
Excluding special items, GM's global income from continuing operations totalled $569m during the quarter, down from $838m a year earlier. The results were in line with Wall Street expectations and shares in GM rose by about 1% in pre-market trade. For the whole of 2004, GM earned $3.7bn, down from $3.8bn in 2003, while its annual revenue rose 4.5% to $193bn. GM said its profits were also hit by higher healthcare costs in the US. "GM reported solid overall results in 2004, despite challenging competitive conditions in many markets around the globe," GM chairman and chief executive Rick Wagoner said in a statement. The company recently announced that it expected profits in 2005 to be lower than in 2004.
| For the whole of 2004, GM earned $3.7bn, down from $3.8bn in 2003, while its annual revenue rose 4.5% to $193bn.GM's revenues rose 4.7% to $51.2bn from $48.8bn a year earlier.General Motors (GM) saw its net profits fall 37% in the last quarter of 2004, as it continued to be hit by losses at its European operations.The US giant earned $630m (£481.5m) in the October-to-December period, down from $1bn in the fourth quarter of 2003.GM said its profits were also hit by higher healthcare costs in the US. |
Telegraph newspapers axe 90 jobs
The Daily and Sunday Telegraph newspapers are axing 90 journalist jobs - 17% of their editorial staff.
The Telegraph Group says the cuts are needed to fund an £150m investment in new printing facilities. Journalists at the firm met on Friday afternoon to discuss how to react to the surprise announcement. The cuts come against a background of fierce competition for readers and sluggish advertising revenues amid competition from online advertising. The National Union of Journalists has called on the management to recall the notice of redundancy by midday on Monday or face a strike ballot.
Pearson's Financial Times said last week it was offering voluntary redundancy to about 30 reporters.
The National Union of Journalists said it stood strongly behind the journalists and did not rule out a strike. "Managers have torn up agreed procedures and kicked staff in the teeth by sacking people to pay for printing facilities," said Jeremy Dear, NUJ General Secretary. NUJ official Barry Fitzpatrick said the company had ignored the 90-day consultation period required for companies planning more than 10 redundancies. "They have shown a complete disregard for the consultative rights of our members," said Mr Fitzpatrick, who added that the company now planned to observe the consultation procedures. The two Telegraph titles currently employ 521 journalists.
Some broadsheet newspapers - especially those which have not moved to a tabloid format - have suffered circulation declines, which are hitting revenues. The Telegraph has announced no plans to go tabloid although both The Independent and The Times have seen circulation rise since shrinking in size.
The Guardian is hedging its bets, planning a larger tabloid format like those popular in continental Europe. The Telegraph Group was bought by the Barclay twins - Frederick and David - last year, having previously been owned by Lord Conrad Black's Hollinger International. The brothers are currently mulling the sale of another of their businesses, retailer Littlewoods.
Telegraph executive Murdoch MacLennan said the two newspapers would add eight colour pages in the coming months.
"Journalists are the lifeblood of any newspaper, and maintaining the quality of The Daily Telegraph and The Sunday Telegraph for our readers is vital," he said. "However, action to improve our production capability and secure our titles against the competition is also vital." Many newspapers are investing in new printing machinery that enables them to print more colour pages, or in some cases, have colour on every page. They are hoping that by boosting colour it will make their publications more attractive to advertisers and readers alike. In recent months News Corp's News International unit, which publishes The Sun and the News of the World, the Guardian Media Group, Trinity Mirror and the Daily Mail & General Trust have all announced substantial investments in new printing plants.
| "Journalists are the lifeblood of any newspaper, and maintaining the quality of The Daily Telegraph and The Sunday Telegraph for our readers is vital," he said.The two Telegraph titles currently employ 521 journalists.Telegraph executive Murdoch MacLennan said the two newspapers would add eight colour pages in the coming months.The Daily and Sunday Telegraph newspapers are axing 90 journalist jobs - 17% of their editorial staff.The Telegraph Group says the cuts are needed to fund an £150m investment in new printing facilities.The National Union of Journalists said it stood strongly behind the journalists and did not rule out a strike.The Telegraph has announced no plans to go tabloid although both The Independent and The Times have seen circulation rise since shrinking in size.Many newspapers are investing in new printing machinery that enables them to print more colour pages, or in some cases, have colour on every page.NUJ official Barry Fitzpatrick said the company had ignored the 90-day consultation period required for companies planning more than 10 redundancies. |
Steady job growth continues in US
The US created fewer jobs than expected in December, but analysts said that the dip in hiring was not enough to derail the world's biggest economy.
