/raid1/www/Hosts/bankrupt/TCREUR_Public/030501.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, May 1, 2003, Vol. 4, No. 85
Headlines
F R A N C E
ALCATEL SA: Considering Government's Suggested Astrium Merger
ALSTOM S.A.: Siemens Considers Acquisition of T&D Unit
FRANCE TELECOM: Posts First Quarter Results for 2003
RHODIA SA: Presents Results For The First Quarter Of 2003
VIVENDI UNIVERSAL: Confirms Sale of US Assets, Except Music Arm
VIVENDI UNIVERSAL: To Vigorously Challenge Ex-CEO's Salary Claim
G E R M A N Y
ALLIANZ AG: Chairman Positive on 2003 Operating Results
GERLING-KONZERN: Deutsche Bank, Swiss Re to Bring in EUR119 Mln
INFINEON TECHNOLOGIES: Accelerates Corporate Restructuring
INFINEON TECHNOLOGIES: New Technology Reduces Production Cost
INFINEON TECHNOLOGIES: Reorganizes Communications Department
H U N G A R Y
DAM STEEL: Gets Back on Its Feet After Three-month Paralysis
RABA AUTOMOTIVE: No Major Changes Expected from Newly Named CEO
I R E L A N D
ABBEY NATIONAL: Closing Two New Ireland Life Businesses
I T A L Y
FIAT SPA: Chairman Says Capital Increase Size Depends on Plan
N E T H E R L A N D S
BUHRMANN N.V.: Presents Preliminary Q1 2003 Results
BUHRMANN N.V.: Sells DocVision to Royal TPG Post BV
BUHRMANN N.V.: Shareholders Adopt Main Resolutions at AGM
CEREON B.V.: Parent Files for Closure of Business
S W E D E N
LM ERICSSON: To Cut More Jobs as Losses Mount in First Quarter
S W I T Z E R L A N D
ABB GROUP: Says Core divisions Sustain Growth in Q1 2003
ASCOM: Sells Energy Systems Business Unit to Delta Electronics
SWISS INTERNATIONAL: To Discontinue Temporary Security Fee
U N I T E D K I N G D O M
BAE SYSTEMS: Presents Results of Annual General Meeting
BRITISH ENERGY: Announces Receipt of Further Payment for Bruce
BRITISH ENERGY: Politics to Ultimately Influence London Transfer
CORDIANT COMMUNICATIONS: Receives Preliminary Takeover Offers
CORUS GROUP: Chairman's Statement at Annual General Meeting
CORUS GROUP: Fitch Says Restructuring Crucial, But Future Hazy
CORUS GROUP: Turnaround Plan Calls for Layoffs, Joint Ventures
FIRST CHOICE: Issues Trading Update Prior to Close Period
LEEDS UNITED: Hires Advisers for Restructuring Plans
SCOTTISH & NEWCASTLE: S&P Puts Ratings on Watch Negative
- - - - - - - -
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F R A N C E
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ALCATEL SA: Considering Government's Suggested Astrium Merger
-------------------------------------------------------------
Alcatel SA Chairman Serge Tchuruk has confirmed that
consolidation talks with Astrium NV over their satellite-making
operations "will certainly take place," The Wall Street Journal
said yesterday.
Troubled Company Reporter-Europe disclosed Wednesday that the
French government had recently written the management of Alcatel,
urging the company to consider merging with Astrium, the space
unit of European Aeronautic Defense & Space Co. Alcatel has
repeatedly rejected merger offers in the past, the Journal said.
The paper says Astrium would likely end up as the dominant
partner, given its closer ties to pan-European agencies and its
more bureaucratic management system. The report adds a European
consolidation could force U.S. counterparts to follow. The
satellite arms of Boeing Co., Lockheed Martin Corp. and Loral
Space & Communications Ltd. have engaged in various unsuccessful
consolidation talks at different times over the years.
ALSTOM S.A.: Siemens Considers Acquisition of T&D Unit
------------------------------------------------------
Siemens AG, Europe's largest electronics and electrical
engineering firm, is reportedly considering Alstom SA's
transmission and distribution unit for acquisition.
Frankfurter Allgemeine Zeitung said that Siemens Chief Executive
Officer Heinrich von Pierer told the paper that the Germany
company is "looking at it".
This was confirmed by a spokesman who said Siemens, which
recently made a deal with the ailing French company to buy its
industrial turbine business, is definitely looking at acquiring
the T&D unit as well as others.
Franfurter Allgemeine also reported the FAZ said T&D posts annual
sales of over EUR2 billion. Citing unsourced reports, the paper
noted that the unit had by last week attracted five bidders
comprising four investment funds plus General Electric Co.
Alstom recently said it agreed to sell its industrial turbine
business to Siemens, indicating that that in the year to the end
of March the unit generated sales of approximately EUR1.25
billion and an EBIT margin of around 7%.
However, an Alstom spokeswoman declined to confirm whether talks
between the two companies over the sale of the unit have taken
place. She said though that Siemens might well be interested in
the T&D operations.
She noted that Alstom's timetable for divesting the unit by the
end of the year remains unchanged.
TCR-EU yesterday reported that Siemens is not interested in
acquiring any other parts of Alstom.
CONTACT: ALSTOM S.A.
G. Tourvieille/M. Dowd
Phone: +33 1 47 55 23 15
E-mail: internet.press@chq.alstom.com
Investor relations
E. Rocolle-Teyssier
Phone: +33 1 47 55 25 78
E-mail: investor.relations@chq.alstom.com
or
SIEMENS AG
Wittelsbacherplatz 2
D-80333 Munich, Germany
Phone: +49-89-636-3300
Fax: +49-89-636-342-42
Homepage: http://www.siemens.de
FRANCE TELECOM: Posts First Quarter Results for 2003
----------------------------------------------------
Continued sustained growth by Orange and Wanadoo and better
resistance in fixed line telephony
TOP Program: First positive results
-- Fixed line telephony in France: slowdown in the decrease in
revenues; slowdown in loss of local market share and
stabilization of long distance market share; enormous success of
local and national calling plans; revenues from broadband
Internet access (including Wanadoo) have doubled, reaching 157
million euros; the goal of 2.8 million ADSL customers by the end
of 2003 confirmed; double-digit growth in data network solutions.
-- Orange: a refocus on higher value-added customers; positive
trends in ARPU confirmed; an increase in revenues from non-voice
services.
-- Wanadoo: broadband access doubled in one year, representing
nearly 20% of Wanadoo's customers in Europe and one third of
customers in France; increase in revenues from online
advertising; 15% growth in revenues from online directories.
-- International: TP Group continued to grow driven by the rapid
development of its wireless activities, which offset the loss in
fixed line services. Equant experienced an increase in network
services despite the difficult global economic situation.
-- TOP: an improvement in operational performance throughout the
group
--increase in operating free cash flow(1): 3.1 billion euros
in the first quarter of 2003 compared to 1.9 billion euros in the
first quarter of 2002
--short-term improvements higher than expected
--successful launch of medium- and long-term improvements
To see CONSOLIDATED REVENUES:
http://bankrupt.com/misc/FRANCE_TELECOM_CONSOLIDATED_REVENUES.pdf
(*)In order to provide a basis of comparison with the results as
of March 31, 2003, figures on a comparable basis are presented
for the first quarter of 2002. To this end, the actual results
for the first quarter of 2002 have been adjusted to reflect the
same scope of consolidation and exchange rates as in the first
quarter of 2003.
France Telecom's consolidated revenues for the period ended March
31, 2003 were 11.4 billion euros, an increase of 7.3% compared to
the year-earlier period.
On a comparable basis(*), France Telecom's consolidated revenues
increased 3.3% for the period ended March 31, 2003, representing
increased growth compared to the 2.9% quarterly increase
registered in the fourth quarter of 2002. This increase was
linked to the improvement in revenues from fixed line telephony
in France, which decreased 4.8% for the period ended March 31,
2003 compared to a decrease of 7.5% on a comparable basis(*) in
the fourth quarter of 2002, representing an improvement of 2.7
points during the first quarter of 2003. Revenues from Orange and
Wanadoo continued to pursue sustained growth at a rate comparable
to that observed during the fourth quarter of 2002. France
Telecom had 111.7 million customers at March 31, 2003,
representing a 23.5% increase on a historical basis and a 6.9%
increase on a comparable basis(*).
Orange:
Contributive revenues(2) from Orange reached 4.2 billion euros
for the period ended March 31, 2003, an 8.5% increase on a
historical basis and a 10.5% increase on a comparable basis(*).
Network revenues were 3.9 billion euros, a 10.6% increase (the
same as on a comparable basis(*)). Orange and its controlled
subsidiaries had 44.9 million customers at March 31, 2003, a
10.8% increase on a historical basis and a 7.1% increase on a
comparable basis(*). Net growth in the subscriber base reached
3.0 million new customers in one year. The increase in network
revenues was also due in part to the positive trend in ARPU(6)
that benefited from the development of non-voice services, which
represented 12.6% of network revenues at March 31, 2003.
Contributive revenues(2) from Orange France reached 1.8 billion
euros for the period ended March 31, 2003, representing an
increase of 5.2% on both a historical basis and a comparable
basis(*), with network revenues recording a 4.1% increase. This
increase was generated by a 5.2% growth in Orange France's
customer base, which reached 19.231 million at March 31, 2003.
ARPU(6) decreased 3.4% (on both a historical basis and a
comparable basis(*)) due in large part to successive decreases in
call termination rates for calls from fixed line service
operators beginning in April 2002 (a decrease of approximately
15%) and in January 2003 (also a decrease of approximately 15%).
The effect of these decreases was partially offset by the
development in usage levels: average traffic per customer
increased 5.8% during the first quarter of 2003. At the same
time, non-voice services increased rapidly (25% compared to the
first quarter of 2002), representing 11.3% of network revenues
compared to 9.4% in the first quarter of 2002. Orange France
maintained its leadership position with a 49.4% market share
compared to 49.8% at December 31, 2002, a 0.4 point increase
compared to March 31, 2002 (market share of 49.0%).
Contributive revenues(2) from Orange UK reached 1.4 billion
euros, a 1.2% increase on a historical basis, for the period
ended March 31, 2003. On a comparable basis(*), excluding in
particular the exchange rate effect, this increase amounted to
10.2%, with an increase in network revenues of 11.3%. This was
due in part to the 5.1% increase in Orange UK's customer base,
which reached 13.313 million at March 31, 2003, as well as the
significant increase in ARPU(6), which increased by 7.3% in the
first quarter of 2003. In addition to the 3.6% increase in
average traffic per customer in the first quarter of 2003, total
ARPU(6) benefited from the growing contribution of non-voice
services, representing 15.8% of network revenues compared to
13.6% in the first quarter of 2002.
Contributive revenues(2) from Orange Rest of World, which
represented 23.4% of Orange's total revenues, increased 29.8% on
a historical basis and 22.2% on a comparable basis(*), and
benefited from the transfer to Orange as from July 1, 2002of the
71.25% interest in MobiNil formerly held by France Telecom
(consolidated in the Fixed line, voice and data services -
Outside France segment). The increase on a comparable basis(*) of
22.2% for the period ended March 31, 2003 was due to the rapid
growth in the number of subscribers (12.7% on a comparable
basis(*) reaching 12.4 million customers at March 31, 2003) as
well as the increase in ARPU(6), particularly in Belgium,
Switzerland, Denmark, and the Netherlands. On a historical basis,
the number of subscribers grew by 29.1%
Wanadoo:
Contributive revenues(2) from Wanadoo reached 532 million euros
for the period ended March 31, 2003, a 41.9% increase on a
historical basis and a 35.4% increase on a comparable basis(*).
Both of Wanadoo's business segments contributed to this continued
growth. Revenues from the "Access, portals and e-commerce"
segment increased 53.6% and revenues from the "Directories"
segment increased 8.7% on a comparable basis(*).
Access, portals and e-commerce: Wanadoo had 8.8 million active
customers at March 31, 2003 compared to 6.7 million customers at
March 31, 2002, representing an increase of 32% on a historical
basis and an 18.1% increase on a comparable basis(*). The number
of broadband customers increased significantly by 131.8%, with
1,613,000 customers at March 31, 2003 compared to 696,000 one
year earlier. The share of Wanadoo's broadband subscribers in the
total number of active customers in Europe increased from 10.5%
at March 31, 2002 to 18.4% at March 31, 2003. The increase in the
number of broadband customers contributed to the growth of
ARPU(6) in all markets.
In France, the number of subscribers reached 4.130 million at
March 31, 2003, representing annual growth of 26.3% on a
historical basis and on a comparable basis(*). The number of
Wanadoo's ADSL subscribers in France more than doubled in one
year to reach 1.174 million at March 31, 2003, representing
nearly 30% of all users compared to 14.7% one year earlier.
In the United Kingdom, revenues from Freeserve's access services
increased 68.6% mainly due to the growth in the number of active
customers which reached 2.7 million at March 31, 2003, or an
annual increase of 7.6%. The increasing proportion of contract
subscribers (which reached 41% at March 31, 2003, compared to 30%
a year earlier) also contributed to the growth in revenues.
Benefiting from an upturn in revenues from online advertising in
the first quarter of 2003, revenues from the "Portals" division
increased 20.9%. In addition, revenues from e-commerce grew
rapidly (a 32.2% increase for the period ended March 31, 2003, on
a historical and on a comparable basis(*)). In particular,
Alapage recorded 245,000 orders in the first quarter of 2003,
representing growth of 52% compared to the first quarter of 2002.
Directory Activities: Revenues from Directories increased 8.7%.
This sustained increase in revenues related to the fact that
revenues for the first quarter of 2003 benefited from non-
recurring revenues. Revenues generated from online directories in
France (advertising and website creation) increased 15% for the
period ended March 31, 2003. At the same time, revenues from
Internet directories in France and Spain (pagesjaunes.fr and
qdq.com) continued to grow rapidly (37%).
Fixed line, voice and data services - France
Contributive revenues(2) from Fixed line, voice and data services
- France decreased 6.6% for the period ended March 31, 2003
compared to the year-earlier period, related in part to the sale
of TDF on December 13, 2002. On a comparable basis(*), the
segment has experienced improvement in its trends, with a
decrease of 3.4% on a comparable basis(*) following a decrease of
5.7% on a comparable basis(*) recorded in the fourth quarter of
2002. The improvement is particularly significant in fixed line
telephony services, where the decrease in revenues on a
historical and on a comparable basis(*) amounted to 4.8%,
compared to a decrease of 7.5% on a comparable basis(*) in the
fourth quarter of 2002, representing a 2.7 point improvement
since the beginning of 2003.
The impact of the opening of the local communications market to
competition, which affected France Telecom's revenues from
telephone communications in 2002, has subsided in the first
quarter of 2003 with the slowdown in France Telecom's loss of
market share in local communications. France Telecom's market
share in local traffic in March 2003 amounted to 79.1% compared
to 86.0% in March 2002, representing a decrease of 6.9 points in
one year. In comparison, France Telecom's market share in local
traffic in December 2002 amounted to 80.9% compared to 96.8% in
December 2001, representing an annual decrease of 15.9 points.
France Telecom's market share in long distance traffic (domestic
and international) remained stable at 63.3% in March 2003
compared to 63.7% in March 2002. The slight decrease of 0.4 point
within one year is comparable to the decrease recorded in
December 2002 (-0.3 point).
At the same time, subscriptions to calling plans continued to
grow rapidly (48% within one year), with nearly 7.4 million
subscriptions at March 31, 2003. In addition, the success of the
"Heures France" calling plan launched in July 2002 contributed to
70% of the net increase in subscriptions in the first quarter of
2003. The total number of telephone lines remained stable, with
34.1 million lines at March 31, 2003.
In addition, revenues from ADSL broadband Internet access more
than doubled compared to the first quarter of 2002 (excluding
services billed by Wanadoo) due to the rapid increase in
subscriptions. The number of broadband Internet access services
for retail customers (including Wanadoo's ADSL access) more than
tripled, to reach 1,777,000 at March 31, 2003 compared to 559,000
the previous year. Sustained growth has continued, with an
increase of 418,000 in the first quarter of 2003 following an
increase of 521,000 during the previous quarter. This growth will
aid France Telecom in reaching its goal of providing ADSL access
to 2.8 million subscribers by the end of 2003. ADSL has become a
mass market with strong potential and also has capacity to become
a growth driver for France Telecom. At the same time, Minitel
revenues continued their downward trend.
