Markets & Finance

Adidas Rises after Deal to Sell Salomon


From Standard & Poor's European MarketScope

France

Media group Vivendi Universal was up €0.32 to €23.70 Monday, after the company's games unit and game developer Valve settled a pending federal court lawsuit filed by Valve in August 2002. Under the settlement, Vivendi Universal Games will cease distribution of retail packaged versions of Valves games, including Half-Life, Half-Life 2, Counter-Strike, Counter-Strike: Condition Zero, and Counter-Strike: Source, beginning August 31, 2005.

Carmaker Renault was up €0.80 to €65.50, after the brokerage Cheuvreux downgraded the company to underperform from outperform. The broker cut its target to €69 from €83, noting that incoming CEO Carlos Ghosn will not disclose targets for the company before the autumn. The broker believes that, with a lack of catalyst for the shares, valuation could remain low in the coming months. Carlos Ghosn is responsible for the12-month turnaround of Nissan Motor Company. The Times newspaper wrote that France's No. 2 car company is in sound financial shape, but Ghosn's arrival comes at a time when European automakers are struggling to wring growth out of saturated home markets. The newspaper adds that, at 5.1%, the company's operating profit margin was half of Nissan's last year, and outgoing Renault CEO Louis Schweitzer had warned of a slip to 4% in 2005.

Steelmaker Arcelor was down €0.16 to €15.44, after the company's annual general meeting Friday approved all proposed resolutions. In particular, shareholders approved fiscal-year 2004 accounts and the payment of a gross dividend of €0.65 per share, payable Monday. The company will publish first-quarter results tomorrow. Reuters consensus points to earnings before interest, taxes and depreciation of €1.57 billion from €696 million last year with net profit rising to €776.6 million from €234 million a year earlier. Analysts are expected to focus on the outlook for margins and spot steel prices amid growing concerns of slowing demand and production cuts.

Wine, hotel, and perfume group Taittinger was up €2.80 to €270.80, after the broker Fideuram Wargny upgraded the company to buy from reduce, with a target of €375.

Germany

Sporting goods maker Adidas was up €9.20 to €129.30, after the company said it has sold its winter sports unit, Salomon, to Amer Sports for €458 million. The company also reported that net income jumped 43% on accelerated sales growth to €105 million, compared to €72 million in the year ago period and higher than the €95 million forecast. The company forecast that net income will climb nearly 15% in 2005. In addition, sales gained 9.6% to €1.778 billion compared to €1.7 billion forecast. Order backlog rose 9% in local currencies. European orders are unchanged from a year ago. U.S. orders gained 8% and Asian orders increased by 33%. First-quarter earnings per share came in at €2.15 compared to €2.09 forecast. First-quarter pre-tax profit came in at €170 million, compared to €158 million forecast. First-quarter earnings before interest and taxes rose 27% to €179 million. The bank Kepler said continued growth in Europe is important for sentiment, as is the highlighting of the upper end of the guidance range. The bank said underlying momentum should carry the group through a summer lacking major sporting events, meanwhile excitement is already building for the FIFA 2006 World Cup. The broker maintained its buy rating with a €140 target.

BASF was up €0.70 to €50.80 after the bank HVB upgraded the chemical maker to outperform from neutral, with a target of €60. The bank also increased its 2006 earnings per share estimates to €5.62 from €4.84, saying the current valuation is only justified with a free-cash flow of €1.8 billion, but adds that over the cycle the company's free-cash flow is roughly €2.5 billion. It said that in 2005/06 free-cash flow will probably be well above €3 billion.

Insurance and asset management group Allianz was up €0.96 to €93.20, after the company's CEO, Michael Diekmann, said he sees "no negative surprises" at the group's investment banking unit Dresdner Kleinwort Wasserstein, the banking unit, in the newspaper Sueddeutsche Zeitung. He went on to say that the group had no acquisitions in the pipeline, and added that he thinks the shares are undervalued because investors do not understand the company's growth strategy. The company reports first-quarter earnings on May 13.

Spain

Telecom Telefonica was up €0.16 to €13.29, as Portugal Telecom's shareholders have not eliminated shareholder restrictions of 10% of the capital, thus Telefonica could see itself forced to sell-off 0.8% if Portugal Telecom amortizes 10% of its capital as part of its share buy back programme. Telefonica's current stake is 9.7%. The bank Fortis thinks this sell-off is not relevant for Telefonica but continues to bring to light the difficulties of both operators to undertake considerable corporate moves together. Elsewhere, according to the Sunday Express, Telefonica's production company Endemol may see its £1.75 billion flotation vastly reduced in value and delayed, because its French division may be excluded. The company confirmed earlier this year its plans to list its unit Endemol at the end of this year or beginning of the next.

Britain

U.K. markets were closed Monday for a bank holiday.


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