In Wednesday's UK papers

07 September 2005 08:01  [Source: ICIS news]

A summary of political, economic, trade, business and product news affecting the chemical and related industries.

 

International Economics and Politics

 

US growth on target for 3.6%, says OECD

The Organisation for Economic Co-operation and Development (OECD) kept its forecast for US economic growth this year unchanged from June at 3.6% but said it was too early to gauge the impact of Hurricane Katrina.

Separately, the US services sector accelerated in August, according to the Institute of Supply Management survey. Its headline index of services activity rose to 65, from 60.5 in July.

The Times page 42 (Need to Know)

 

Eurozone at risk from hurricane aftermath

Flimsy recovery in the eurozone leaves it more exposed to the economic toll from record oil prices and Hurricane Katrina than the buoyant US, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.

The think-tank said it was still impossible to gauge the full economic repercussions of Katrina. It raised its projection for the eurozone slightly, to 1.3%, from 1.2% but cut the projected UK economic growth rate this year to 1.9% from 2.4%.

But Jean-Phillippe Cotis, the OECD's chief economist gave warning that the greater underlying strength of American conditions meant that the US is less vulnerable to economic fallout from the combination of rising energy costs and the hurricane than is the eurozone - despite the immediate impact on America. He urged central banks to adopt a relaxed attitude to interest rates in the wake of surging oil prices and Hurricane Katrina. Describing the $20-a-barrel rise in oil prices since May as a major economic shock, Cotis said the ability of economies to shake off its effects would depend on their underlying momentum.

In the eurozone, he said a "chronic demand deficit" meant that there was no case for any increase in rates by the European Central Bank (ECB) for some time.

The

The Times page 44

Financial Times page 1, 17, 20 (Lex), 21

 

Merkel makes debt a priority

Paying down debt would be the priority of a new German government led by the current opposition leader Angela Merkel who is tipped to win the general election later this month.

"The federal budget now has a structural shortfall of Euro60bn ($75bn)," said a spokesman for her party on the issue. "But we take our goal of reaching a balanced budget by 2013 very seriously.

Germany's candidates have previously focused on remedies for unemployment and changes to the tax system as their main policy weapons. But the budget deficit will be a significant constraint for the winner.

Merkel has not only pledged to reduce the deficit from 3.7% of gross domestic product (GDP) to less than 3% by 2009 but she would have to reconcile that with promised labour market and social security reforms which could cost billions of euros.

The Independent page 55 (Outlook)

Financial Times page 8

 

OECD cuts UK growth forecast to 1.9%

The Organisation for Economic Co-operation and Development (OECD) cut its forecast for UK growth in 2005 to 1.9%, from its forecast of 2.4% in June. The downgrade was because of low consumer spending and was a blow to the government's growth projection of 3% to 3.5%.

The downgrade to the OECD's view of Britain's prospects brought it into line with that of most City and academic forecasters and was blamed on consumers' retreat from the UK's high streets as well as the shock from soaring oil prices.

Separately, UK manufacturing output rose by 0.1% in July, the fourth consecutive monthly increase in the sector's best run of monthly advances for five years. Output was 0.2% up on a year earlier.

UK industrial production, a broader measure which includes volatile energy and mining output, fell by 0.3% in July as was down 1.6% year-on-year.

The Times page 42 (Need to Know), 44

The Independent page 53

The Daily Telegraph page 35

The Guardian page 2, 17 (Roundup)

 

Trade

 

Mandelson attacks 'Maginot" mentality

The European trade commissioner, Peter Mandelson, attacked protectionist forces inside the European Union (EU) on Tuesday saying a "Maginot line" mentality should not be allowed to distract the union from the reforms needed to compete with the rising powers of India and China.

Mandelson said the recent trade dispute with China showed that Europe could no longer rely on short-term political fixes to stave off the pressures of globalisation. The attempt to manage trade, he said, was a cul-de-sac. "It inhibits innovation and adjustment. It entrenches uncompetitiveness," he said.

The Times page 40, 42 (Need to Know)

The Daily Telegraph page 35

The Guardian page 12

 

Pharmaceuticals

 

Sanofi faces battles on patents

Sanofi-Aventis had good and bad news to report on the patent front on Tuesday.

On the plus side, the French pharmaceuticals group said it had won US regulatory approval for Ambien CR, a new version of its top-selling sleeping pill, which it hopes will compensate for the expiry next year of patents on its existing insomnia treatment.

But on the other side of the coin, Sanofi found out that two generics drugmakers, Barr Pharmaceuticals of the US and Teva Pharmaceuticals of Israel, were teaming up to sell a cheap copy of its Allegra hay-fever drug, without waiting for a court to give them a green light.

Sanofi is currently legal challenges from generics companies to patents on Plavix and Lovenox, blood thinning treatments that are two of its top selling drugs.