Revenues from the Business services segment increased 5.7% on a
historical basis and increased 5.5% on a comparable basis(*) for
the period ended March 31, 2003, generated by a rapid development
of solutions in data transmission, which achieved growth of 24.1%
on a historical basis and on a comparable basis(*) at March 31,
2003. Excluding the impact of the transfer of Equant customers in
France to Transpac, the increase in data transmission revenues
amounted to 18.2% (on a historical basis and a comparable
basis(*)). This increase was partially offset by the 11.6%
decrease on a comparable basis(*) in revenues from standard
leased lines (11.3% decrease on a historical basis).
Fixed line, voice and data services - Outside France
Revenues from the Fixed line, voice and data services - Outside
France segment increased 37.2% on a historical basis compared to
March 31, 2002. This increase was mainly due to a combination of
the positive effect of the full consolidation of the Polish
operator TP Group (TP S.A. and its subsidiaries) since April 1,
2002 and the unfavorable change in the exchange rate. On a
comparable basis(*), contributive revenues(2) from Fixed line,
voice and data services - Outside France decreased 0.6% for the
period ended March 31, 2003.
Equant:
Contributive revenues(2) from Equant for the period ended March
31, 2002 (600 million euros) decreased 22.6% on a historical
basis and 5.1% on a comparable basis(*) compared to the year-
earlier period. For the most part, this decrease on a comparable
basis(*) reflected the impact of the transfer of Equant's
customers in France to Transpac SA in accordance with the
contractual provisions put in place in June 2001 at the time of
Equant's consolidation into the France Telecom group.
Sales in network services, which represented more than half of
Equant's revenues, increased 3.7%. The 12.1% increase in direct
sales (including sales completed by Transpac) more than offset
the 23.3% decline in revenues from indirect distribution
channels. Revenues from integration services, impacted by the
general economic downturn, decreased 2.3%. Finally, revenues from
SITA decreased 2.6% as a consequence of tariff decreases
contractually agreed to in June 2001.
TP Group:
TP Group, fully consolidated as of April 1, 2002, contributed
1.070 billion euros to the revenues of "Fixed line, voice and
data services - Outside France" for the period ended March 31,
2003, an increase of 2.1% on a comparable basis(*) compared to
the year-earlier period. Fixed line services, which represent
nearly 80% of TP Group's total revenues, recorded a decrease of
3.3% on a comparable basis(*). As of March 31, 2003, the Polish
operator had 10.881 million fixed line customers, representing an
annual increase of 3.9%. At the same time, on a comparable
basis(*), wireless services of the subsidiary PTK Centertel
continued strong growth with an increase of 34.1% in the first
quarter of 2003. The number of active customers for PTK
Centertel's wireless services was 4.739 million at March 31, 2003
compared to 3.171 million at March 31, 2002, representing an
annual increase of 49.4%. In addition to strong growth in
wireless services, TP Group benefited from the significant
increase in the Internet market, with 1.6 million active
customers at March 31, 2003, an increase of 17.7% compared to
March 31, 2002.
Key Consolidated Figures at March 31, 2003
At March 31, 2003, the France Telecom group (including France
Telecom's controlled subsidiaries) had a total of 111.7 million
customers, broken down as follows:
Customers (in millions) Countries
Wireless Communications 50.8 21
Fixed Line Telephony 49.6 10
Internet Access(active customers) 10.5 11
Cable Networks 0.8 1
The number of customers continues to increase at a steady pace.
At March 31, 2003, 21.3 million additional customers on a
historical basis (of which 17.2 million were related to the
consolidation of TP Group) and 7.2 million additional customers
on a comparable basis(*) have joined the France Telecom group
since the end of the first quarter of 2002, representing an
increase of 6.9% on a comparable basis(*).
During the first quarter of 2003, the number of subscribers
continued its sustained growth. With an additional 75,000
customers on a historical basis, the first quarter of 2003 was
most significantly affected by the divestment of Casema, a cable
network operator in the Netherlands. On a comparable basis(*),
the first quarter of 2003 recorded an additional 1.6 million
customers. The number of active customers for wireless services
increased by nearly 1 million within this three-month period
while the number of active Internet customers increased by
532,000. At the same time, fixed line services in Europe (outside
France) added 137,000 subscribers (also on a comparable basis(*))
due in part to the development of operations in Spain and in
Poland.
TOP Program: First positive results
-- A successful launch
-- Immediate gains surpass expectations
-- Transformation of processes underway
The 100 TOP projects launched in January 2003 have created the
dynamic anticipated since the beginning of the first quarter of
2003. France Telecom's long-term goals for improving its
operational performances are reflected throughout the group and
are delivering the anticipated results.
France Telecom recorded 3.1 billion euros in operating free cash
flow(1) in the first quarter of 2003 compared to 1.9 billion
euros in the first quarter of 2002, on a comparable basis(*).
This improvement of 1.2 billion euros was generated by an
increase in revenues of approximately 350 million euros, OPEX(3)
gains of approximately 500 million euros and CAPEX(4) gains of
approximately 350 million euros.
The improvements recorded since the beginning of the first
quarter of 2003 were due, in part, to short-term gains (Quick
Wins) that surpassed expectations and were mainly made in
purchasing, overhead costs and communications and marketing
expenses.
Projects that aim to improve medium- and long-term operational
performances were successfully launched. Their impact is less
noticeable in the short term, but should gradually become more
perceptible throughout the year and until 2005.
In the medium term, the impact of these projects should be
realized:
-- in the area of investments (CAPEX(4)) mainly due to an
improvement of synergies and a better pooling of resources among
France Telecom's divisions; and
-- in the area of OPEX(3), as a result of an internalization of
certain activities and an improvement in certain operational
processes.
These permanent sources for improving operational performances
will progressively replace short-term gains.
A selective reduction of CAPEX(4) in order to sustain growth:
approximately 350 million euros in gains
Approximately 350 million euros in gains were realized in the
area of CAPEX(4) in the first quarter of 2003.
Contributions by segment to the reduction in CAPEX(4) broke down
as follows: 47% from Fixed line, voice and data services -
France, 32% from Orange, 10% from Wanadoo and 11 % from Fixed
line, voice and data services - Outside France.
The largest gains were derived:
-- one-third from Orange, mainly as a result of its withdrawal
from Sweden and a better allocation of expenses in Switzerland,
Denmark and the Netherlands.
-- one-third from "Networks and Operators" due to the completion
of the modernization program for switching in France and a
decrease in international investments.
The France Telecom group continues to invest, especially in areas
of growth and development. The CAPEX(4) of Orange in the first
quarter of 2003 remained at generally the same level overall as
in 2002 in France and the United Kingdom. A 19% increase in
investment expenditures in ADSL should allow for a better
deployment of networks and a doubling in the number of ADSL lines
in France in 2003. TP Group continues to modernize its network in
Poland. WIFI was successfully launched and improvements within
France Telecom's divisions are anticipated in order to modernize
the distribution network and business networks.
The decrease in CAPEX(4) was due, in large part, to:
-- an improvement in process, with, for example, the creation of
coordination efforts such as the investment committee. This
committee oversees the consistency of investments decisions of
the France Telecom group. The committee enables France Telecom to
better define its priorities in accordance with its strategy;
-- an improved allocation of spending;
-- an improved pooling of resources; and
-- a better adjustment to market needs.
Gains related to OPEX(3): approximately 500 million euros
Approximately 500 million euros in gains were realized in OPEX(3)
in the first quarter of 2003, representing a decrease of 6.3%
compared to the first quarter of 2002 on a comparable basis(*).
The gains related to OPEX(3) were mainly due to short-term
improvements (Quick Wins) linked to reductions in consulting,
general and administrative expenses, communication and
advertising. On a comparable basis, external purchases decreased
by 343 million euros between the first quarter of 2002 (4,809
million euros) and the first quarter of 2003 (4,446 million
euros).
On a comparable basis(*), between the first quarter of 2002 and
the first quarter of 2003:
-- The "Fixed line, voice and data services - France" segment
contributed in the reduction in OPEX(3) by 249 million euros
through reductions in equipment purchases and the internalization
of certain activities, such as Transpac.
-- Orange's OPEX(3) decreased by 107 million euros. The
restructuring of Orange in Switzerland, Denmark and the
Netherlands as well as the withdrawal from Sweden also
contributed to the reduction in OPEX(3) in this segment for the
first quarter of 2003. The operational restructuring of Orange
Corporate generated savings of 15 million euros at the end of
March 2003. Reductions were also realized as a result of an
improved coordination of corporate communication campaigns and a
decrease in sponsoring expenses.
-- At Wanadoo, the optimization of customer services and an
improvement in sales and distribution procedures in France and
the United Kingdom led to a slight increase in OPEX(3) of 15
million euros, despite a 35.4% growth in activity on a comparable
basis(*).
-- Equant contributed to the decrease in OPEX(3) by reducing its
access costs and improving process. TP Group successfully pursued
its continued restructuring, particularly relating to
distribution and customer service. OPEX(3) decreased 133 million
euros in the "Fixed line, voice and data services - Outside
France" segment.
As a result of the sourcing project, 369 million euros out of the
goal of 720 million euros in cash savings to be realized in 2003
has already been contracted and is expected to produce the
anticipated results. The first wave of this project was
successfully introduced. A purchasing volume of approximately 5.4
billion euros is involved in this first wave of the program for
which 18 out of 30 categories had already been launched as of
March 31, 2003.
TOP gains momentum
The excellent results of the TOP program confirm the positive
momentum of the company, based upon the mobilization of the
entire Group, management's capacity to build a reliable strategy
and carry through on its goals, as well as France Telecom's
potential to generate additional cash through an improvement in
productivity, for the benefit of its customers worldwide.
The successful launch of the TOP program and its initial results
provide France Telecom with greater flexibility to develop its
operating activities. France Telecom thus confirms its goal to
generate 15 billion euros in free cash flow(5) over the period of
2003-2005 (of which more than 3 billion euros in 2003) dedicated
to the reduction of its debt.
In the context of the Ambition FT 2005 Plan, the TOP program will
continue to give France Telecom the financial and operational
flexibility necessary to become the leading European operator by
2005 in the sectors of fixed line telephony, wireless
communications, Internet and business services.
NOTES:
* Comparable basis: In order to provide a basis of comparison
with the results as of March 31, 2003, figures on a comparable
basis are presented for the first quarter of 2002. To this end,
the actual results for the first quarter of 2002 have been
adjusted to reflect the same scope of consolidation and exchange
rates as in the first quarter of 2003.
(1) Operating free cash flow: Operating income before
depreciation and amortization and before amortization of
actuarial adjustments in the early retirement plan, less
acquisitions of tangible and intangible assets excluding GSM and
UMTS licenses.
(2) Contributive revenues: Consolidated revenues excluding intra-
group transactions.
(3) OPEX: Operating expenditures before depreciation and
amortization of assets and before amortization of actuarial
adjustments in the early retirement plan.
(4) CAPEX: Acquisitions of tangible and intangible assets,
excluding GSM and UMTS licenses.
(5) Free cash flow: Net cash provided by operating activities,
less net cash used in investing activities.
(6) APRU: Average revenue per user.
CONTACT: Nilou du Castel
Phone: +33 1 44 44 93 93
E-mail: nilou.ducastel@francetelecom.com
Emilie Richer
Phone: +33 1 44 44 93 93
E-mail: emilie.richer@francetelecom.com
RHODIA SA: Presents Results For The First Quarter Of 2003
---------------------------------------------------------
Rhodia Tuesday published its results for the first quarter of
2003. In a difficult economic and geopolitical environment, the
results for the first quarter - which seems to represent a trough
in the business cycle - correspond to the estimates published on
April 7, 2003. The highlights of the period are as follows:
-- Growth in net sales, on a comparable basis of structure and
exchange rates
-- Group performance affected by the rise in the value of the
euro and higher raw material prices
-- Positive operating income
-- Negative net income, also impacted by an unfavorable tax
effect
RESULTS FOR THE FIRST QUARTER OF 2003
Unaudited figures In millions of euros
Q1 2002 Q1 2002 Q1 2003 % change
restated* compared with
Q1 2002
restated
1,711 1,368 Net sales 1,428 + 4.4%
197 140 EBITDA 112 - 20%
79 46 Operating income 9 - 80.4%
7 - Net result
(after minorities)** -52 -
-6 - Net result
(after minorities)*** -63 -
* Figures restated to account for divestitures completed in 2002
and based on current exchange rates.
** Excluding the amortization of goodwill.
*** Including amortization of goodwill.
A quarter heavily impacted by a difficult economic and
geopolitical environment
As Rhodia announced when it published its annual results on
February 5, and confirmed on April 7, 2003, the Group's business
activities during the first quarter of the year suffered from the
high price of raw materials, particularly petrochemicals, a
weakening in demand and the negative impact of the rise in the
value of the euro.
For the first quarter of 2003, Rhodia reports net sales of
EUR1,428 million, down 16.5% compared with the same period last
year on a historical basis (EUR1,711 million). Restated on a
comparable basis- (excluding changes in Group structure and
exchange rate fluctuations, which had a negative impact on the
historical results of EUR168 million and EUR175 million
respectively, or 9.8% and 10.2%)-net sales grew by 4.4% despite
the unfavorable economic environment, driven by a 3% increase in
volumes and a 1.4% increase in prices. All the Divisions
contributed to this overall improvement with only the
Pharmaceuticals & Agrochemicals Division, as anticipated, seeing
a 5.9% decline in net sales.
The high level of raw material prices constituted a major brake
on this quarter's performance and significantly depressed the
Group's operating income with a negative impact estimated at
EUR51 million compared with the same period in 2002.
Rhodia's success in reducing its fixed costs was overshadowed by
the restructuring provisions (EUR7 million more than in the same
period in 2002) designed to improve the Group's competitiveness,
and by an extraordinary EUR7 million cost related to
difficulties, which have since been resolved, to re-start an
intermediates production unit.
All these items had a negative impact on the Group's performance
and depressed Rhodia's operating income to EUR9 million compared
with EUR46 million for the first quarter of 2002, on a comparable
basis (constant structure and exchange rates).
EBITDA (Operating income before depreciation and amortization)
declined by 20% on a comparable basis (constant structure and
exchange rates) to EUR112 million compared with EUR140 million
for the same period last year. On the same basis, EBITDA/Sales
ratio declined from 10.2% in the first quarter of 2002 to 7.8% in
the first quarter of 2003.
Equity earnings of affiliated companies of - EUR9 million for the
first quarter of 2003 remained stable from the first quarter of
2002. For the same period, interest expenses declined by 29%,
from EUR38 million to EUR27 million due to the reduction achieved
during 2002 in the Group's net debt and stable financing costs.
As an outcome, net result after amortization of goodwill (EUR10.8
million) stands at - EUR63 million due to the estimation of non
recoverability of tax losses for the period.
Results by Division *
Q1 2002 In millions of euros Q1 2003
restated
Pharmaceuticals & Agrochemicals
221 Net sales 208
2 Operating income -21
19 EBITDA -3
8.6% EBITDA/Sales -1.4%
Food & Consumer Care
542 Net sales 554
48 Operating income 39
76 EBITDA 73
14% EBITDA/Sales 13.2%
Industrial Care & Services
303 Net sales 330
17 Operating income 9
38 EBITDA 39
12.5% EBITDA/Sales 10%
Automotive, Electronics & Fibers
326 Net sales 363
9 Operating income 13
33 EBITDA 39
10.1% EBITDA/Sales 10.7%
* In accordance with the new organization and excluding the
segment " Others "
Pharmaceuticals & Agrochemicals: an extremely difficult start to
the new year, as anticipated
The Pharmaceuticals & Agrochemicals Division saw a decline in its
business activities linked to the impact of higher raw material
prices and the decline in the value of the dollar. The
pharmaceuticals business also suffered-as anticipated-from the
negative effects of the postponement of approvals by the US Food
& Drug Administration (FDA). Business in the agrochemical market
was sluggish, offset however by the good performance achieved by
Intermediates in Brazil. The difficulties encountered with the
re-commissioning of an intermediates production unit operated for
a third party further depressed the results for the first quarter
of the year. These difficulties have now been resolved.
