Markets & Finance

Pernod Ricard Rises on Seagram's Sale


Britain

Marks & Spencer was up £0.09 to £3.67 after the retailer reported a 5.4% fall in like-for-like sales in the 14 weeks to July 9, with general merchandise down 11.2% and food up 0.7%. Clothing was also down 9.2% and sales in the home unit fell 22.3%. Following the update, the broker Seymour Pierce said that food has performed well, but added that in some ways this was the easy fix. The broker noted that the general merchandise number is chronic, but broker suspects that, provided that the retailer's performance improves, and sales fall no more than 3% for the year, the broker's near top of the range estimate of £680 million is achievable.

Exploration outfit Tullow Oil was up £0.06 to £1.97 after the company reported first half trading at record levels and said that its outlook is encouraging. The company said that it had a strong production performance, combining with continuing favorable oil and gas pricing.

Luxury clothing retailer Burberry was up £0.21 to £4.33 after the company reported first-quarter underlying revenues up 9% to £113.2 million, with first quarter retail sales also up 9% to £60.5 million. The group said that it is encouraged by the initial consumer response to its autumn/winter merchandise. JP Morgan was expecting underlying sales growth of 6% to £109 million and underlying retail sales up 8%. Goldman Sachs was expecting group sales of £107 million.

Prudential insurance and financial services group was up £0.06 to £5.30 after the company said that its joint-venture in China has been awarded a further two city licences, taking its total to ten and making it the largest foreign life insurer in the country in terms of licences. The new licences will enable Citic Prudential Life to sell its portfolio of products in Nanjing and Shenzhen, with a combined population of 12 million. The bank UBS lifted its target to £6.10 from £5.80 and kept a buy rating.

Mobile phone services provider Vodafone was up £0.02 to £1.44 after Goldman Sachs increased its rating to outperform from in line.

France

Liquor group Pernod Ricard was up €3.20 to €133.00 after the company sold its Seagram's vodka brand to U.S. firm Young's Holdings in order to concentrate on its other brand Stolichnaya. Seagram's sold some 640,000 boxes in fiscal-year 2004. Pernod Ricard acquired the exclusive Stolichnaya contract during the Allied Domecq deal for an undisclosed amount. Meanwhile, Deutsche Bank resumed coverage of the company with buy a rating and increased its target to €150 from €115, before it suspended coverage. The bank ETC Pollak Prebon noted that the company trades at price-to-earnings (fiscal year 2005) ratio of 18.3, compared to Diageo's 15.1 and Remy Cointreau's 19.7.

Supermarket retailer Carrefour was down €1.00 to €39.00 as brokers reacted to a disappointing second quarter. The bank UBS cut its target to €38 from €42 and reiterated a neutral rating following weak second half results below consensus, hit by a poor trading environment in Europe. JP Morgan cut its earnings per share estimates by 10% and warned of sector deterioration. Earlier, the company posted second-quarter sales up to €20.35 billion, up 4.1%, with like-for-like sales up 0.3%.

Total oil group was up €2.20 to €205.60 as the price of a barrel of benchmark crude oil continued to climb Wednesday morning, as a new storm, Tropical Storm Emily, builds in the Atlantic Ocean.

Chip equipment maker Alcatel was up €0.14 to €9.94, after the broker ETC Pollak Prebon lifted its target to €9.3 from €9.2 and kept its reduce rating. The move followed the company's release of strong second quarter preliminary sales results up 8% to €3.1 billion, higher than expected. Goldman Sachs said that whereas the pre-announcement yields only a 3% earnings upgrade, gross margins are still declining

Video game maker Infogrames was up €0.04 to €1.76 as the company's subsidiary Atari and Activision Ink signed a contract to include two of Atari's most famous games Pitfall! and River Raid in the new Flashback 2 console. The console will feature more than 40 games, including arcade classics, unreleased titles and rare home-made games designed by fans.