Financial Times page 28

 

Energy

 

Oil prices recover ground on Tuesday

Oil prices eased on Tuesday as industrialised countries prepared to use emergency stockpiles and US refiners planned to resume production after Hurricane Katrina. Benchmark US light crude fell $1.47 to $66.10 a barrel. Benchmark London Brent was down 7 cents at $64.76.

Saudi Arabia is leading the Organisation of the Petroleum Exporting Countries (Opec) to lower prices and pump more oil to compensate for the loss of crude production from Gulf of Mexico after the hurricane. The kingdom, the world's largest oil producer, widened on Monday the discount at which it sells its oil to US and European refineries to a six-month high. The decision would encourage demand for the kingdom's oil and could be followed by other Gulf producers, Opec officials and oil traders said.

US oil production in the Gulf of Mexico recovered on Monday to almost 70% of the pre-Katrina level of 1.5m barrels a day, but fell back on Tuesday to 58%. At the peak of the hurricane disruption, output was 95% down. Four of the eight refineries hit by the storm were restarting on Tuesday.

The Times page 42 (Need to Know)

Financial Times page 10

 

Call for coordinated EU oil policy

The European Union's (EU) top energy official has called for greater co-ordination of strategic oil reserves.

Andris Piebalgs, the EU energy commissioner, said seven of the EU's 25 member states were in effect excluded from decisions to tap into national oil reserves at times of crisis because they were not members of the International Energy Agency (IEA).

Piebalgs maintained that the IEA would retain its leading role on future decisions to release oil reserves but he also did not want to exclude the possibility of EU countries taking action outside the agency. The commissioner said that any decision on the release of strategic reserves would continue to rest with the member states.

Piebalgs called on Europeans to reduce their energy consumption while increasing their use of renewable fuels after warning that the recent sharp rise in oil prices was unlikely to be reversed.

Financial Times page 12

 

Russia and Germany sign $5bn pipeline deal

Russia and Germany are poised to sign an agreement to build a $5bn (EUro4bn) gas pipeline linking the two countries via the Baltic Sea.

Gazprom, the Russian gas monopoly, will sign an agreement in principle with Germany's Eon and with Wintershall, a subsidiary of BASF, to build the 1,200 km (750 mile) pipeline. Gazprom will own 51% of the North European Gas Pipeline, while the German partners will each hold just under 25%. The pipeline is expected to be completed by  2010.

Vladimir Putin, the Russian president, who will sign off the agreement, is putting energy at the top of his agenda for Russia-European Union (EU) relations in advance of a summit in the UK next month. But he is facing criticism from some of his former allies, notably Poland and other East European states, who see the pipeline as a manoeuvre designed to make them more vulnerable to Russian pressure. Gazprom currently exports about 116bn cubic metres of its gas through overland pipelines crossing Ukraine, Belarus, Poland and Slovakia.

Financial Times page 8

 

Rush to grab UK oil licences

A record licensing round announced around Britain's coasts on Tuesday saw 24 new companies awarded licences.

Critics describe the unprecedented interest, at a time when production in the North Sea is declining, as evidence of a speculative bubble. Some analysts said that many of the new entrants could face problems finding equipment and capital to develop the fields. But government officials countered by pointing out  that companies had committed to drilling 17 wells. A total of 152 licences were issued overall, the highest number ever.

The interest has, in part, been sparked by a change in the way licences are issued. Under the new "Promote" programme, companies no longer have to prove they are financially or technically capable of developing the field before receiving a licence. The process costs a fraction of the traditional licence in order to encourage a new breed of smaller, more entrepreneurial companies to develop North Sea fields.

Financial Times page 3

 

Amnesty slams big oil policy in Africa

A consortium of western oil companies, led by ExxonMobil, has drawn up legal agreements with African governments that potentially override the human rights of the local populations, according to Amnesty International.

The agreements relate to a 665-mile (1,064 km) pipeline running from the Doba oilfields in Chad to the Atlantic terminal at Kribi in Cameroon. An Amnesty spokeswoman said the consortium was "effectively side-stepping the rule of law in Chad and Cameroon".

The Guardian page 2

 

Company News and Results

 

ABB returns to paying dividends

ABB, the Swiss-Swedish electrical and engineering group, intends to restore a dividend from this year after a five year suspension.

The move reflects the return to profitability of a company which flirted with bankruptcy but is back on the takeover trail.

ABB made net earnings of $201m (Euro160m) last year - revised to a $35m loss after a new asbestos settlement offer and other adjustments. The recovery has continued in 2005, with net profits of $199m in the first quarter and $126m, following a $66m charge, in the second.

Fred Kindle, who took over as chief executive in January, said ABB's power products and automation products division, which have already met ore exceeded divisional profitability targets, would spearhead acquisitions.