Food & Consumer Care: strong resilience
All consumer markets, with the exception of those in Asia, felt
the effects of weak demand. Despite this, the Division increased
its sales due, in particular, to the saturation of its new Acetow
production capacity. All the business activities were adversely
affected by the significantly higher cost of raw materials and
energy, offset during the quarter by growth in sales volumes.
Industrial Care & Services: Silicones facing stiffer competition
Despite the adverse economic environment characterized by the
rise in raw material prices and the impact of fluctuations in
foreign exchange rates, all the enterprises in the Industrial
Care & Services Division-with the exception of Silicones-resisted
strongly and achieved a significant increase in their net sales
figures. Silicones continued to suffer from difficult market
conditions, marked by persistently weak demand, intense downward
pressure on prices and the negative impact of raw material costs.
The paints and construction materials business managed to offset
the effects of foreign currency exchange and the rise in raw
material prices with strong growth, and Silica Systems made
progress, particularly in the tire market.
Automotive, Electronics & Fibers: enhanced results compared with
2002
Engineering Plastics and Polyamide Intermediates achieved strong
growth in sales through the success of their commercial actions,
despite the difficult business environment depressed by higher
raw material prices and sluggish demand. Electronics & Catalysis
achieved growth in its automotive pollution control activity and
the electronics market saw early signs of recovery. Textile
Fibers' business remains deeply depressed, however, while the
Technical Fibers activity achieved enhanced results.
Net Debt
In addition to the effects of lower results, net debt was
affected by an increase in working capital requirements,
characteristic of the beginning of the year, and increased to
EUR2,300 million compared with a level of EUR2,133 million at the
end of December, 2002. Capital expenditures (EUR66 million) were
in line with the strict limits fixed by the Group for 2003.
Outlook
In a still uncertain economic and geopolitical environment, the
second quarter should see an improvement compared with the first
quarter of the year, despite the persistently high cost of
petrochemical raw materials.
Rhodia appears to have now reached a turning point in its
performance as far as its margins are concerned. The recovery of
our selling prices noted at the end of the period, combined with
the beginning of a gradual decline in raw material costs
following the fall in oil prices observed since the end of March,
should enable the Group to improve its margins slightly during
the second quarter, followed by a more substantial recovery
during the second half of the year.
Rhodia maintains its target for the end of 2003, to reduce its
Net Debt/EBITDA ratio to less than 2.5 through, particularly, the
pursuit of its restructuring drive, the launch of sixty new
products this year, its ability to generate free cash flow and
the continuation of its program of divesting non-strategic
assets.
This presentation contains elements that are not historical
facts, including, without limitation, certain statements on
future expectations and other forward-looking statements. Such
statements are based on management's current views and
assumptions and involve known and unknown risks and uncertainties
that could cause actual results, performance or events to differ
materially from those anticipated.
Rhodia is one of the world's leading manufacturers of specialty
chemicals. Providing a wide range of innovative products and
services to the consumer care, food, industrial care,
pharmaceuticals, agrochemicals, automotive, electronics and
fibers markets, Rhodia offers its customers tailor-made solutions
based on the cross-fertilization of technologies, people and
expertise. Rhodia subscribes to the principles of Sustainable
Development communicating its commitments and performance openly
with stakeholders. Rhodia generated net sales of EUR6.6 billion
in 2002 and employs 24,500 people worldwide. Rhodia is listed on
the Paris and New York stock exchanges.
CONSOLIDATED INCOME STATEMENT*
1st quarter
2002 2003
(EURm)
Net sales 1,711 1,428
EBITDA 197 112
Operating income 79 9
Equity in earnings of
affiliated companies -8 -9
Interest expenses -38 -27
Other gains and losses -16 -8
Income tax -8 -16
Goodwill amortization -13 -11
Minority interests -2 -1
Net result after minorities -6 -63
* Unaudited figures
DIVISIONAL RESULTS*
Q1 2002 Q1 2002 Restated (MEUR) Q1 2003
Rhodia restated
1,711 1,368 Net sales 1,428
79 46 Operating Income 9
197 140 EBITDA 112
11.5% 10.2% EBITDA/Sales 7.8%
Pharma & Agro
311 221 Net sales 208
8 2 Operating Income -21
31 19 EBITDA -3
10% 8.6% EBITDA/Sales -1.4%
Food & Consumer Care
611 542 Net sales 554
54 48 Operating Income 39
87 76 EBITDA 73
14.2% 14% EBITDA/Sales 13.2%
Industrial Care &
Services
382 303 Net sales 330
25 17 Operating Income 9
51 38 EBITDA 33
13.4% 12.5% EBITDA/Sales 10%
Automotive, Electronics
& Fibers
361 326 Net sales 363
11 9 Operating Income 13
38 33 EBITDA 39
10.5% 101.1% EBITDA/Sales 10.7%
Others
46 -24 Net sales -27
-19 -30 Operating Income -31
-10 -26 EBITDA -30
-21.7% 108.3% EBITDA/Sales 111.1%
* Unaudited figures
BALANCE SHEET 31/03/2003 (EURm)
Fixed assets 5,093 Equity 1,724
Working capital 572 Long term & short term
previsions 1,641
Net debt 2,300
Assets 5,665 Liabilities 5,665
CONTACT: INVESTOR RELATIONS
Marie-Christine Aulagnon
Phone: ( 33-1 55 38 43 01)
Fabrizio Olivares
Phone: ( 33-1 55 38 41 26 )
VIVENDI UNIVERSAL: Confirms Sale of US Assets, Except Music Arm
---------------------------------------------------------------
It's official: Vivendi Universal will sell all U.S.-based assets,
save for Universal Music Group, the world's No.1 recording label,
The Wall Street Journal said.
Vivendi Chairman and CEO Jean-Rene Fourtou made the announcement
during the group's annual meeting Tuesday. From now on, he said,
Vivendi will focus on telecommunications, the only remaining
division raking in profits for the group.
Despite signaling a strategic shift, the announcement did not
surprise the market, says the Journal. During its rapid
expansion under former CEO Jean-Marie Messier, Vivendi had
envisioned to take the leading position in media and technology.
That grand vision, however, had a fatal flaw: Mr. Messier bought
only partial ownership in various units, which left it with no
access to their cash. This defect almost forced the company to
file for bankruptcy last summer, the Journal says.
Mr. Fourtou hopes to revive the group's fortune through Cegetel
and Morocco Telecom, where it holds 70% and 35%, respectively.
He said the two profitable units would generate EUR3 billion in
operating cashflow next year.
U.S. businesses up for sale include Hollywood studio, Universal
Pictures; TV production studio, Universal Television Group;
console and computer games unit, Vivendi Universal Games;
Universal theme parks and two U.S. cable networks, the Journal
says.
"We're in negotiations with several potential buyers to sell
Vivendi Universal Entertainment (VUE), in its entirety or in
parts, for cash or a mix of cash and shares in a bigger, more
competitive entity," Mr. Fourtou told shareholders. "Even the
latter option would imply completely exiting VUE eventually."
Sources told the Journal Mr. Fourtou is leaning toward selling
the entertainment group as a whole. He has allegedly concluded
that he can probably get a better price by touting the synergies
between its various components.
The Journal says companies interested in VUE assets include
Liberty Media Corp., Viacom Inc., General Electric Co.'s NBC and
Metro-Goldwyn-Mayer Inc. Most are particularly interested in
Vivendi's cable-TV networks, such as the Sci Fi Channel and USA
Network, insiders told the paper.
Mr. Fourtou aims to cut the company's debt to EUR10 billion by
year's end to regain an investment-grade credit rating, according
to the paper. Group debt totaled EUR15.1 billion at the end of
March, down from the EUR19 billion Mr. Fourtou inherited from Mr.
Messier when he succeeded him in July.
Following the disposal, New York-based Universal Music will
become the only American asset left for Vivendi. Mr. Fourtou
said he hasn't made a "definitive decision" on the fate of the
group. He, however, commented during the annual meeting that
selling the unit "would probably be tantamount to giving up an
exceptional position [in the music business] at too low a price."
Apple Computer is believed to be interested in Universal Music.
VIVENDI UNIVERSAL: To Vigorously Challenge Ex-CEO's Salary Claim
----------------------------------------------------------------
Vivendi Chairman and CEO Jean-Rene Fourtou told shareholders
Tuesday the company has not yet paid a single cent of ex-CEO
Jean-Marie Messier's US$20 million compensation claim and assured
them it will never happen.
"We are refusing to pay and we're asking for the cancellation of
those clauses because he resigned," Mr. Fourtou said referring to
the provision of Mr. Messier's contract of employment. "I have
paid nothing to Jean-Marie Messier - nothing," he added.
The employment contract of Mr. Messier is now the subject of a
lawsuit filed in a U.S. court. Apparently, under American rules
he is entitled to compensation despite his voluntary resignation.
This is not the case if French regulations are to be followed.
Mr. Messier lived in an apartment provided by Vivendi in New York
during his tenure as CEO and remained there until the end of
March 2003. After his departure, Vivendi decided to allow him to
stay on in the Central Park apartment at a rent of US$31,000 per
month until the end of December 2002.
"Let's wait for [the court's] conclusions. This will take
considerable time and occupy a large number of lawyers. I'm as
unhappy about that as you are," Dow Jones quoted Mr. Fourtou as
saying.
=============
G E R M A N Y
=============
ALLIANZ AG: Chairman Positive on 2003 Operating Results
-------------------------------------------------------
Schulte-Noelle at Allianz Annual General Meeting:
Unsatisfactory result for 2002 must remain an isolated
event/Group aims to achieve a significant improvement in
operating earnings for 2003
Henning Schulte-Noelle, Chairman of the Board of Management of
Allianz AG, was optimistic at the Annual General Meeting in
Munich that the company would succeed in achieving a significant
improvement in the operating result during the current year. He
commented that this assessment was based on the restructuring
measures that had been introduced at Dresdner Bank, ongoing
improvement in the combined ratio for property and casualty
business, and continuation of strong growth in the life insurance
sector. Uncertainties remained in the light of developments in
the capital markets and the economic environment, which could
impact negatively from write-downs on securities and loan loss
provision. In general, the Group had to be in a position to
generate profits independently from the development of the
capital markets. "Back to basics", i.e. focusing on operating
business, is the slogan for the future.
For Schulte-Noelle, the Annual General Meeting marked the
handover of the Chairmanship of the Board of Management to
Michael Diekmann. Schulte-Noelle described fiscal year 2002 as an
unsatisfactory and disappointing year: "There is no positive
gloss to be applied here: this result must remain an isolated
event. We have learned the right lessons from this experience."
He continued that the accumulation of financial burdens from
environmental catastrophes, the collapse in the capital markets,
and the depressed economy had left a deep impression in the
consolidated result that concluded with a loss of 1.2 billion
euros. In addition, the costs and risks in some divisions had not
been adapted quickly and consistently enough to changes in the
economic environment. By contrast, he also saw positive
developments. The Group was deriving significant benefit from the
strong demand for quality providers in the insurance market.
Strength in fixed-income investments was rated as a particularly
positive factor. The integrated financial services provider had
been accepted by customers and had produced substantial increases
in joint sales already in the first year.
2002 was therefore "an ambivalent, but not a wasted year",
according to Schulte-Noelle: "We laid groundwork of fundamental
importance and began numerous initiatives. Their common aim is:
reinstatement of profitability." Schulte-Noelle cited the
following initiatives, which are to be continued during the
course of 2003:
-- Turnaround programs were successfully initiated in areas with
unsatisfactory profitability. Costs were reduced, tough goals
were formulated and new people were recruited to take on
management functions. This program had already yielded its first
successes, notably at Dresdner Bank, Fireman's Fund and Allianz
Global Risks where the industrial insurance business of the Group
is bundled.
-- Internal procedures had been tightened, complexity reduced and
risk management significantly improved.
-- Unprofitable business areas and markets had been abandoned,
for example in the Philippines.
-- Premiums and prices had been adjusted to take account of the
increased risks and had been accepted by the market.
-- The proportion of equities had been further reduced and the
existing portfolio protected to a large degree by hedging
measures.
-- The capital measures already introduced during the autumn of
last year had considerably strengthened the capital base. This
secured important competitive advantages and opportunities for
growth. The current capital increase of 4.4 billion euros had
been positively accepted by the market. This underlines the
ongoing trust that capital markets put in Allianz.
Schulte-Noelle emphasized that "back to basics" formed the
background to all these initiatives, i.e. focusing on operating
business. The Group wants to operate profitably over the long
term, even if there is no significant improvement in the capital
markets and economic growth continues weak. As far as property
insurance is concerned, this means that the combined ratio will
become the key parameter. In the area of life insurance,
continuous review of the policyholder dividend and its adaptation
to a level that can be financed over the long-term were central
issues. And the new realities in banking business would be
leading to even stricter cost management and risk oriented credit
management.
Schulte-Noelle reiterated his conviction that the takeover of
Dresdner bank had been the right strategic step. The overwhelming
majority of customers liked receiving financial products from a
single source. Schulte-Noelle: "Compared to the old cooperation
model, business with life insurance policies in the bank branches
has doubled, and business in the non-life sector has quadrupled.
The changing market environment and customer behavior during the
last year has underlined the advantages of a broad and flexible
product line and distribution under one roof."
For the first three months of the current fiscal year, Schulte-
Noelle indicated that further improvements were anticipated in
operating business: Allianz was confident that the combined ratio
in property and casualty insurance was already below 100 percent
in the first quarter of 2003. He continued that the growth trend
in life insurance products was continuing especially with
investment-oriented products. Current indications were that a
significant improvement in the operating result was expected at
Dresdner Bank.
However, earnings performance in the first quarter of 2003 would
continue to be negatively impacted by the sustained high level of
write-downs on securities amounting to around 0.8 billion euros.
Substantial restructuring expenses also needed to be taken into
account still, as well as the fact that no notable net gains on
disposal had been booked. Full figures were being published on
May 16.
CONTACT: Richard Lips
Phone: +49-89-3800-5043
Dr. Ilja-Kristin Seewald
Phone: +49-89-3800-2960
Stefan Denig
Phone: +49-89-3800-17790
GERLING-KONZERN: Deutsche Bank, Swiss Re to Bring in EUR119 Mln
---------------------------------------------------------------
Gerling-Konzern Allgemeine Versicherungs AG could now breath a
lot easier, after Deutsche Bank and Swiss Re have reportedly
agreed to inject EUR180 million into the group in exchange for
more than 90% stake in its credit insurance unit, the Financial
Times says.
The British paper says the group will use EUR119 million of the
fresh cash to bolster its ailing re-insurer, Gerling Global Re,
which has ceased writing new business. A wave of claims related
to asbestos and the September 11 terrorist attacks has left this
unit inutile.
Under the deal, Deutsche Bank will also give back its one-third
stake in the Gerling group for free, leaving control of the group
with Rolf Gerling, whose grandfather founded the business. Last
week, Deutsche Bank wrote down the value of its Gerling stake
from EUR500 million to nothing, ostensibly in preparation for the
deal, the paper says.
The report adds Deutsche Bank will likely put up EUR120 million
to take 45-50% of the credit insurance business Gerling NCM.
Swiss Re will contribute EUR60 million and give up its share
options to take a similar stake. Sal Oppenheim and other banks
are also to be shareholders, the paper adds.
Deutsche Bank, Swiss Re and Gerling have yet to confirm to deal,
but an announcement could come within the week, the Financial
Times says.
INFINEON TECHNOLOGIES: Accelerates Corporate Restructuring
----------------------------------------------------------
-- Further decentralization measures
-- Slimming down the company also includes downsizing
-- Systematic implementation of the Agenda 5-to-1 corporate
strategy
Infineon Technologies AG (FSE/NYSE: IFX) is introducing a wide-
ranging series of measures to force the pace on the corporate
restructuring that is already being driven by various programs. A
return to the profit zone and sustained success for the company
are the paramount corporate objective, explained Dr. Ulrich
Schumacher, Infineon's President and CEO, at a press conference
in Munich. As already announced, against the backdrop of a
continuing weak market environment Infineon is banking on
realizing massive savings, including by the further streamlining
of corporate structures as well as through the implementation of
the Agenda 5-to-1 program.