Luxury goods group Hermes was down €4.10 to €164.80 after JP Morgan downgraded the group to underweight from neutral and kept a €160 fair value on a valuation call. The broker noted that the European luxury goodssector has risen 14% over the past six months and most sector drivers have either sustained or turned more positive over the past few months, including U.S. dollar-to-euro exchange rate, sustained strong growth in Asia (excluding Japan) and the US and a slight improvement in Japan. However, the broker noted that it could sees limited upside to current share prices for most luxury goods companies, after adjusting its numbers.

Germany

Volkswagen was down €0.82 to €40.03 after CEO Bernd Pischetsrieder said that the company's executive committee will recommend that the supervisory board accept Peter Hartz's resignation. Earlier board member and Lower Saxony's minister Christian Wulff defended the state's 18.2% holding in the company, saying that it looks out for all interests of stakeholders. Hartz will not receive a severance package, Wulff said. Separately, the company is to review the way it delivers parts, builds cars and buys parts from suppliers as it struggles to cut costs by €7 billion by 2008. The company will also reduce warranty claims by 50% by 2008.

Commerzbank was up €0.30 to €18.45, as the company may cut up to 600 jobs at its Mittelstand unit. The bank seeks to cut another 300 jobs in its commercial banking unit, according to the newspaper Handelsblatt. The company is trying to reach an agreement with the workers' council that aspires to save these jobs if in the next two years revenue can be increased by 8% and operating profit by 15%. Meanwhile, Deutsche Bank increased its target to €20.50 from €19 with a buy rating.

Television broadcaster ProsiebenSat1 was up €0.42 to €15.35 as media group Axel Springer may complete the purchase agreement for a majority stake in the company next month. The due diligence process may be completed by theend of this month, after which Springer may buy a majority stake from current owner Haim Saban, according to the newspaper Handelsblatt.

MG Technologies was up €0.44 to €10.44 after the company said that it is changing its name to GEA Group as it focuses on engineering.

Netherlands

Chip equipment maker ASML was down €0.43 to €13.27 after the company posted second-quarter net profit of €112 million compared to €65 million a year ago, on net sales up 24% year on year to €763 million. Net bookings come in at 24 systems with a value of €297 million, compared to 83 systems worth €982 million in the second quarter of 2004. The bank Kempen said that although the company's second quarter of 2005 results are stronger than expected, the outlook is disappointing on the back of the weaker-than-expected order intake.

Nordics

SKF, the maker of roller bearings, was up 5.50 Swedish kronor to 88.25 kronor, after the company posted second-quarter pre-tax profit of 1.3 billion kronor, beating expectations of 1.17 billion, according to a Reuters' poll.

Mobile phone maker Nokia was up €0.18 to €14.56 after the bank ING initiated coverage with a hold rating and set its price target at €15. The broker noted that competition continues to increase in the telecoms equipment market, and that peer Ericsson is better placed to meet long-term challenges. The broker also noted that competition from Far Eastern manufacturers is increasing and adds that downside risks are not insignificant.

Italy

Banca Intesa was up €0.13 to €4.03 after the company disclosed in its three-year business plan that it expects 2007 net income of €3 billion, cost to income ratio of 50%, revenue growth of 7.4%, and return on equity of 20%. The company is seen targeting Eastern Europe retail banking as part of its external growth plan. With the exception of the ROE target, which is ahead of market expectations, the statement is fairly in line. The bank also aims to increase its dividend payout to 60% over the three-year period.

Banca Popolare Italiana was up €0.11 to €8.31 after the Bank of Italy has approved two counterbids by the company for the Italian bank Banca Antonveneta. However, it is still unclear as to when these offers will begin. Market watchers believe Dutch bank ABN Amro is unlikely to obtain a 50% + 1 share in Banca Antonveneta and instead will sell its shares to Banca Popolare Italiana once the offer by ABN Amro closes on July 22. Gianpiero Fiorani, the CEO of Banca Popolare Italiana, will be questioned by Rome prosecutors today at 13:30 GMT. The prosecutors are investigating false accounting practices related to the company's counterbid for Banca Antonveneta.

Spain

Cosmetic surgery group Dermoestetica was up €1.56 to €10.66 on its first day of trading. The company began trading at just under €11.00 per share, above the offer price of €9.10 per share. This offer price was at the top end of the indicative range and reflects high demand for the shares.


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