Markets & Finance

Roche Gains on Strong Results


From Standard & Poor's European MarketScope

Switzerland

Drugmaker Roche was up 5.40 Swiss francs to 170.70 francs, as the company posted first-half sales up 14.4% year on year at 16.622 billion Swiss francs, with net profit coming in 4% higher at 3.242 billion francs. The company also lifted the guidance for its key pharmaceutical division, now expecting full-year margins for the drug unit to be better than those in 2004. Based on better-than-expected results, the bank Kepler said it will increase its forecasts. The figures confirm its view that the company is one of the most exciting stories in pharmaceuticals, and rates it a buy. Bank Sarasin confirmed its buy rating as the company remains its favored investment in the pharmaceutical sector universe.

France

Food group Danone was up €4.95 to €92.55 after the Financial Times reported that PepsiCo is understood to have engaged investment banks Morgan Stanley and UBS to advise on a possible takeover of the company. Shares in the group jumped yesterday on renewed takeover speculation ahead of the group's results tomorrow and PepsiCo's board meeting on Friday. Exane BNP-Paribas downgraded the group to neutral from outperform, noting that the PepsiCo bid is tempting but too risky. While Nestle is seen as a white knight, should PepsiCo make an offer, the Swiss broker Zuercher Kantonalbank thinks a complete takeover is improbable, though Nestle could buy some businesses.

Credit Agricole was up €0.67 to €22.68 after the bank named Georges Pauget as its new CEO, who will replace Jean Laurent in September. Pauget was CEO of Credit Lyonnais since December 2003. According to the newspaper Les Echos, the new appointment is seen as a positive step in terms of the company 's plans to expand abroad.

Steelmaker Arcelor was up €0.17 to €17.47 after China announced plans yesterday to consolidate its steel sector by forcing mergers among the hundreds of steel mills. The policy, announced last night by the National Development and Reform Commission, aims to curb softening prices by controlling output. The commission expects 10 of China's biggest mills should produce half the national output by 2010. The policy also looks to prevent foreign investors from acquiring controlling stakes insteel groups.

Champagne maker Taittinger was up €6.50 to €365.50 after the company received six offers yesterday for its assets from groups including Eurazeo-Colyseo-Whitehall-Credit Agricole, as well as Carlyle and Wendel Investissement, according to the newspaper Les Echos. The company's assets include Taittinger Champagne as well as the emblematic Crillon Hotel in Paris. The group's advisors Rothschild and BNP Paribas have asked candidates to put in firm offers, and plan to open all the envelopes at the same time today, to avoid suspicions of favoritism.

Britain

Retail group Gus was up £0.47 to £9.01 after the company reported sales in its Experian credit-reference unit up 27%, in its Argos department stores up 2% and its Homebase home-improvement chain up 1%. The group said that, although the British retail environment remains very challenging, the company is confident that all businesses have clear strategies to deliver sustainable long-term growth. It also announced that the the demerger of its remaining 66% stake in Burberry is expected to take place in December 2005 after the release of Burberry's first half results.

Mobile services provider 02 was up £0.03 to £1.40 after the company said that it has added 646,000 customers in the first quarter, taking the total base to 24.6 million. British average revenue per user slipped to £271 compared to £273 last quarter, while German average revenue per user fell to €356 from €363. Before the results, Societe Generale was predicting an increase of 601,000, customers, and Dresdner Kleinwort Wasserstein predicted over 600,000 additions.

Music retailer HMV was up £0.05 to £2.49 after Goldman Sachs raised its forecasts by 3% for fiscal-year 2006 and 2% for 2007, following the 2005 results. The broker retained its outperform rating

Royal Dutch Shell was down £0.03 to £18.35 as shares in the combined company start trading today. Morgan Stanley set the price target for B shares at £20.65.

Germany

Reinsurance group Munich Re was up €1.19 to €93.67 after Deutschebank upgraded the company to buy from hold and increased its price target to €105 from €92. The groups said that the company has been held back by persistent fears and lack of management confidence over U.S. reserves. But with the announcement yesterday that the company will boost reserves at its U.S. AmRe unit by $1.6 billion, those concerns should finally put that to an end, the broker said, adding that the even better news is that the bottom line impact is significantly less than was feared.

Steelmaker Thyssen Krupp was up €0.28 to €15.13 on news that China is taking measures curb the steel glut. China has said that it will force mills to merge, shut small polluting furnaces to curb expansion of the industry and prevent a glut of the metal on world markets. The measures were announced yesterday in Beijing by the National Development and Reform Commission and should be seen as a positive in terms of price stabilisation for iron ore and coal prices.

Carmaker Volkswagen was up €0.82 to €41.77 after the company's Fox model received good safety ratings despite a report in which some of the new generation of cheap cars are deemed to have compromised on safety. Renault's Logan was cited as having low safety standards. Separately, the Business Times newspaper reported that the company is to form a venture with Proton in Malaysia to distribute its vehicles.

Italy

Carmaker Fiat was up €0.08 to €6.93 as shares continue to rise in good volumes, after around 5.2% of the capital changed hands on the market yesterday. The newspaper Il Sole 24 Ore said that the share price rally started on July 8, when CEO Sergio Marchionne met with a group of Italian and international fund managers. After yesterday's government meeting to discuss possible aid to help improve the company's productivity, the management will present the industrial plan to the unions today. The group's Ferrari unit denied that shares in the luxury car group would be sold through a private placement and confirmed a possible listing in the future. The company's second-quarter figures are due for release on July 28.

Netherlands

Supermarket operator Ahold was down €0.11 to €7.22 after ABN Amro raised its target to €8 from €7. The broker noted that last week the company reiterated that the recovery at the US Foodservice unit is gaining momentum. Stabilizing U.S. food retail activities should support the shares further, the broker said, maintaining its underweight rating. Yesterday, Lehman Brothers lifted its target to €7.0 from €6.6 as it raised forecasts on the back of partial International Financial Rsporting Standards disclosures. It kept its equalweight rating.

Nordic

Mobile networks company Ericsson was down 0.60 Swedish kronor to 26.20 kronor ahead of its second-quarter results due tomorrow. Deutsche Bank expects another good quarter to be reported, with the company outgrowing the market and delivering strong profitability. However, the broker believes that expectations of strong second quarter are already priced in, and reiterates its hold recommendation and a target at 22 kronor. Goldman Sachs noted that the company will experience positive transaction benefits from currency in the second and third quarter, and reiterated its outperform rating.

Mobile phone maker Nokia was down €0.31 to €14.72 ahead of the company's second quarter results tomorrow. JP Morgan expects strong market share and unit growth from the company in the second quarter, but has some concerns on mix and margins. The broker maintains its neutral rating. Separately, industry research group Gartner raised its global mobile sales forecasts to 779 million phones in 2005, an increase of 16% year on year, compared to an earlier estimate of 750 million.


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