Cost-cutting
In summer 2001, Infineon unveiled a radical cost-cutting program
in the shape of its Impact initiative, which led to savings
amounting to 2.8 billion euros. With the follow-on program
Impact, the company aims to optimize its corporate processes and
structures. This will produce further cost reductions of 500
million euros, 50 million of which will come in the current
fiscal year. The lion's share of the savings will be financially
effective on an EBIT basis in the next fiscal year. A major
contribution will be made by the relocation of individual
business units as well as by outsourcing of various functions to
external service providers.
In light of the continuing tense market situation, Infineon also
plans to downsize its workforce. Up to 900 jobs will be reduced,
including 500 in various corporate functions, plus another 150 in
the Secure Mobile Solutions Group, mostly in Sweden. There will
also be cuts through transfer or outsourcing.
Decentralization
By transferring responsibility for the Automotive and Industrial
Electronics Group to Villach, Austria, Infineon is taking one
more step toward the decentralization of the company. The Group,
which posted record results for the sixth quarter in succession,
will be controlled from Villach in future. Infineon has already
benefited in the past here from the proximity between research
and production facilities. With the relocation, the company hopes
to shorten distances even further and so be in a position to
launch new products onto the market more quickly. Following the
move, some 2,400 employees will be working in Villach.
Infineon expects increased efficiency from the decentralization
of business units and the strengthening of the regions in line
with the Agenda 5-to-1 program. The course that has been embarked
upon, namely expanding a powerful regional presence in the USA
and Asia, will be continued and is a major cornerstone of this
corporate strategy. In Singapore, the foundation stone for a new
building of the future Asia headquarters was laid in April. Over
2,000 people will be employed at this location. Infineon will
invest over 1.5 billion euros in the key growth market of Asia
over the next four years. On America's East Coast, Infineon is
currently planning to establish a new US expansion site besides
San Jose, California.
Possible new company headquarters
Infineon is examining the financial benefits of relocating the
corporate headquarters outside Germany. The company is currently
examining various sites in Asia, the USA and Europe - amongst
others Switzerland. Potential savings would be available to
Infineon for investments in new technologies and infrastructure.
Location Germany
Infineon has to hold its own in a fiercely competitive global
environment and will go wherever the general conditions are most
favorable for the task in hand. "Germany will continue to be an
attractive location for Infineon not least because of the
availability of highly qualified specialists, e.g. in R&D, even
if various corporate activities, e.g. administrative functions,
can be handled more efficiently abroad and will therefore be
relocated," explained Schumacher. "Our far-reaching measures are
designed to ensure the lasting global success of the company,
which will also enable us to safeguard our jobs in Germany long-
term," continued Schumacher.
Infineon has steadily expanded its market position in the last
several years and has grown faster than the market even during
the downturn. In the first half of the current fiscal year, for
example, growth was 28 percent. Forecasts for worldwide market
growth in the 2003 calendar year are currently running at 11
percent.
However, the continuing weakness of the international high-tech
markets over the last two years and the uncertain development of
the market confirm Infineon in its decision to restructure the
company in order to create structures that will bring lasting
success. Infineon also wants to continue to set technological
standards and reap considerable rewards from this in terms of
market position and costs.
Productivity
On the cost side, Infineon is constantly increasing its
productivity and manufacturing efficiency. With the immediate
introduction of 110-nanometer technology, the company is cutting
the production costs of memory chips by another 30 percent. In
the second quarter, Infineon reduced the costs for 256-megabit
equivalents from 6.10 to 5.40 US dollars. By the end of the
fiscal year (September 2003) the company wants to squeeze costs
as low as 4.50 US dollars.
With the early introduction of 300mm production technology,
Infineon has already demonstrated its leading position in cost-
efficient production. Today Infineon is producing chips more
cheaply than with the 200mm technology that is still prevalent
across the industry and will be able to realize cost savings of
up to 30 percent when its plant in Dresden reaches full capacity.
The company is well ahead of schedule in ramping-up its 300mm
facility in Dresden which has reached more than 6,000 wafer
starts per week.
Solution Business
As outlined in the Agenda 5-to-1 program, Infineon will expand
its profitable solution business. For this, the company is also
committed to diversification. There are already signs of initial
success with special innovations that create new markets.
Examples of new applications are:
Infineon's entry into the "bioscience" growth business with
innovative biochips
Wearable electronics, e.g. jackets with integral MP3 player
Radio identification to simplify logistics in checking objects in
and out, e.g. in libraries (Vienna main library).
Partnerships
Partnerships, cooperation ventures and acquisitions are vital to
the economic and technological success of the company. Infineon
will systematically follow the course already embarked upon.
Through agreements with the Chinese SMIC and the Taiwanese
Winbond, for example, Infineon secures capacities without having
to invest in new production facilities. In this way the company
increases its profitability and at the same time gains market
share. The cooperation model with Nanya provides for joint
development and production, so R&D costs will be shared and the
company's presence in Asia strengthened.
"Now the task is to use the restructuring of the company to
achieve our primary objective - a return to profitability. All
our actions and planning are subordinate to this goal," commented
Schumacher.
About Infineon
Infineon Technologies AG, Munich, Germany, offers semiconductor
and system solutions for the automotive and industrial sectors,
for applications in the wired communications markets, secure
mobile solutions as well as memory products. With a global
presence, Infineon operates in the US from San Jose, CA, in the
Asia-Pacific region from Singapore and in Japan from Tokyo. In
the fiscal year 2002 (ending September), the company achieved
sales of Euro 5.21 billion with about 30,400 employees worldwide.
Infineon is listed on the DAX index of the Frankfurt Stock
Exchange and on the New York Stock Exchange (ticker symbol: IFX).
Further information is available at http://www.infineon.com
INFINEON TECHNOLOGIES: New Technology Reduces Production Cost
-------------------------------------------------------------
Munich/Germany - April 29, 2003 - Infineon Technologies AG
(FSE/NYSE: IFX) today announced that it is using its advanced
0.11-micron process technology for volume manufacturing for
DRAMs. Samples of high-density 256Mbit DRAMs manufactured in the
new 0.11-micron process have already been successfully validated
at Intel and also delivered to strategic partners. The new
process results in significantly smaller structures, thus
allowing a reduction in the chip size and a production cost
advantage per chip of around 30 percent compared to the current
volume process technology used by Infineon. The smaller
structures compared to the company's previous 0.14-micron DRAM
process, allow Infineon to manufacture greater than 50 percent
more chips per wafer.
"With our new 0.11-micron process, Infineon once again
underscores its technology leadership," said Dr. Andreas von
Zitzewitz, Member of the Managing Board and Chief Operating
Officer of Infineon Technologies AG. "Our latest shrink version
of the 256Mbit DRAM is the smallest 256Mbit device in the
industry. This results from the combination of the ultra-dense
0.11-micron process and our proprietary trench cell technology -
which produces approximately 10 percent smaller chip sizes than
competitive technologies at same feature size."
The new process was developed at Infineon's Dresden 200mm wafer
facility and is now ready to start its ramp-up to volume
production of high-density and high-speed memories on 200mm and
300mm process lines. During ramp-up at Dresden the new process
technology will also be transferred to the other facilities of
Infineon`s fab cluster, including Richmond, Virginia, the
production joint venture with Nanya called Inotera Memories, and
the company's DRAM foundry partner fabs.
Infineon is the first DRAM manufacturer to use the advanced 193nm
(nanometer) lithography in volume production for its new 0.11-
micron DRAM technology. Future process generations with smaller
feature sizes are planned to use the same lithography and will
benefit from the experiences already gained. The first products
manufactured on the new 0.11-micron technology are 256Mbit DDR
components, which are used in personal computers and servers. The
transition to smaller process geometries is ideal for production
of high-speed memories like DDR2 and Graphics RAM. In addition
the smaller feature sizes enable memory densities up to 1Gbit per
chip. All DRAM components produced on the process will be based
on environmental-friendly technology using lead-free and halogen-
free materials.
Combined with Infineon's recent announcement that its production
of DRAM chips on 300mm wafers had reached "cost crossover"
compared to 200mm wafers, the company continues to reinforce its
position as a productivity and cost leader in DRAM manufacturing.
"As the pioneers of 300mm technology we have set a new worldwide
standard for high-volume semiconductor products. Now we are
beginning to reap the production efficiency benefits of our
longterm investment in this new technology," said Dr. von
Zitzewitz.
Just one year after the start of volume production of memory
chips on 300mm-diameter silicon wafers, Infineon produces memory
chips since December 2002 at a lower cost per component on 300mm
wafers than on 200mm wafers. This crossover allows the company to
garner the full benefits of 300mm wafer production; increased
productivity and cost savings up to 30 percent for equivalent
volumes of memory chips as the plant ramps to full capacity
production.
More information about the Infineon range of DRAM products is
available at http://www.infineon.com/memory
About Infineon
Infineon Technologies AG, Munich, Germany, offers semiconductor
and system solutions for the automotive and industrial sectors,
for applications in the wired communications markets, secure
mobile solutions as well as memory products. With a global
presence, Infineon operates in the US from San Jose, CA, in the
Asia-Pacific region from Singapore and in Japan from Tokyo. In
fiscal year 2002 (ending September), the company achieved sales
of Euro 5.21 billion with about 30,400 employees worldwide.
Infineon is listed on the DAX index of the Frankfurt Stock
Exchange and on the New York Stock Exchange (ticker symbol: IFX).
Further information is available at www.infineon.com.
Infineon_110nm
Infineon is using its advanced 0.11-micron process technology for
volume manufacturing for DRAMs. Samples of high-density 256Mbit
DRAMs manufactured in the new 0.11-micron process have already
been successfully validated at Intel and also delivered to
strategic partners. The new process results in significantly
smaller structures, thus allowing a reduction in the chip size
and a production cost advantage per chip of around 30 percent
compared to the current volume process technology used by
Infineon. The smaller structures compared to the company's
previous 0.14-micron DRAM process, allow Infineon to manufacture
greater than 50 percent more chips per wafer.
CONTACT: Worldwide Headquarters
INFINEON TECHNOLOGIES AG
P.O. Box 80 09 49
D-81609 Muenchen
Germany
Phone: +49-89-234-22404
Fax: +49-89-234-28482
E-mail: ralph.heinrich@infineon.com
INFINEON TECHNOLOGIES: Reorganizes Communications Department
------------------------------------------------------------
To provide optimal support for the strategic realignment of
Infineon Technologies, the company's communications department is
being reorganized with effect from May 1, 2003.
"In future we want to provide even better access to all external
and internal target groups through strategically integrated
communications. To achieve this the communications department is
being organized to be more target group oriented, flexible and
hard hitting. In future the communications department will be
subdivided into corporate communications and products &
technologies communications. In addition the new structure
includes electronic media as a new field. In addition we are
greatly strengthening communications in our target markets of
Asia and the USA" explained the head of the communications
department, Christoph Sieder.
The new corporate communications section will be headed by Gnter
Gaugler. Reiner Schnrock will be responsible for the new
products & technologies communications section.
As part of this restructuring and realignment of the Media
Relations department the current press spokesperson Katja
Schlendorf is leaving the company by mutual agreement.
Christoph Liedtke is responsible for public affairs, which
includes executive communications as well as the strategic
content management of Infineon's corporate communications.
The internal communications section will be headed by Peter Weiss
who is responsible for all internal communications activities
worldwide including the employee publication Galaxy Magazine, its
online version Galaxy eMag, and also Infineon's corporate
intranet.
Much greater importance is being attached to Infineon's regional
site communications. With immediate effect Susanne Eyrich will
take responsibility for communications activities at Infineon
Technologies' state-of-the-art production site in Dresden.
Infineon's global communications work in the growth regions of
Asia and America will be further expanded: this includes opening
a new communications office in Shanghai, headed by Mei Lu, and a
further communications office soon to be opened in Taipeh. All
regional communications activities in Asia will be controlled
from regional headquarters in Singapore where Kaye Lim will be
responsible.
In the US market, with great future potential, communications
activities will be expanded with the opening of a corporate
communications office in New York in fall 2003. The New York
office will be headed by Gitu Ramani and will focus mainly on
Public Affairs and Networking.
Overall these changes will greatly strengthen the strategic
alignment, integrated communications and regional presence of
Infineon.
About Infineon
Infineon Technologies AG, Munich, Germany, offers semiconductor
and system solutions for the automotive and industrial sectors,
for applications in the wired communications markets, secure
mobile solutions as well as memory products. With a global
presence, Infineon operates in the US from San Jose, CA, in the
Asia-Pacific region from Singapore and in Japan from Tokyo. In
the fiscal year 2002 (ending September), the company achieved
sales of Euro 5.21 billion with about 30,400 employees worldwide.
Infineon is listed on the DAX index of the Frankfurt Stock
Exchange and on the New York Stock Exchange (ticker symbol: IFX).
Further information is available at www.infineon.com.
CONTACT: Worldwide Headquarters
INFINEON TECHNOLOGIES AG
P.O. Box 80 09 49
D-81609 Muenchen
Germany
Phone: +49-89-234-28481
Fax: +49-89-234-28482
E-mail: guenter.gaugler@infineon.com
=============
H U N G A R Y
=============
DAM STEEL: Gets Back on Its Feet After Three-month Paralysis
------------------------------------------------------------
The liquidator DAM Steel Rt, the Hungarian steel-maker that shut
down operation in January this year, will re-start the plant on
May 12, says the Budapest Business Journal.
Janos Kovacs, chief executive of Matraholding Rt -- DAM's
liquidator -- told the paper negotiations with creditors are
already complete, including talks with the plant's energy
supplier. Key to DAM's resuscitation, he said, is CIB Bank's
agreement to extend another Ft2.5 billion in credits, along with
state-owned Hungarian Development Bank.
CIB is the company's main creditor as well as that of Cogne
Acciai Speciali srl, DAM's previous Italian owner. The latter
announced earlier this year it did not have sufficient capital to
operate the factory, located in Miskolc, northeast Hungary.
Cogne acquired DAM's assets in April 2001 for Ft 4.35 billion,
but failed to turn a profit, forcing it to call in liquidators
and give up its investment.
Among others, Cogne cited the over-billing of energy supplier
Emasz Rt as one of its main reasons for shutting down the
company. Mr. Kovacs says this dispute is now over.
"They were absolutely fair and very good partners. I could tell
that DAM was important to them and that they wanted to keep us as
customers," he said referring to Emasz.
Mr. Kovacs admits the first months of production will be
difficult, as the steel-maker must win back the confidence of
customers in Hungary and abroad. Many of them have already
commissioned other companies to provide their steel requirements.
"[Still] we remain positive that we can win back our customers.
[We've] received very few negative signals from our customers,"
he told the Budapest Business Journal.
He said a new owner for the company could be had by next year.
Currently, he said, two companies are seriously interested in
buying up DAM's assets, though he declined to name the firms.
About 1,200 workers went on forced leave when the company shut
down operations in January this year, the paper says.
RABA AUTOMOTIVE: No Major Changes Expected from Newly Named CEO
---------------------------------------------------------------
Newly appointed CEO Istvan Pinter is expected to bring little
change at Raba Automotive Holding Rt, the struggling auto parts
manufacturer based in Gyor, Hungary. He is not expected to last
long as well, says the Budapest Business Journal.
Mr. Pinter has been with the company since the 1980s and, just
before his appointment, he served as deputy CEO and chief
strategic officer. As a result, few analysts believe he is the
right man for a company desperately needing of a culture change.
According to the paper, Mr. Pinter presided over the company's
divestment of non-core businesses -- those outside the axles,
automotive parts and military vehicles segments. Although
creditable, most analysts criticized management for not going far
enough in the restructuring.
"I don't think there will be any major changes," Peter Makray, an
analyst with Erste Bank Investment Hungary Rt, told the Budapest
Business Journal in an interview. He maintains his "sell"
recommendation on Raba stocks.