According to Labor Department figures, 157,000 new jobs were added last month. That took 2004's total to 2.2 million, the best showing in five years. Job creation was one of last year's main concerns for the US economy. While worries still remain, the conditions are set for steady growth in 2005, analysts said. The unemployment rate stayed at 5.4% in December, and about 200,000 jobs will need to be created each month if that figure is to drop.
"It was a respectable report," said Michael Moran, analyst at Daiwa Securities.
"Payroll growth in December was a little lighter than the consensus forecast, but we had upward revisions to the prior two months and an increase in manufacturing employment." "Manufacturing is a cyclical area of the economy and if it's showing job growth, it's a good indication that the economy is on a solid growth track." That means that the Federal Reserve is likely to continue its policy of raising interest rates. The Fed lifted borrowing costs five times last year to 2.25%, citing evidence the US economic recovery was becoming more robust.
Job creation was one of last year's main concerns for the US economy, and proved to be a main topic of debate in the US presidential election. While demand for workers is far from booming, the conditions are set for steady growth. "Overall, compared to the previous year it looks great, it just keeps going stronger and stronger and I expect that to be the case" in 2005, said Kurt Karl, economist at Swiss Re in New York. Meanwhile, economists cautioned against reading too much into data from the Federal Reserve showing an unexpected $8.7bn drop in consumer debt in November. A fall in consumer spending, which makes up about two-thirds of all US economic activity, could help limit the extent of any future interest rate rises. But economists said there could be a number of reasons for a fall in the borrowing, which include credit cards and personal loans, while noting that such figures can vary on a month-to-month basis.
| Job creation was one of last year's main concerns for the US economy.Job creation was one of last year's main concerns for the US economy, and proved to be a main topic of debate in the US presidential election.The US created fewer jobs than expected in December, but analysts said that the dip in hiring was not enough to derail the world's biggest economy."Manufacturing is a cyclical area of the economy and if it's showing job growth, it's a good indication that the economy is on a solid growth track."While worries still remain, the conditions are set for steady growth in 2005, analysts said.The Fed lifted borrowing costs five times last year to 2.25%, citing evidence the US economic recovery was becoming more robust.The unemployment rate stayed at 5.4% in December, and about 200,000 jobs will need to be created each month if that figure is to drop. |
BP surges ahead on high oil price
Oil giant BP has announced a 26% rise in annual profits to $16.2bn (£8.7bn) on the back of record oil prices.
Last week, rival Shell reported an annual profit of $17.5bn - a record profit for a UK-listed company. BP added that it was increasing its fourth-quarter dividend by 26% to 8.5 cents, and that it would continue with share buybacks. BP chief executive Lord Browne said the results were strong "both operationally and financially."
The company is earning about $1.8m an hour.
Despite the record annual profits figure, BP's performance was below the expectations of some City analysts. However, BP's share price rose 4p or nearly 1% in morning trading to 548p. Its profit rise for the year included profits of $3.65bn (£1.97bn) for the final three months of 2004 - up from $2.89bn a year ago but below its third quarter.
Speaking on the BBC's Today programme on Tuesday, Lord Browne said the profits were not solely down to the high oil price alone.
"The profits are up more than the price of oil is up," he said. Lord Browne pointed out that BP was reaping the benefits of its investment in oil exploration. "We have spent many years buying (assets) when the price is low," he said. The company has made new discoveries in Egypt, the Gulf of Mexico and Angola.