Financial Times page 28

 

Air Liquide revises upwards full-year returns

Air Liquide, the industrial gases group, increased its full-year profits outlook at it reported a better than expected 26.5% rise in first-half net profits to Euro436m ($547.4m).

Earnings were supported by cost savings, economies from integrating the German, British and US activities of Messer Griesheim acquired last year, growth in Asia and North America and strong demand for hydrogen and healthcare gases.

The company also confirmed a forecast for annual sales growth of 7% to 9% in the next three to five years.

The Times page 42 (Need to Know)

Financial Times page 29 (News Digest)

 

Gas Natural rules out higher bid for Endesa

Gas Natural, of Spain, said that it would not increase its Euro22.6bn ($27.1bn) offer for Endesa, the Spanish utility.

On Tuesday, Endesa unanimously rejected Monday's takeover bid by Gas Natural as board members met to study a formal response to the surprise move by the country's main gas distributor. The offer was described as "hostile and clearly insufficient" by a company official. Analysts shared that view. They said the proposed sale of Endesa assets to partly finance the deal and ease regulatory hurdles amounted to a break-up of one of the world's largest electricity groups.

Gas Natural, which would absorb a company twice its size by market capitalisation, said on Tuesday that it would sell Endesa's controlling stake in Snet of France as well as generation assets in Italy to Iberdrola, Spain's second-largest group. It would also sell 1.25m deregulated gas connections in Spain to Iberdrola - a plan agreed weeks before Monday's bid.

The Times page 42 (Need to Know)

Financial Times page 20 (Lex), 29

The Daily Telegraph page 35

 

CNPC unloads a stake in PetroKaz

China National Petroleum Corporation (CNPC) is in talks to sell a stake in PetroKazakhstan to Kazmunaigaz (KMG), the national oil and gas company in Kazakhstan.

The Beijing group's$4.2bn (Euro3.3bn) bid last month was hailed as the largest ever cross-border acquisition by a Chinese company. The PetroKaz assets are still expected to be shared with PetroChina, CNPC's listed unit, which is in the process of forming a joint venture with the parent to run the Chinese group's overseas business.

ONGC, in partnership with the Indian industrial group Mittal Steel, has submitted a rival offer for PetroKaz. Its executives complained in August, when the Kazakhstan government announced the deal with CNPC, that the auction was unfair and that they were not given a chance to raise their offer.

Financial Times page 31

 

Novartis prepares to raise Chiron offer

Novartis, the Swiss pharmaceuticals group, is expected to raise its bid for Chiron after the troubled American flu vaccination maker spurned its offer of $40 a share.

On Tuesday, shares of Chiron traded at a premium to Novartis's offer as investors anticipated a second approach. They rose 73 cents to $43.52 in early trading in New York.

Analysts said that Novartis could offer $45 a share but cautioned that the company was unlikely to pay a much greater premium because its majority stake dissuades rivals from entering the fray. It has emerged that Chiron's independent directors have declared Novartis's takeover offer inadequate and denied its claims that they encouraged a bid.

The Times page 51

The Daily Telegraph page 36 (City Bulletin)

 

Acambis chalks up £12.8m loss

Acambis, the UK-based vaccines manufacturer, reported net losses of £12.8m ($23.6m/Euro18.8m) for the six months to the end of June on sales of £12.4m, compared with profits of £26.9m on sales of £51.3m at the same time last year.

Gordon Cameron, chief executive, said revenues were expected to fall for the full year because of the end of a large smallpox contract with the US. He also said that the two US patent challenges against Acambis by Bavarian Nordic, a rival smallpox producer, were "without foundation" and did not reduce his company's freedom to operate, a precondition for winning a second smallpox contract from the US government.

Financial Times page 26 (Small Cap Briefing)

 

HLS seeks US listing

Huntingdon Life Sciences (HLS), the animal testing company that pulled its listings in London and New York in 2002, returns to the US exchange today (Wednesday).

The company quit the exchanges after protestors harassed shareholders and market makers. HLS has a market capitalisation of £218m ($401m/Euro335m).

The Daily Telegraph page 33, 38 (City Comment)

 

Scottish Power clears out boardroom

Scottish Power, a potential bid target for the German utility Eon, announced on Tuesday a series of top-level departures as part of plans to slash its cost base by £60m ($110m/Euro88m) a year.

The group said main board directors Charles Berry and David Nish would be leaving with immediate effect as would human resources director Mike Dominic Fry. Scottish Power chief executive Ian Russell said the sale of the group's PacificCorp business would significantly change the scale and shape of the business. The group intends to simplify the structure of the remaining operations.

Eon announced on Monday that it was considering an all-cash bid for Scottish Power.

The Times page 47

Financial Times page 22

The Daily Telegraph page 33

The Guardian page 16

 

(Some of the stories may not appear in all editions of the relevant newspapers.)

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