For his part, Andor Daroczi, an analyst with ConCorde Securities
Rt, believes the new CEO is likely to be a temporary choice and
that the board of directors could later name a new manager from
outside the company.
Last year, Raba recorded the most dismal financial performance in
recent years, posting losses of Ft2.5 billion on Ft39.4 billion
in revenues. But the company blamed negative external factors,
such as the worldwide economic recession and the weakening of the
dollar. Net sales revenue from exports dropped Ft10 billion in
2002 compared to a year earlier due to the exchange rate factor.
It also blamed the dollar for the reduction of Ft2 billion in
sales revenue and operating profit.
Analysts, however, believe the company should have done more
internally to prepare for the hard times. They say the company
remains overextended in terms of its lines of business and
oversized in terms of staff.
Concorde's Mr. Daroczi said profitability will only come when the
firm slashes its 5,000-strong workforce by 15%-20%. The Gyor
municipality, the largest shareholder in Raba with an 11.2%
stake, will likely oppose this step, the paper says.
=============
I R E L A N D
=============
ABBEY NATIONAL: Closing Two New Ireland Life Businesses
-------------------------------------------------------
Abbey National plans to close two new business in its two Dublin-
based life operations, Scottish Mutual International 1 and
Scottish Provident Ireland. The decision is effective from close
of business, Tuesday (29 April 2003).
SMI and SPIreland will continue to service existing customers and
investments will continue to be managed by Abbey National Asset
Managers in Glasgow and other fund managers as they run off.
The decision to close to new business reflects extremely poor
investment market conditions for all financial providers with
many funds being closed to new business across the industry.
Abbey National closed Scottish Mutual's UK with-profits fund in
December 2002. Scottish Provident's UK and Irish with-profits
fund was closed in August 2001 when Abbey National took over the
company.
Editors' Notes
At the end of 2002, SPIreland and SMI had over 125,000 policies
in force and nearly GBP4bn of assets under management.
SPIreland
Scottish Provident Ireland operates in the domestic Irish market
and offers life, pension and investment products. It markets
through intermediaries with a particular focus on personal and
executive pensions and personal investments, including with-
profits bonds.
SPIreland is based in Dublin with offices in Galway, Limerick and
Cork.
SMI
Scottish Mutual International markets with-profit and unit linked
investments to high net worth individuals, trusts and
corporations in Europe, the Far East and Middle East. Its
traditional market has been UK residents and expatriates but has
expanded to include local residents and expatriates of other
nationalities.
SMI is based in Dublin with offices in Dubai and Hong Kong.
1. SMI will continue to provide products for residents of the UK,
Isle of Man and Channel Islands as part of Abbey National's
stated strategy of focusing entirely on UK Personal Financial
Services. However, all With Profit Bond products will be
withdrawn from 29th April. Clients who are resident in other
parts of the world will not be eligible.
Media Enquiries:
Matt Young, Abbey National Media Relations. Tel: 020 775 64232
Alastair Glenn, Abbey National Media Relations. Tel: 020 7756
4194
In this document `SMI' relates to the international, cross border
business activities undertaken from Dublin by SMI plc.
`SPIreland' relates to domestic Irish activities. SPIreland is a
trading name used jointly by SMI plc and the Irish branch of
Scottish Provident Limited (SPL) for policies sold in Ireland.
The staff involved with SMI and SPIreland are employed either by
SMI plc itself or one of Abbey National's service company
subsidiaries, ANFIS Ireland or ANFIS in the UK.
=========
I T A L Y
=========
FIAT SPA: Chairman Says Capital Increase Size Depends on Plan
-------------------------------------------------------------
Fiat SpA's expected capital boost size is related to turnaround
plan needs, newly-appointed chief executive Giuseppe Morchio said
in an interview with financial daily Il Sole 24 Ore.
Morchio said the size of an expected capital increase at Fiat
will depend on the needs of a new industrial plan based on
improving the quality of its products, a more competitive cost
structure and being at the cutting edge of innovation.
He said: "We need to define the industrial plan of action to
understand how much money we need. We want to use the new cash
for investments and innovation, not to cover operating losses."
"In our future, technological innovation in the auto sector --
and therefore also in components -- is fundamental... and a
prerequisite for us being competitive and staying that way over
the long-term," he added.
The chief executive was positive that the new models should prove
some positive signs at the end of the year, although he said 2003
had got off to a bad start with an "ugly" first quarter.
Meanwhile, it is noted that Fiat has already begun a EUR5 billion
recapitalization of its ailing car arm Fiat Auto but is widely
expected to call for new cash at group level.
Reports say its controlling Agnelli family has approved capital
hikes at holdings that own Fiat so they can take part, with
family head and Fiat chairman Umberto Agnelli confirming that
Fiat would unveil its new plan by late June and adding it was
likely the company would need new funds.
On the issue that Fiat has been talking to its creditor banks
about lengthening the terms of a EUR3 billion loan and putting
forward another EUR1 billion of credit, Morchio declined to
comment. However, he said "we have a very good relationship with
our banks... They helped us through difficult moments and are
still encouraging us".
Morchio further revealed that General Motors Corp, part owner of
Fiat Auto, is yet to make a decision whether to put forward its
part of the planned recapitalization of the car unit.
He was quoted saying: "GM's position is clear. We respect their
desire not to subscribe to the capital increase just now but
there are another 18 months for them to make a final decision".
TCR-EU recently reported that had a record loss of EUR3.9 billion
last year. It is also in need of some EUR2 billion a year to
launch new models through 2004 after partner General Motors Corp.
stopped investing more cash.
Fiat decided to sell assets and has so far raised at least EUR5
billion this year. EUR2.4 billion of this was raised from the
sale of Toro, EUR1.6 billion from FiatAvio, EUR160 million from
real estate, and EUR805 million from truck rental company Fraikin
SA.
CONTACT: FIAT SPA
250 Via Nizza
10126 Turin, Italy
Phone: +39-011-686-1111
Fax: +39-011-686-3798
Toll Free: 800-804027
Home Page: http://www.fiatgroup.com/e-index.htm
=====================
N E T H E R L A N D S
=====================
BUHRMANN N.V.: Presents Preliminary Q1 2003 Results
---------------------------------------------------
In the Annual General Meeting of Shareholders' held Tuesday, the
following information was disclosed regarding the course of
affairs in the first quarter of 2003:
Based on preliminary figures, Buhrmann posted net sales of EUR
2,154 million in the first quarter of 2003 (first quarter 2002:
EUR 2,547 million). The decline includes a significant
translation effect, mainly caused by a 20% fall in the average
exchange rate of the US dollar to the Euro. The Office Products
North America Division sales increased by 1% organically. In the
Office Products Europe/Australia, Paper Merchanting, and Graphic
Systems divisions organic sales declined by 4%, 7% and 25%
respectively. The resulting organic sales decline for the total
Buhrmann Group was 4%, which reflects the difficult circumstances
in our markets.
Net profit from ordinary operations before amortisation of
goodwill (cash earnings) totaled EUR 91 million. This includes
EUR 58 million from indemnity payments which we received. In
addition, we experienced a tax benefit of EUR 30 million
resulting from the related release of a valuation allowance
regarding the former ISD* (France) investments. Excluding
exceptional items and the aforementioned tax benefit, cash
earnings totaled EUR 5 million for the first quarter of this year
(first quarter 2002: EUR 37 million). First quarter cash earnings
per share (fully diluted) amounted to EUR 0.57. Excluding
exceptional items and the tax benefit, cash earnings per share
for the first quarter of 2003 totaled EUR 0.02 (2002: EUR 0.22).
Interest-bearing net debt further decreased to EUR 1,636 million
at the end of the first quarter of 2003, versus EUR 2,183 million
at the end of the first quarter of 2002 and EUR 1,735 million at
year-end 2002.
The financial statements for the first quarter and a detailed
analysis of financial and operational developments will be
published on Wednesday, 7 May 2003.
*ISD = The Information Systems Division which was divested in May
2000.
BUHRMANN N.V.: Sells DocVision to Royal TPG Post BV
---------------------------------------------------
Buhrmann NV and Cendris, an operating company of Royal TPG Post
BV, part of TPG NV, have reached an agreement about the sale of
Buhrmann subsidiary DocVision to Cendris. The transaction will
result in a small book profit that will be recorded as an
exceptional gain in the second quarter of this year.
DocVision is specialised in providing services in the area of
mailroom, copy/print services and archives management. The
company employs about 300 staff, working across many sites at
customers in the Netherlands. In 2002, the company realised sales
of EUR 23 million.
The divestment of DocVision is in line with Buhrmann's strategy
to concentrate its activities primarily on the business-to-
business distribution of non-production related products and
services for the office market and graphic arts industry.
The past years DocVision has achieved a profitable growth.
However, within Buhrmann's overall portfolio, this subsidiary is
a completely independent activity with only very limited synergy
with the core business of the Group.
Cendris offers a variety of specialised solutions for direct
communication, data and document management in the Benelux,
United Kingdom, Italy, Germany and Central Europe. In 2002, the
company reported sales of EUR 210 million and employed 4,000
staff. With the acquisition of DocVision, Cendris will improve
its position to benefit from the increasing demand for
outsourcing of mailroom, copy/print and archive management
services in the Netherlands.
BUHRMANN N.V.: Shareholders Adopt Main Resolutions at AGM
---------------------------------------------------------
The Annual General Meeting of Shareholders of Buhrmann NV Tuesday
adopted the company's financial statements for 2002.
A stock dividend of EUR 0.07 on ordinary shares in respect of the
2002 financial year will be paid out of the share premium
reserve. For shareholders who express the wish to receive a cash
amount, the company will sell the shares in which the stock
dividends are being converted. These shareholders will then
receive a cash amount of EUR 0.07 per ordinary share. On the
preference shares A the statutory dividend of EUR 0.21 gross per
share will be paid.
Furthermore, the meeting approved the reappointment of Messrs
R.C. Gay and A.P. Ressler as members of the Supervisory Board.
CEREON B.V.: Parent Files for Closure of Business
-------------------------------------------------
Neways Electronics International N.V. (Neways) announces that for
economic reasons it has filed for bankruptcy of its operating
company Cereon B.V. in Amsterdam. In future, all mobile telephone
service and repair activities will be carried out by the
operating companies Evic Service & Repair Center in Echt (L.) and
Evic Service & Repair in Budapest, Hungary.
Cereon currently has 18 employees. The effects of the closure
will be included in the 2003 results as extraordinary
expenditure.
===========
S W E D E N
===========
LM ERICSSON: To Cut More Jobs as Losses Mount in First Quarter
--------------------------------------------------------------
First quarter summary
-- Net sales down 30% to SEK 25.9 b. - GSM/WCDMA track down 12%
-- Net income SEK -4.3 b.
-- Earnings per share SEK -0.27
-- Cash flow before financing SEK 0.7 b. - maintaining good
liquidity
-- WCDMA 12% of mobile networks sales - five Ericsson networks
launched
-- Restructuring program well on plan - additional opportunities
identified and in progress
First quarter Fourth quarter
SEK b. 2003 2002 Change 2002 Change
Orders booked, net 27.1 41.9 -35% 30.7 -12%
Net sales 25.9 37.0 -30% 36.7 -30%
Adjusted gross
margin (%) 34.1% 31.7% - 32.6% -
Adjusted operating
income -3.4 -4.4 - -2.3 -
Adjusted income after
financial items -3.5 -5.2 - -2.1 -
Net income -4.3 -3.0 - -8.3 -
Earnings per share -0.27 -0.27 - -0.58 -
Cash flow before financing
activities 0.7 -4.1 - 1.6 -
Opex run rate,
annualized 47 68 -31% 51 -8%
Number of employees 60,940 82,012 -26% 64,621 -6%
Net sales in the first quarter were down 30% sequentially. Orders
booked declined by 12%. Gross margin improved, despite falling
volumes, as a result of lower component prices, better capacity
utilization and other cost reductions. Operating expense
reductions well on plan reaching a run rate of SEK 47 b. Cash
flow before financing was positive with reductions in working
capital. Liquidity was maintained with a payment readiness of SEK
66 b.
CEO COMMENTS
"I am positively surprised by the spirit and strong commitment
among our employees given our challenging situation and ongoing
restructuring. Despite the near-term uncertainties, the longer-
term market opportunities are obvious and I am convinced that the
convenience of mobility and the benefits of 3G will continue to
attract new customers and increase usage," says Carl-Henric
Svanberg, President and CEO of Ericsson.
"However, our ambition as the industry leader is to create a
strong and profitable company, irrespective of market
fluctuations. The macroeconomic environment has become more
uncertain with weaker short-term demand, further actions are
therefore needed. We are heading in the right direction but a lot
more can be done to simplify our way of working and further
reduce costs. My experience is that the more you work with
process improvements the more opportunities you find."
"A market leader should have market-leading profitability with
clear cost advantages. We already have a leading market position,
the most advanced technology and world class competence, but we
have yet to achieve operational excellence."
"We remain determined to return to profit during 2003 excluding
additional charges for the further restructuring announced
Tuesday. Although first quarter sales are likely to be the low
point this year, I want us to be able to generate profit even if
sales remain at current levels. We are therefore implementing
further operating expense reductions of SEK 5 b. and additional
cost of sales reductions of SEK 8 b. The additional SEK 11 b.
restructuring charges have a relatively quick pay back and we
have sufficient liquidity to carry us through."
"The ongoing restructuring actions, including announced
outsourcing projects, would have brought the headcount down to
54,000 during this year. With the additional actions, headcount
will approach 47,000 next year," concludes Carl-Henric Svanberg,
President and CEO of Ericsson.
Cost reductions and operational realignment
Cost reduction activities reduced operating expense run rate to
SEK 47 b. from SEK 68 b. in the first quarter last year and also
contributed to an improvement of the gross margin to 34.1%.
The earlier planned and announced restructuring charges for 2003
amounted to SEK 5.3 b. During the quarter, restructuring charges
were SEK 3.2 b. of which SEK 0.6 b. is related to asset write-
downs. The remaining charge of SEK 2.1 b. is expected in the
second quarter. Cash outlays were SEK 2.8 b.
The new cost reduction actions launched will further reduce cost
of sales by approximately SEK 8 b. and the annual operating
expenses by SEK 5 b. The actions will be fully implemented by the
third quarter 2004. Costs for these new actions are estimated to
be SEK 11 b. Cash outlays associated with these new actions are
estimated to be approximately SEK 8 b.
Restructuring charges for the full year in total, including new
measures, are estimated to be SEK 16 b. Total cash outlays for
restructuring, including SEK 7.5 b. for charges taken in 2002,
are expected to be approximately SEK 15 b. in 2003 and SEK 5 b.
in 2004.
During the quarter headcount was reduced by 3,700, bringing the
workforce to 61,000 by the end of March. Including all cost
reduction actions, e.g. restructuring, outsourcing and
divestments, the number of employees will be reduced to
approximately 52,000 by the end of the year. The new actions are
expected to result in a headcount approaching 47,000 during 2004.
CONSOLIDATED ACCOUNTS
FINANCIAL REVIEW
As explained under "Accounting principles," a consequence of
adopting new Swedish reporting rules is that the presentation of
certain items in the income statement will change. Minority
interests before tax and income before tax will no longer be
reported. Minority interests are now reported net of taxes. Net
income and earnings per share will not be affected. The
presentation of the balance sheet will not change, but reported
amounts of certain items will be affected. Please see restated
financial statements for last year on pages 16 and 17.
Income
Orders booked were SEK 27.1 b. after deduction of cancellations
of SEK 0.7 b. This is a 35% decline year-over-year, of which ten
percentage points are due to negative currency exchange rate
effects. Compared to the fourth quarter, orders booked declined
12%. The book-to-bill ratio was greater than one.
Sales were SEK 25.9 b., representing a decline of 30% on a
sequential basis, in line with normal seasonality. The year-over-
year decline was also 30%, of which seven percentage points are
attributable to negative currency exchange rate effects. Adjusted
for such currency effects, North America was up slightly while
several other large markets were weak, including China, Japan, UK
and Italy.