However, Lord Browne rejected calls for a windfall tax on his company's huge profits, saying that in the North Sea it paid progressively more tax, the more profits it made. Lord Browne believes oil prices will remain quite high. Currently above $40 a barrel, he said: "The price of oil will be well supported above $30 a barrel for the medium term." BP put production for the year at 3.997 billion barrels of oil, up 10% on 2003, but slightly lower than the four billion barrels it had initially aimed for.
| "The profits are up more than the price of oil is up," he said.Speaking on the BBC's Today programme on Tuesday, Lord Browne said the profits were not solely down to the high oil price alone.Oil giant BP has announced a 26% rise in annual profits to $16.2bn (£8.7bn) on the back of record oil prices.Lord Browne believes oil prices will remain quite high.Last week, rival Shell reported an annual profit of $17.5bn - a record profit for a UK-listed company.Lord Browne pointed out that BP was reaping the benefits of its investment in oil exploration.Currently above $40 a barrel, he said: "The price of oil will be well supported above $30 a barrel for the medium term." |
Yukos accused of lying to court
Russian oil firm Yukos lied to a US court in an attempt to stop the Russian government selling off its key production unit, the court has heard.
The unit, Yugansk, was sold to pay off a $27.5bn (£14.5bn) back tax bill. Yukos argued that since it had a US subsidiary and local bank accounts, the US court could declare it bankrupt and stop the auction of Yugansk. But Deutsche Bank - itself a target of a Yukos lawsuit - said documents had been backdated to strengthen the case.
Deutsche Bank's evidence came on the first day of a two-day hearing in Houston. Its lawyer, Hugh Ray, told the court that Yukos had claimed it had transferred $27m into two Texas bank accounts opened by its new US subsidiary. By doing so, he said, the firm had intended to reinforce its US presence - and thus its chances of getting its case heard in US courts. But he said that the papers documenting the transaction were not drawn up till weeks after Yukos made its bankruptcy application on 14 December, and then backdated.
Yukos chief financial officer Bruce Misamore, who had moved to the US in early December to set up Yukos USA, acknowledged the point. He said the discrepancy was only in the paperwork, but that money had indeed been transferred on 14 December. Even so, he told the court that only $480,000 had been in the accounts that day, with the rest arriving a day later.
Deutsche Bank is involved in the case because it is itself being sued by Yukos. It had agreed to loan to an arm of Russian state gas firm Gazprom the money to bid for Yuganskneftegaz, as the Yukos unit is formally known. The sale went ahead, despite an order from the US bankruptcy court ordered that it should be stopped. In the end, the auction was won by an unknown shell company for $9.4bn - much less than most assessments of its value - before ending up in the hands of state-controlled oil firm Rosneft. Rosneft, meanwhile, has agreed to merge with Gazprom, bringing a large chunk of Russia's very profitable oil business back under state control.
Yukos maintains that it filed for bankruptcy in the US because it feared it would not be able to do so in Russia. It also said that in the event of going bust, it could offer the chance of restructuring. "It gives us a kind of life after death alternative," said Yukos chief executive Steven Theede. Yukos is currently suing four companies - Gazprom, its unit Gazpromneft, Rosneft and the shell company which won the bidding - for their part in Yugansk's disposal. It has also threatened to sue the Russian government for $28bn. Analysts have questioned whether a US court has any jurisdiction over Russian companies, while Moscow officials have dismissed Yukos' legal wrangling as meaningless. Yukos claims that the rights of its shareholders have been ignored and that is has been punished for the political ambitions of its founder Mikhail Khodorkovsky. Mr Khodorkovsky, once Russia's richest man, is in prison, having been charged with fraud and tax evasion and repeatedly denied bail.
| Russian oil firm Yukos lied to a US court in an attempt to stop the Russian government selling off its key production unit, the court has heard.Yukos argued that since it had a US subsidiary and local bank accounts, the US court could declare it bankrupt and stop the auction of Yugansk.But Deutsche Bank - itself a target of a Yukos lawsuit - said documents had been backdated to strengthen the case.Analysts have questioned whether a US court has any jurisdiction over Russian companies, while Moscow officials have dismissed Yukos' legal wrangling as meaningless.Its lawyer, Hugh Ray, told the court that Yukos had claimed it had transferred $27m into two Texas bank accounts opened by its new US subsidiary.Yukos chief financial officer Bruce Misamore, who had moved to the US in early December to set up Yukos USA, acknowledged the point.Deutsche Bank is involved in the case because it is itself being sued by Yukos.Yukos maintains that it filed for bankruptcy in the US because it feared it would not be able to do so in Russia.It had agreed to loan to an arm of Russian state gas firm Gazprom the money to bid for Yuganskneftegaz, as the Yukos unit is formally known.By doing so, he said, the firm had intended to reinforce its US presence - and thus its chances of getting its case heard in US courts. |
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