The gross margin adjusted for restructuring improved year-over-
year from 31.7% to 34.1%. Gross margin improved, despite falling
volumes, as a result of lower component prices, better capacity
utilization and other cost reductions.
Adjusted operating expenses in the quarter were SEK 11.4 b., a
reduction of 32% year-over-year. The net effect of capitalization
of development costs was reduced from SEK 1.0 b. in the first
quarter of last year to SEK 0.6 b. This was a result of both
lowered development expenses and the stage of individual
development projects.
During the quarter, a patent infringement dispute with
InterDigital Communications Corporation (IDC) was settled. In
accordance with this settlement, Ericsson and Sony Ericsson will
pay approximately USD 34 m. in royalties to IDC for past sales.
For the years 2003 through 2006, Ericsson will pay an annual fee
of USD 6 m. for sales of infrastructure equipment. Sony Ericsson
will pay a royalty for each licensed product sold 2003 through
2006. Existing provisions for risks related to patent litigations
are sufficient to cover royalties related to past sales.
Adjusted operating income, excluding items affecting
comparability, was SEK -3.4 b. This is a SEK 1 b. improvement
compared to last year, despite the substantially lower sales.
Net effects of changes in foreign currency exchange rates on
operating income compared to the rates one year ago were
insignificant.
Financial net was SEK -0.1 b. compared to SEK -0.8 b. last year,
due to the substantial cash position.
Net income was SEK -4.3 b. (-3.0 b.). The estimated taxes
resulted in an average tax rate of 30%. Earnings per share,
diluted, were SEK -0.27 (-0.27).
Balance sheet and financing
In the quarter, total assets declined by SEK 4.1 b., attributable
mainly to trade receivables. There were no material changes in
cash or debt, with a continued net cash position of almost SEK 6
b. The equity ratio declined from 36.4% at year-end to 34.9%.
Days sales outstanding (DSO) for trade receivables improved by
five days compared with the first quarter last year to 109. DSO
increased by 17 days compared to the previous quarter due to
lower sales and seasonally slower payments by customers.
Inventory turnover was 4.9 turns, up from 4.1 a year ago.
During the quarter, gross risk exposure for customer financing
was reduced from SEK 21.8 b. to SEK 20.1 b. Risk provisions were
increased by SEK 0.1 b. to 38% of gross exposure (see page 23 for
further details). Unutilized credit commitments decreased by SEK
1.5 b. to SEK 12.5 b.
In February 2003, Moody's lowered their long-term credit rating
of Ericsson by two notches to B1. This will result in increased
interest expenses of SEK 110 m. associated with certain
borrowings with rating triggers.
Cash flow
Cash flow before financing activities was positive by SEK 0.7 b.
A cash payment of SEK 1.4 b. related to the investment in Sony
Ericsson was offset by a release of cash collateral for pensions
of SEK 1.5 b. Reduced trade receivables and limited capital
expenditures more than compensated for seasonality effects in
inventory and payables. Payment readiness remained high at SEK 66
b.
SEGMENT RESULTS
As a consequence of a newly adopted segment reporting
recommendation, explained under "Accounting principles," and in
order to increase transparency only commercial operations are now
included in the segment Other Operations. Internal service units
are therefore now reported under Systems, since most of their
services are provided to Systems. This will reduce orders and
sales in Other Operations and also reduce eliminations from
inter-segment sales. Employees in those units are reported under
Systems. Restated segment information can be found on pages 19
and 20.
SYSTEMS
Orders and sales for Network Equipment and Professional Services
are now reported separately. As before, Network Equipment,
including Network Rollout services will be subdivided into Mobile
Networks and Fixed Networks.
First quarter Fourth quarter
SEK b. 2003 2002 Change 2002 Change
Orders booked 25.0 37.7 -34% 28.5 -12%
Mobile networks 17.5 29.3 -40% 20.9 -16%
Fixed networks 2.0 2.7 -26% 1.9 4%
Professional Services 5.5 5.7 -2% 5.7 -3%
Net sales 24.0 33.3 -28% 33.2 -28%
Mobile networks 17.6 25.6 -31% 24.7 -28%
Fixed networks 1.9 3.3 -42% 3.0 -38%
Professional Services 4.4 4.5 -1% 5.5 -20%
Adjusted operating
income -2.1 -2.8 - -0.3 -
Adjusted operating
margin (%) -9% -8% - -1% -
The decline in orders booked year-over-year for Systems is mainly
attributable to lower network equipment demand as operators
continue to limit capital expenditures. The 34% decline includes
ten percentage points due to negative effects of currency
exchange rate changes and seven percentage points due to lower
equipment orders for TDMA/PDC. Orders for the GSM/WCDMA track
declined 28%. However, Professional Services were up adjusting
for foreign currency effects.
Orders in Western Europe and Brazil were flat year-over-year
while orders were down in all other regions.
Orders for GSM/WCDMA were down 10% sequentially while other
mobile equipment, including CDMA, were down even more. Orders for
Professional Services were down 3% sequentially, mainly due to
seasonal effects.
Orders in Latin America improved sequentially, mainly due to
orders for GSM and EDGE equipment in Brazil. Demand in the US and
China was weak with most other areas of Asia holding up
relatively well. The Europe, Middle East and Africa (EMEA) region
was generally weak with the exception of the UK and Spain.
Of the 28% year-over-year decline in Systems sales, seven
percentage points were related to negative currency exchange rate
effects. Sales of the GSM/WCDMA track declined 12%, less than the
mobile systems market overall. TDMA/PDC declined almost 90%.
Sales of TDMA/PDC now represent less than 5% of Systems sales.
Sales of WCDMA equipment and associated network rollout services
represented 12% of mobile network sales.
Although system sales were almost SEK 10 b. lower than in the
first quarter last year, the losses were reduced by SEK 0.7 b. to
an adjusted operating income of SEK -2.1 b. Excluding risk
provisions for customer financing of SEK 0.1 b. (0.6 b.) the
result was SEK -2.0 b. (-2.2 b). The sequential decline before
customer financing provisions was SEK 2.4 b. mainly due to the
SEK 9.2 b. lower sales.
OTHER OPERATIONS
Internal sales by pure support functions, such as internal IT-
and facilities services, are now excluded from Other Operations
and have also reduced inter-segment sales. Corresponding
headcount is reported in Systems, as almost all of the services
are now provided to Systems. Other Operations now include the
following commercial businesses: Defense Systems, Network
Technology, Enterprise Systems, Mobile Platforms and Bluetooth.
First quarter Fourth quarter
SEK b. 2003 2002 Change 2002 Change
Orders booked 2.6 4.9 -47% 2.6 1%
Orders booked
less divestitures 2.6 3.8 -31% 2.5 5%
Net sales 2.4 4.3 -45% 3.9 -39%
Net sales less
divestitures 2.4 2.9 -17% 3.8 -38%
Adjusted operating
income -0.5 -1.3 - -1.2 -
Adjusted operating
income less
divestitures -0.5 -0.7 - -1.2 -
Adjusted operating
margin (%) -21% -31% - -32% -
Adjusted operating
margin less
divestitures (%) -21% -24% - -31% -
Adjusted for the divestment of parts of Microelectronics and the
transfer of phone operations in China to SEMC, orders booked
increased 5% sequentially while sales were 38% lower. Sales
declined largely in Defense Systems and Mobile Platforms.
Adjusted operating income improved sequentially, however, mainly
due to a better result in Enterprise Systems and unabsorbed costs
in support units in the fourth quarter. The year-over-year
improvement reflects a favorable development in Enterprise
Systems and divestment of parts of Microelectronics.
During the quarter, the opto-electronics operations were divested
to Northlight Optronics. This is in line with the focus on core
business. In total 48 employees were transferred through the
purchase.
PHONES
During the quarter, Sony Ericsson Mobile Communications (SEMC)
shipped 5.4 million units, which is a 7% decline compared with
the first quarter 2002. Sales declined 35% sequentially and 28%
year-over-year due to lower volumes and price pressure. However,
with the planned phase out of TDMA products, shipments of TDMA
dropped more than 90% compared to the first quarter last year. At
the same time, GSM unit shipments increased 30% with the
introduction of new models. The planned product mix shift along
with increased price pressure has led to a lower average selling
price.
Although SEMC reported a loss for the quarter, volumes and sales
are expected to increase during the second quarter with the
introduction of new models in the Japanese and GSM/GPRS markets.
SEMC's ambition is to be profitable for the full year.
Ericsson's 50% share of income before taxes in the quarter was
SEK -0.5 b. and is included in "Earnings from Joint Ventures and
Associated Companies."
RELATED PARTY TRANSACTIONS
Sony Ericsson Mobile Communications (SEMC)
SEK m. First quarter 2003 First quarter 2002
Sales to SEMC 576 1,201
Royalty from SEMC 56 87
Purchases from SEMC 265 605
Increased equity investment 1,384
Receivables from SEMC 541 730
Liabilities to SEMC 115 1,422
MARKET VIEW
The number of mobile subscribers continues to grow on pace to
exceed 1.5 b. subscribers within three years. We expect between
165 and 180 million net additions this year with approximately 44
million during the first quarter.
An estimated 98 million mobile phones were sold during the first
quarter and we maintain our view that unit volume will increase
10% with over 430 million units expected to be shipped this year.
The effects of the weakening macroeconomic environment on mobile
operator investment plans for network infrastructure are unclear.
Continued weak systems demand is the likely implication for the
near term, as mobile operators continue to reduce capital
expenditures.
Last quarter, we indicated that we thought the mobile systems
market, measured in USD, could be down as much as 10% this year.
The uncertainty in the macroeconomic environment has increased,
and several operators are reducing their capital expenditures.
This implies that the market for mobile systems could decline by
more than 10% this year.
Operators are also focusing on operational cost reductions, which
stimulates the market for outsourcing of network related
activities. This is a trend we believe will continue and
underpins our expectations that the available market for
professional services in USD will continue to grow by about 10% a
year.
OUTLOOK
We expect to maintain our shares of the mobile systems and
professional services markets this year. However, our total sales
reported in SEK will decline more than the total market, mainly
due to foreign exchange effects. Divestments and closure of
certain businesses as part of our restructuring activities also
continue to affect our sales.
Previously we indicated that we planned to return to profit at
some time during 2003. This plan did not include additional
restructuring measures. Excluding the additional charges for
restructuring announced Tuesday we remain determined to return to
profit during 2003. We are increasingly confident in our cost
reduction activities.
For the second quarter, we believe sales will be up slightly on a
sequential basis.
Parent Company information
The Parent Company business consists mainly of corporate
management and holding company functions. It also includes
activities performed on a commission basis by Ericsson Treasury
Services AB and Ericsson Credit AB regarding internal banking and
customer credit management. The Parent Company has branch and
representative offices in 16 (15) countries.
Net sales for the first quarter amounted to SEK 0.5 b. (0.3 b.)
and income after financial items was SEK 1.1 b. (0.3 b.)
Major changes in the company's financial position were:
-- Increased current and long-term commercial and financial
receivables from subsidiaries of SEK 21.5 b.
-- Increased cash and short-term cash investments of SEK 2.6 b.
The increases were primarily financed through increased internal
borrowings of SEK 22.0 b. and increased other current liabilities
of SEK 2.4 b. At the end of the quarter, cash and short-term cash
investments amounted to SEK 61.9 b. (59.3 b.).
In accordance with the conditions of the Stock Purchase Plan for
Ericsson employees, 1,603,813 shares from treasury stock were
distributed during the first quarter to employees who left
Ericsson. An additional 191,100 shares were sold in the first
quarter, to cover social security payments related to the Stock
Purchase Plan. The holding of treasury stock at March 31, 2003
was 152,565,365 Class B shares.
The Annual General Meeting decided, in accordance with the
proposal from the Board of Directors, that no dividend will be
paid for 2002.
The Annual General Meeting approved a new employee stock purchase
plan of 158 million new shares.
The Annual General Meeting also approved a temporary increase in
the fee to the Chairman of the Board of SEK 5.5 m. for each of
the years 2002 and 2003.
On April 8, Carl-Henric Svanberg succeeded Kurt Hellstrm as
President and CEO of Ericsson. The new President and CEO will
receive an annual compensation consisting of a base salary of SEK
12 m. and a variable salary of up to 80% of the base salary. The
pension benefit is premium based with an annual premium of 35% of
the total of the base salary plus 50% of the variable salary. The
President and CEO has the right to retire at the age of 60 years.
Severance pay amounts to two years' salary. Additional benefits
are not material.
Carl-Henric Svanberg
President and CEO
Auditors' Report
We have reviewed the first quarter report as of March 31, 2003,
for Telefonaktiebolaget LM Ericsson (publ). We conducted our
review in accordance with the recommendation issued by FAR. A
review is limited primarily to enquiries of company personnel and
analytical procedures applied to financial data and thus provide
less assurance than an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that
causes us to believe that the First quarter report does not
comply with the requirements for interim reports in the Annual
Accounts Act.
To see financials: http://bankrupt.com/misc/ericsson.pdf
CONTACT: Carl-Eric Bohlin
Bo Hjalmarsson
Thomas Thiel
PricewaterhouseCoopers AB
Authorized Public Accountants
Henry Stnson, Senior Vice President,
Corporate Communications
Phone: +46 8 719 4044
E-mail: henry.stenson@lme.ericsson.se
Gary Pinkham, Vice President, Investor Relations
Phone: +46 8 719 0000
E-mail: investor.relations@ericsson.com
Lotta Lundin, Investor Relations
Phone: +46 8 719 0000
E-mail: lotta.lundin@clo.ericsson.se
Glenn Sapadin, Investor Relations
Phone: +1 212 843 8435
E-mail: investor.relations@ericsson.com
Lars Jacobsson, Vice President,
Financial Reporting and Analysis
Phone: +46 8 719 9489, +46 70 519 9489
E-mail: lars.jacobsson@lme.ericsson.se
=====================
S W I T Z E R L A N D
=====================
ABB GROUP: Says Core divisions Sustain Growth in Q1 2003
--------------------------------------------------------
-- Core divisions increase EBIT to US$ 290 million, up 33 percent
over first quarter 2002
-- Group EBIT falls to US$ 92 million due to non-core and
corporate activities
-- Operating cash flow negatively impacted by extraordinary items
-- Cost savings program on schedule
-- ABB remains confident of 2003 targets
ABB's core divisions Power Technologies and Automation
Technologies improved both revenues and earnings in the first
quarter of 2003, sustaining the positive trend established in
2002.
Overall group earnings were lower, due to non-core and corporate
activities. Cash flow from operations fell because of payments
for asbestos and discontinued operations.
"The core divisions are performing according to plan. We are
taking profitable market share while improving our cost
competitiveness," said Jrgen Dormann, ABB chairman and CEO. "We
remain on course to meet our full-year targets in 2003 despite
flat market conditions. Our near-term priorities remain to lower
our cost base and strengthen our finances through continued
divestments."
ABB core divisions Q1 2003 results (US$ millions)
Jan.-Mar. Jan.-Mar. Change
2003 2002
Nominal Local
Orders Power
Technologies 2,051 1,931 6% -3%
Automation
Technologies 2,494 2,164 15% 1%
Revenues Power
Technologies 1,784 1,527 17% 6%
Automation
Technologies 2,230 1,861 20% 5%
EBIT* Power
Technologies 128 110 16% 6%
Automation
Technologies 162 108 50% 28%
EBIT Power
margin Technologies 7.2% 7.2%
Automation Technologies 7.3% 5.8%
* Earnings before interest and taxes
Core divisions
ABB's core divisions reported an 11 percent increase in orders
(flat in local currencies).
Revenues were 18 percent higher at US$ 4,014 million (up 5
percent in local currencies) due to a strong order backlog, and
their combined EBIT increased 33 percent to US$ 290 million,
driven mainly by productivity improvements. Order backlog for the
core divisions at the end of March 2003 totaled US$ 9.9 billion.
ABB Group Q1 2003 results (US$ millions)
Jan.-Mar. 2003 Jan.-Mar. 2002 Change Nominal
Orders 5,081 4,695 8%
Revenues 4,495 3,951 14%
EBIT* 92 272 -66%
Net income -45 155 n.a.
* Earnings before interest and taxes
Group results
For the first three months of 2003, the group - the Power and
Automation Technologies divisions, non-core and corporate
activities - reported an 8 percent increase in orders (-4 percent
in local currencies) to US$ 5,081 million, compared to US$ 4,695
million in the same period last year. Base orders (orders below
US$ 15 million) amounted to US$ 4,766 million, or about 94
percent of total orders, the same as a year earlier. The order
backlog was US$ 10,684 million, up about 7 percent from December
31, 2002.
Total revenues in the first quarter were 14 percent higher (flat
in local currencies) at US$ 4,495 million, reflecting the sound
order backlog of the core divisions.
Group EBIT was US$ 92 million compared to US$ 272 million in the
first quarter of 2002, a decrease of US$ 180 million, but ahead
of plan for the quarter. Earnings in 2002 included one-time
positive items, including a capital gain from the divestment of
the Air Handling business of US$ 54 million, recorded in
Corporate. In the first quarter of 2003, EBIT was negatively
impacted by an approximate US$ 30 million book loss following the
divestment of the aircraft leasing portfolio, and write-downs and
lower earnings in non-core activities (mainly Building Systems,
remaining parts of Structured Finance and Insurance).
Finance net was negative US$ 130 million compared to negative US$
58 million in the first quarter of 2002, reflecting higher
financing costs, a US$ 23 million mark-to-market unrealized loss
and related amortization on the equity conversion option on the
convertible bond (bifurcation), and an about US$ 30 million
write-down in marketable securities.
Discontinued operations reported a net loss of US$ 10 million
compared to income of US$ 22 million in the first quarter of
2002. The loss reflects the negative results in the Oil, Gas and
Petrochemicals division. The division reported EBIT of US$ 35
million compared to US$ 53 million in the first quarter of last
year.
The group's first quarter net loss amounted to US$ 45 million,
compared to net income of US$ 155 million for the same period in
2002.
Divestments
The company continued its program of divesting non-core
businesses. The company sold its aircraft leasing portfolio for
cash proceeds of about US$ 90 million, recording a book loss of
about US$ 30 million. ABB also disposed of car leasing assets in
its ABB Export Bank unit in the first quarter, realizing a small
capital gain on the transaction. ABB said talks were continuing
with potential buyers of the Oil, Gas and Petrochemicals
division, and ABB remains on target to sell the division and most
of the Building Systems business in 2003. The company re-
confirmed plans to sell its Equity Ventures participations and
the remaining parts of its Structured Finance business.
Cost reduction
ABB said it realized net savings of some US$ 70 million in the
first quarter of the year from its Step Change cost savings
program. About 1,700 people left the company as a result of Step
Change, out of a total reduction of around 4,000 jobs in the
quarter. The 18-month program, introduced in late 2002, aims to
lower ABB's cost base by about US$ 800 million.
As of March 31, 2003, ABB employed 135,067 people, compared to
139,051 at the end of 2002.
Cash flow
Net cash used by operating activities was US$ 928 million in the
first quarter. This figure was influenced by the payment of US$
226 million by Combustion Engineering for the asbestos trust, and
US$ 254 million for discontinued operations, in Oil, Gas and
Petrochemicals, as well as US$ 162 million in non-core activities
and US$ 57 million in restructuring costs.
The combined cash flow from operations in the two core divisions
in the quarter amounted to negative US$ 192 million, which is in
line with the seasonal increase in working capital during the
first few months of the year.
Balance sheet
Cash and marketable securities totaled US$ 3,814 million at March
31, 2003, (US$ 4,613 million at the end of the previous quarter,
December 31, 2002). Long-term debt at March 31, 2003 as a
percentage of total debt was 60 percent compared to 68 percent at
the end of December 2002. Gross debt amounted to US$ 8,156
million, compared to US$ 7,952 million three months earlier.
Gross debt included a draw down of US$ 747 million on the US$ 1.5
billion revolving credit facility negotiated in December 2002.
Mainly as a result of the sale of about 80 million treasury
shares during February and March, stockholders' equity rose
slightly to US$ 1,078 million at March 31, 2003 from US$ 1,013
million three months previously.
Asbestos
ABB announced in February this year that a U.S. subsidiary,
Combustion Engineering (CE), had filed for a pre-packaged Chapter
11 in the U.S. bankruptcy courts. Voting on the pre-packaged plan
ended on February 19 and CE has confirmed that it has received
more than 75 percent of claimant votes in favor of the plan,
representing more than two-thirds of the total value of claims as
required for approval by eligible claimants. The court hearing to
review and confirm the plan started on April 24 and will continue
on May 1 and 2. ABB remains confident the plan will be approved.
Group outlook*
The outlook remains unchanged. From 2002 through 2005, ABB
expects a compound average annual revenue growth of about 4
percent.
For 2003, ABB aims to achieve an EBIT margin of 4 percent. For
2005, the Group's target EBIT margin is 8 percent.
By December 31, 2003, total debt is expected to be reduced to
about US$ 6.5 billion, and gearing (total debt divided by total
debt plus stockholders equity) to be about 70 percent. For 2005,
total debt is expected to be reduced to about US$ 4 billion, and
gearing to be approximately 50 percent.
*All targets exclude major acquisitions and divestments, and are
based on local currencies.
Divisional performance Q1 2003
Beginning this quarter, ABB will report according to its new
divisional structure consisting of Power Technologies and
Automation Technologies. Unaudited, restated full-year 2001 and
quarterly 2002 figures for these divisions were published in the
full-year 2002 results on February 27, 2003.
For all figures except EBIT margins, comments refer to the first
quarter results expressed in local currencies. EBIT excluding
capital gains/losses is shown only if the aggregate of such
gains/losses for the division is material (if capital
gains/losses represent more than 10 percent of divisional EBIT).
Power Technologies division
US$ in millions Jan.-Mar Jan.-Mar Change Change
(except where 2003 2002 In local
indicated) currencies
Orders 2,051 1,931 6% -3%
Revenues 1,784 1,527 17% 6%
EBIT 128 110 16% 6%
EBIT margin 7.2% 7.2%
Restructuring costs
(included in EBIT) -11 -24
Although orders for Power Technologies decreased slightly, base
orders (orders below US$ 15 million) increased by 2 percent,
reflecting ABB's strong technologies and customer focus. The
Medium-Voltage Products business area contributed with double-
digit growth. Large orders (orders above US$ 15 million)
decreased compared to the first quarter of last year when ABB
took a US$ 115 million order in Mexico. Order improvements in
Asia, the Middle East and Africa, and Eastern Europe more than
compensated for weak demand in the Americas and mixed demand in
Western Europe.
Revenues increased by 6 percent, reflecting our focus on faster
project execution. Higher product billings in some Asian and
Western European countries also fueled improved revenues. The
increase was mainly driven by the Power Systems, Medium-Voltage
Products and Utility Automation Systems business areas.
EBIT in the first quarter increased in line with higher revenues.
The EBIT margin remained at 7.2 percent as a result of continuing
benefits from restructuring programs and improved margins in the
systems business and most of the product businesses.
New business highlights included a large order for railway power
supply in the U.K., the largest-ever export order recorded by ABB
in India, and three significant contracts for power plant
automation in Cyprus, Germany and Italy.
Automation Technologies division
US$ in millions Jan.-Mar Jan.-Mar Change Change
(except where 2003 2002 In local
indicated) currencies
Orders 2,494 2,164 15% 1%
Revenues 2,230 1,861 20% 5%
EBIT 162 108 50% 28%
EBIT margin 7.3% 5.8%
Restructuring costs
(included in EBIT) -16 -18
In spite of continued price pressure and strong European
currencies, orders increased slightly for the quarter. Order
increases in the Petroleum, Chemical and Consumer business area,
mainly from oil and gas industry customers, were offset by a
decline in the Paper, Minerals, Marine and Turbochargers business
area. Geographically, the growth came primarily from Europe and
Asia (mainly China and India).
Revenues increased 5 percent because of volume growth in the
Drives and Motors business area. Last year's demand from original
equipment manufacturers (OEMs) and Tier-1 automotive suppliers
fueled strong revenue growth in the first quarter of this year
for the Robotics, Automotive and Manufacturing business area.
EBIT improved by 28 percent, reflecting productivity
improvements. The continued strong focus on improving the gross
profit margin on orders, while reducing our overall cost base,
resulted in higher EBIT margins in all business areas compared to
the same period last year. Strong demand for several new products
and continued double-digit growth in our service business also
improved first-quarter performance. EBIT margin increased to 7.3
percent from 5.8 percent.
New business highlights included two services agreements in
Germany and Italy, worth more than US$ 200 million that are in
line with the division's strategy to build higher-margin business
across its large installed base, as well as an automation, power
and safety contract in Norway.
Non-Core Activities
US$ in millions Jan-Mar. Jan-Mar.**
2003 2002
EBIT -64 39
Insurance -2 17
Equity Ventures 22 14
Remaining Structured Finance -28 72
Building Systems -33 -8
New Ventures -4 -19
Other non-core activities* -19 -37
* Comprises mainly Group Processes
** Restated
Non-core activities recorded an EBIT loss for the first quarter
of US$ 64 million.
Insurance earnings continued to benefit from a positive premium
income development, as experienced in 2002, which was offset in
the current quarter by an additional write-down in marketable
securities (US$ 13 million).
The loss in the remaining Structured Finance activities is the
result of the reduced lease and loan portfolio, lower income from
the 35 percent stake in the Swedish Export Credit Corporation,
and the loss on the disposal of the aircraft leasing portfolio.
Building Systems posted a loss for the quarter of US$ 33 million,
following further project write-downs and restructuring, mainly
in Germany and Sweden.
New Ventures reduced losses by implementing cost savings in
selling, general and administrative of more than 50 percent.
Corporate
US$ in millions Jan.-Mar. Jan.-Mar.
2003 2002
EBIT -134 15
Headquarters/Stewardship -106 29
Research and development -21 -18
Other* -7 4
* includes consolidation, real estate and Treasury Services.
Headquarters/Stewardship costs increased mainly due to the non-
recurrence of several one-time gains during the first quarter of
2002. These one-time items included the profit on disposal of the
Air Handling business and the recovery of former chief
executives' pension payments.
Other Income and Expenses (included in EBIT)
US$ in millions Jan-Mar. Jan-Mar.
2003 2002
EBIT -25 81
Restructuring charges -33 -43
Capital (losses) / gains -9 57
Write-downs of assets 0 -7
Income from equity
accounted companies,
licenses and other 17 74
Discontinued Operations
US$ in millions Jan-Mar. Jan-Mar.
2003 2002
Income (loss) -10 22
Oil, Gas and Petrochemicals -12 16
Structured Finance - 16
Metering -3 11
Asbestos 4 0
Other divested businesses 0 -3
Abandoned businesses/Other 1 -18
For the first quarter of 2003, losses from discontinued
operations amounted to US$ 10 million versus income of US$ 22
million for the same period a year ago, reflecting a decrease in
Oil, Gas and Petrochemicals earnings, due to lower EBIT and
higher allocated interest expenses.
Oil, Gas and Petrochemicals
US$ in millions Jan.-Mar. Jan.-Mar. Change Change
(except where 2003 2002 in
local
indicated)
currencies
Orders 502 627 -20% -24%
Revenues 779 973 -20% -26%
EBIT 35 53 -34% n.a
Orders and revenues decreased in the quarter, driven by lower
activity in both the Upstream and Downstream markets. Downstream
orders included a US$ 97 million contract for BP SECCO in China,
while Upstream received a US$ 39 million order for Kizomba B
engineering services in Angola. Upstream and Downstream reported
lower earnings, reflecting higher project costs.
ABB (http://www.abb.com)is a leader in power and automation
technologies that enable utility and industry customers to
improve performance while lowering environmental impact. The ABB
Group of companies operates in around 100 countries and employs
about 135,000 people.
ASCOM: Sells Energy Systems Business Unit to Delta Electronics
--------------------------------------------------------------
Ascom sells Energy Systems Business Unit to Delta Electronics
Thailand Plc
Ascom has agreed to sell its Energy Systems Business Unit along
with the associated companies and assets to Delta Electronics
(Thailand) Public Company Limited for a net cash consideration of
approximately CHF 150 million plus the assumption of certain long
term liabilities amounting to approximately CHF 30 million by
Delta. The two companies signed a purchase agreement yesterday.
With the sale of Energy Systems, Ascom's management has taken a
major step in the implementation of its June2002 decision to
focus the Group on a few core markets with good growth potential
and profitability as well as low capital intensity. The
divestment will allow Ascom to further reduce debts and result in
a sustainable streamlining of the balance sheet structure. The
Energy Systems Business Unit ideally complements the offerings
and global presence of Delta Electronics. The transaction,
subject to the usual regulatory clearances, is targeted for
completion by the end of June 2003.
In June 2002 the Ascom Board of Directors decided to focus the
Group consistently on international core markets in the fields of
secure, high-availability voice and data communications, network-
based security solutions as well as networked revenue collection
systems for public and private transport, where Ascom can
leverage its extensive know-how, strong international customer
base and market position.
Ascom Energy Systems is a global leader in the development,
manufacture and marketing of innovative, customised power supply
systems and equipment for telecommunications, information and
network technologies, industrial automation, office
communications and medical technology. Operating in 16 countries,
the Business Unit posted year-end revenues of CHF 371 million for
the year 2002.
The parties agreed on the transaction on 28 April 2003. Final
implementation of the transaction is conditional upon clearance
by the relevant regulatory authorities. The final purchase price
will be determinded at closing.
"The successful divestment of Energy Systems will allow Ascom to
strengthen the balance sheet. We can now concentrate our
resources on expanding our core markets," says Ascom Chairman and
CEO Juhani Anttila. "In a difficult market Ascom management has
succeeded in finding a strong, well-known industry leader as a
partner, and a forward-looking solution that addresses the
interests of the Energy Systems Business Unit, its customers,
employees and partner companies."
"The acquisition of Ascom Energy Systems marks a significant step
forward in Delta's ability to offer complex, high-power solutions
to its customers and provides Delta with a broader product
portfolio and a strong position in the European market. The
combination of Ascom Energy Systems R&D capability, strong
European operations and customer relationships with Delta's
operational efficiency and global manufacturing base will
strengthen Delta's leading position in the power management
industry" says James Ng, President of Delta.
About Ascom
Ascom is an international supplier of telecommunications systems,
integrated voice and data communications, wireless and corded
security solutions and networked revenue collection systems for
public and private transport operators. Ascom's business units
plan, build, maintain and operate tailor-made comprehensive
solutions along the whole of the added-value chain with a
service-oriented portfolio and proven technology know-how as well
as its own products. Ascom is active worldwide in markets with a
high growth potential. The Ascom registered shares (ASCN) are
quoted on the SWX Swiss Exchange in Zurich.
About Delta Thailand
Delta Electronics (Thailand) Public Company Limited ("Delta"),
headquartered in Bangkok, is a leading global supplier of
merchant power supply, video display, and component products for
OEM/ODM customers. Delta isa publicly listed company on the
Thailand Stock Exchange where it has been quoted since 1995.
Delta currently has a market capitalization of over US$800
million. Delta reported revenues of US$940 million and net
profits of US$76 million in 2002. Delta received an "Asia's Best
Companies" Award from FinanceAsia in 2002.
SWISS INTERNATIONAL: To Discontinue Temporary Security Fee
----------------------------------------------------------
The Iraq war imposed heightened security precautions on all
airlines. These extra measures were reflected in the charging of
a temporary security fee.
With effect from May 1, 2003, SWISS is to discontinue the
increased security fee prompted by the war in Iraq. The situation
in the Middle East has now stabilized to such an extent that
flights to the Middle and Far East are operating normally again.
This means that aircraft no longer have to carry extra fuel in
case of longer flights or possible re-routing to alternative
airports. The costs for additional safety measures will decrease
at most of the airports as well.
CONTACT: SWISS Corporate Communications
P.O. Box, CH-4002 Basel
Phone: +41 (0) 848 773 773
Fax: +41 61 582 35 54
E-mail: communications@swiss.com
Homepage: http://www.swiss.com
===========================
U N I T E D K I N G D O M
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BAE SYSTEMS: Presents Results of Annual General Meeting
-------------------------------------------------------
BAE SYSTEMS plc held Tuesday its Annual General Meeting of
shareholders. At the meeting Sir Richard Evans, Chairman, will
confirm that trading in the first few months of the year has been
consistent with the outlook for the Group indicated at the time
of the publication of the Report and Accounts. That is, that the
underlying trading performance for the company's defence
businesses in 2003 is expected to remain broadly in line with
that for 2002 before taking account of the exceptional charges in
2002 for the Nimrod and Astute contracts.
Programmes performance is expected to be restrained by low export
activity and with production programmes still in early phases of
maturity. Restructuring of the Nimrod and Astute contracts is
expected to benefit future performance over the long term and
good sustained growth is anticipated in UK defense support
activity and across the company's operations in North America.
Airbus plans a similar volume of activity for 2003 as for 2002,
however the commercial airline market remains difficult to
predict.
BRITISH ENERGY: Announces Receipt of Further Payment for Bruce
--------------------------------------------------------------
Further to the announcement of 23 December 2002 with regards to
the disposal of Bruce Power and Huron Wind, British Energy
announces today that it has now received Canadian $20 million
(circa GBP8.7 million) retained in an escrow account on
completion for a possible price adjustment relating to pensions
following confirmation that no such adjustment is required.
CONTACT: Paul Heward, Investor Relations
Phone: 01355 262 201
Andrew Dowler, Financial Dynamics
Phone: 020 7831 3113
BRITISH ENERGY: Politics to Ultimately Influence London Transfer
----------------------------------------------------------------
British Energy denies it is relocating its headquarters in
Scotland to London, a move widely rumored in recent days.
Energy Minister Brian Wilson told the Financial Times: "I have
been assured by Mike Alexander that this is simply a rehash of an
old story... about British Energy looking at costs. They have
made no internal recommendations, far less decisions."
Rumors have been circulating that Mr. Alexander, British Energy's
new CEO, has allegedly revived an earlier plan to relocate to an
operational center at Barnwood, Gloucestershire. The move,
according to the Financial Times, could save the company GBP20
million a year.
It is not easy, however, to make a decision on the matter due to
political considerations. The paper says a departure of such a
big name to England would create a storm in Scotland where there
are few big corporate headquarters. In 1998, when the group's
English and Scottish nuclear units merged, Barnwood was rejected
as headquarters to satisfy Scottish political sensitivities.
The paper, however, says an option for the group is to keep a
small Scottish "brassplate" headquarters, with most of the 300
jobs at the existing headquarters in East Kilbride, south of
Glasgow, transferred to London.
CORDIANT COMMUNICATIONS: Receives Preliminary Takeover Offers
-------------------------------------------------------------
Observers do not expect troubled advertising group, Cordiant
Communications, to find a buyer for its business as a whole, even
as it announced earlier this week that it has received "very
preliminary approaches" from possible bidders.
Analysts interviewed by the Financial Times believe the company's
plan to sell its entire business under a single package could
only be futile. They said big US and European advertising groups
had no need for a package deal and potential financial buyers
would require stability of revenues, which Cordiant could
certainly not promise.
Cordiant's core business includes Bates Worldwide in advertising,
Fitch in branding and design, 141 in marketing services and
Healthworld, a pharmaceutical industry specialist. Analysts say
the company could face difficulties even in selling these
constituent parts. Accordingly, lenders could be loath to sell
the more attractive units for fear of ending up with a rump.
Meanwhile, analysts say it is pretty much normal for potential
bidders to have a look at Cordiant. They believe it is just a
ploy by rivals to win away clients and creative people without
making an offer for the company.
CONTACT: College Hill
Alex Sandberg
Adrian Duffield
Phone: +44 (0) 20 7457 2020
CORUS GROUP: Chairman's Statement at Annual General Meeting
-----------------------------------------------------------
The following is a statement to be made by Sir Brian Moffat,
Chairman, Corus, at the Company's Annual General Meeting,
1100hrs, April 29, 2003.
"As I said in my statement accompanying the Report and Accounts
for 2002 the Board remains concerned about the erosion of the
market value of Corus, the continuing loss making situation and
its medium term refinancing. Accordingly the Board is determined
to take the necessary action to restore market confidence.
Today I will update you on our plans and actions to address these
points which I will cover under four headings, namely UK Asset
Review, Refinancing, Management and Current Trading.
UK ASSET REVIEW
Turning to the UK Asset Review, on 11th March 2003 it was
announced that the Board was conducting a review of the Group's
UK asset base recognising the need to reverse the significant
losses that have been incurred as a result of the progressive
decline of UK manufacturing, sterling exchange rates and
increased market penetration from steel imports. The main
objectives of the review were to size the business to the
available market whilst eradicating the losses and creating an
internationally competitive cost base for our UK businesses which
would be cash positive even at the bottom of the cycle. The
review has now been concluded and the key findings are as
follows:
-- To provide feedstock for the Group's UK mills and downstream
businesses, steelmaking in the UK should be concentrated on 3
sites which should be developed to meet their continuing
requirements. Steelmaking for flat products should be
concentrated at Port Talbot in South Wales, steelmaking for long
products at Scunthorpe in North Lincolnshire and steelmaking for
engineering steels at Rotherham in South Yorkshire.
-- Once the necessary investment has been carried out at Port
Talbot and Scunthorpe, steel production from Teesside will not be
required for the Group's internal demand. In order to try to
avoid the closure of Teesside, however, the Group will endeavour
to refocus this site to become a cash generative slab and bloom
producer feeding international markets. The Company will also
explore other options for its future.
-- With steelmaking for flat products in the UK concentrated at
Port Talbot, the mills and coating line at Llanwern will be
supplied from there.
-- With steel production and primary rolling for engineering
steels concentrated at Rotherham, the closure of steelmaking and
hot rolling at Stocksbridge in South Yorkshire should take place
in due course. The aerospace steels and all finishing of
engineering billets/rounds will remain at the Stocksbridge site.
At Rotherham, the Thrybergh bar mill should be enhanced to roll
coiled bar and the Roundwood coiled bar mill should be closed.
The finishing facilities at Tipton in the West Midlands should
also be relocated to Rotherham.
-- In the light of the above the Group's UK steelmaking
requirements for the core flat products, long products and
engineering steels businesses (i.e. not including Teesside) would
reduce to become 10.5 mtpa largely focussed on satisfying UK
market demand.
-- Approximately 1,150 jobs would be directly affected by these
closures and rationalisation measures and some 2,200 people are
employed at Teesside in slab and bloom production and related
services.
-- The Board anticipates that the capital expenditure and
restructuring cash costs associated with these proposals should
not exceed GBP250 million.
-- Work should continue to look at ways of reducing further the
number of satellite sites and of joint venturing some of the
downstream businesses to secure cost and competitive advantage.
The results of the review have been published at this time in
order to inform all interested parties and a full consultation
process is underway.
The job losses relating to these initiatives are in addition to
those contained in the 2001 restructuring programme and which are
due to be completed in 2004.
REFINANCING
The funding plans for the Group going forward are an essential
part of the Board Review. Discussions are progressing towards
agreeing a new three year banking facility to fund medium term
working capital. Additional funding will be sought as necessary
to provide for Group restructuring initiatives through a
combination of non-core disposals and further access to debt and
equity markets as appropriate. The implementation of the Group's
restructuring programme will be influenced by the timing and
availability of such additional funding as is required.
MANAGEMENT
As announced earlier this month we are delighted to welcome Mr.
Philippe Varin to the position as Chief Executive and he will
commence his employment with us on 1st May. Mr. Varin is a highly
experienced international manager and was formerly Senior
Executive Vice President and Group Executive Committee Member of
Pechiney.
As part of the appointment process we have discussed with him the
Board's Review of our UK Assets and the associated refinancing.
Mr. Varin's immediate priority will be to develop and implement
these plans and agree the refinancing package.
As you may be aware I had planned to retire from Corus at this
meeting. At the Board's request however I agreed to defer my
retirement in order to provide continuity and stability pending
the appointment of a new Chief Executive and subsequently a new
Chairman.
With the appointment of Philippe Varin the Board was unanimous in
asking Jim Leng, our Deputy Chairman, to succeed me as Chairman.
I am delighted to say that he has accepted the job with effect
from lst June 2003.
I am sure you will join me in wishing Philippe Varin and Jim Leng
well in their new roles. They will be an excellent combination.
CURRENT TRADING
Turning to the current trading situation, the trend of
progressive improvement in the Group's operating results seen in
the latter months of 2002 continued during the first quarter of
this year. European prices remain firm despite subdued demand
although the outlook remains uncertain in the light of the
fragile global economy.
CONCLUSION
This is an extremely demanding time for Corus and I would like to
place on record my personal appreciation of the tremendous work
and support of the Board and employees."
CORUS GROUP: Fitch Says Restructuring Crucial, But Future Hazy
--------------------------------------------------------------
Fitch Ratings-London-April 29, 2003: Fitch Ratings, the
international rating agency, says that Corus' announcement this
morning of its long-awaited and crucial restructuring programme
is a positive move following the company's recent struggle for
survival. The main points of action include a new redundancy
programme involving 1,150 employees, a full review of the group's
UK assets implying plant closures and the disposal of non-core
assets. Last week, Corus' appointment of a new CEO from French
metal company Pechiney provided a clear signal, in Fitch's
opinion, that the troubled steel company is willing to take some
hard but necessary decisions in order to reinvigorate its
management team.
Fitch still believes, however, that the period of heightened
uncertainty has not yet ended for the company. Corus and its
banking partners have yet to agree on the refinancing of EUR1.4
billion of bank facilities maturing in January 2004. In addition
to this immediate need, the company now also faces the task of
finding additional financing to fund its latest redundancy
programme, with a cost estimated at GBP250 million. In addition,
there is increased pressure on the company's asset sale plan,
which the group is relying on to finance part of the redundancy
programme. Fitch expresses some concern over the timing of the
disposal programme and particular attention will be paid to the
successful completion of the aluminum asset sale, which the newly
appointed CEO committed to on his appointment.
Fitch believes that beyond the short- to medium-term refinancing
risks, the medium-term viability of the company will increasingly
depend on its ability to re-position itself as a cost competitive
and carbon-focused steel producer against the backdrop of the
steel industry's structural issues of overcapacity and weakened
demand.
Fitch has today published a global steel report. The new report
is available on the Fitch Ratings web site at
'http://www.fitchresearch.com'or by contacting the Ratings Desk
on +44 (0) 207 417 6300.
CONTACT: Valerie Poulain, London
Phone: +44 20 7417 4294
Monica Insoll, London
Phone: +44 20 7417 4281
CORUS GROUP: Turnaround Plan Calls for Layoffs, Joint Ventures
--------------------------------------------------------------
Corus Group Plc announced Tuesday it will lay-off 1,150 workers
at its Teesside plant, northeast of England, as it transforms the
unit into an independent operation that will sell unfinished
steel to other producers around the world.
The Financial Times says a further 2,200 jobs could be lost if
the unit fails to turn profitable within three years. According
to the company, it is also seeking joint-venture partners that
could form part of a rescue package.
Departing Chairman Sir Brian Moffat told the Financial Times he
has had "one or two conversations" with potential industry
partners, but he declined to discuss details. In the past, the
company has had discussions with Netherlands-based LNM and CSN of
Brazil about possible partnerships. Other potential partners
include Severstal and Novolipetsk of Russia, Azovstal of Ukraine
and Switzerland-based Duferco, the paper says.
Sir Brian will meet with Patricia Hewitt, UK trade minister,
Friday to discuss how the government could help the company,
including putting pressure on other countries to reduce imports
of low-cost steel.
FIRST CHOICE: Issues Trading Update Prior to Close Period
---------------------------------------------------------
Prior to entering its close period on May 1, 2003, First Choice
announces the following trading update:
At its Annual General Meeting on March 11, 2003, First Choice
announced that it anticipated that Winter losses would be at
levels broadly similar to last year. As expected during the Iraqi
conflict, customers postponed making bookings and the Group
adjusted its low season capacity accordingly. As a result, the
Group continued to trade in line with its expectations and first
half losses are still expected to be at the levels announced in
March.
Due to the high level of flexibility within the business,
capacity levels are continually managed to ensure they are
aligned with demand. Whilst mindful of the challenging and
unpredictable economic environment, there have been encouraging
signs in booking levels for the Summer across the Group's
businesses, over the last two weeks. The outcome for the full
year is anticipated to be in line with the Board's expectations.
The Group will announce its interim results for the six months
ended 30 April 2003 on 10 June 2003.
CONTACT: Peter Long, Chief Executive
Phone: 01293 588024
Andrew Martin, Group Finance Director
Phone: 01293 588750
Hudson Sandler
Lesley Allan/Jessica Rouleau
Phone: 020 7796 4133
LEEDS UNITED: Hires Advisers for Restructuring Plans
----------------------------------------------------
Following the interim results announced on 31st March 2003, the
board of Leeds United, under the new chairman Professor John
McKenzie, has conducted a thorough review of the organization and
structure of the Company and the cost savings necessary to return
it to trading profitability as soon as possible.
As a result of this review the following changes have been agreed
and implemented with immediate effect: -
-- Professor John McKenzie has become full time executive
Chairman and assumes direct responsibility for all the Company's
operations;
-- Stephen Harrison has resigned as Finance Director and Chief
Operating Officer;
-- The intention of the Board is to recruit a new Finance
Director as soon as possible. Until that time, Neil Robson, a
director of Ernst & Young LLP, has been seconded to Leeds United
and becomes interim chief financial officer; and
-- Ernst & Young LLP has been appointed to advise on alternatives
for restructuring and refinancing the Company.
The board has now identified annualized cost savings of some GBP5
million in total (including the figure of GBP3 million announced
on March 7, 2003). These will be implemented as soon as
practicable and will be significant for the next financial year.
Editor's Notes:
-- Professor John McKenzie joined the Board in February 2003 as a
Non-Executive Director.
-- Stephen Harrison has been Finance Director since February 2000
and became Chief Operations Officer in June 2002.
CONTACT: LEEDS UNITED PLC
Professor John McKenzie, Chairman
Phone: 0113 226 6100
BINNS & CO PR LTD
Peter Binns
Phone: 020 7786 9600
SCOTTISH & NEWCASTLE: S&P Puts Ratings on Watch Negative
--------------------------------------------------------
Standard & Poor's Ratings Services said Tuesday it placed its
'BBB+/A-2' corporate credit ratings on U.K.-based brewer Scottish
& Newcastle PLC (S&N) on CreditWatch with negative implications,
following the announcement that it is to acquire
U.K.-based cider manufacturer Bulmer Holdings PLC for 278
million ($442 million) through a cash and share offer.
S&N is also considering acquiring Portuguese brewer Sociedade
Central de Cervejas and its associated water business Sociedade
da Agua de Luso.
"Although, by the end of 2003, S&N also intends to divest about
2.3 billion of its Managed Retail division, these debt-financed
acquisitions will hamper the restoration of the group's already
weak financial profile to levels commensurate with the ratings,"
said Standard & Poor's credit analyst Hugues de la Presle.
"Furthermore, although the group plans to reduce its future
dividend payout and will have lower capital expenditures
following the disposal of its retail arm, its free cash flow
generation should remain modest in the coming years."
Standard & Poor's aims to resolve the CreditWatch status within
the next six weeks after meeting with S&N's management to discuss
the timing and extent of the potential acquisitions and
divestments, as well as the group's financial policy. "Any
potential downgrade is likely to be limited to one notch, but
there are some execution risks linked to the divestment of the
group's retail arm," added Mr. de la Presle.
CONTACT: STANDARD & POOR'S RATINGS DESKS
Phone: (44) 20-7847-7400 (London)
(33) 1-4420-6705 (Paris)
Analysts: Hugues De La Presle, London
Phone: (44) 20-7826-3731
Vincent Allilaire, London
(44) 20-7826-3628
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter -- Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Trenton, NJ
USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam,
Larri-Nil Veloso, Ma. Cristina Canson, and Laedevee Gonzales,
Editors.
Copyright 2003. All rights reserved. ISSN 1529-2754.
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