Sam,
France's Alcatel Posts 1st-Half Profit, Aided by Telecom Turnaround
PARIS -(Dow Jones)- French engineering conglomerate Alcatel Alsthom SA said Thursday it swung to a first-half net profit of 1.49 billion francs ($25 million) from a loss a year earlier of 374 million francs.
The turnaround came thanks to a 17% rise in first-half sales and a drastic improvement in operating earnings, which the company said would continue in the second half.
Operating profit jumped to 2.68 billion francs from 478 million francs, while sales, reported in July, rose to 86.8 billion francs from 74.3 billion francs.
In late 1995, Alcatel (ALA) announced a massive restructuring plan in order to revamp its telecommunications and cables unit and sell nonstrategic assets. The plan led to a 1995 net loss of 25.6 billion francs, the largest loss in French corporate history.
Alcatel Thursday said its telecommunications activities swung to an operating profit of 600 million francs for the first half of the year, compared with a loss of 1.3 billion francs a year ago.
Cable and components activities saw operating profit rise to 1.3 billion francs from 1.1 billion francs, while engineering and systems activities remained at break-even.
Operating profit from its 50% stake in turbine and high-speed train manufacturer GEC Alsthom was steady at 700 million francs.
Alcatel Chairman Serge Tchuruk said the company's focus is on telecommunications, which accounts for the bulk of the rise in the company's sales.
Communications is also the cornerstone of the company's interest in state-owned Thomson-CSF. Tchuruk said the company remains interested in the group, particularly in nonmilitary applications, and is expecting some word from the government on the planned sale within a few weeks.
Tchuruk said retaining control of Thomson-CSF isn't the key issue, but benefiting from synergies in the communications sector is.
Defense minister Alain Richard said that the Prime Minister would receive a list of French businesses ready to take part in the privatization of Thomson SA, the holding company for Thomson-CSF. He said he expects the deal to be finalized before the end of the year.
Turning to its joint venture with the United Kingdom's General Electric Co., GEC-Alsthom, Tchuruk said no decision had been made yet about its future. The long-touted possibility of a flotation on the stock exchange remains a possibility, Tchuruk said.
Looking ahead, Tchuruk said he expects Alcatel to continue its recovery in 1997 and is still expecting satisfactory earnings.
Tchuruk expects the ratio of its operating income to sales to continue to rise at the same rate during the second half of the year as during the first, or by about 2.5% from the year-ago figure.
Net profit in the first half was boosted by an increase in capital gains of about 1.3 billion francs, up from 300 million francs a year earlier. Of that 1.3 billion francs, most came from the 3.5 billion francs sale of its stake in Havas SA.
As of Sept. 18, the company had sold 5.1 billion francs in assets so far in 1997. Since its restructuring in 1995, the company has sold a total of 12.1 billion francs in assets.
Restructuring charges in the first-half of 1997 increased to 759 million francs from 246 million francs a year ago. About 500 million francs of that is from a restructuring charge taken by GEC-Alsthom at the end of its fiscal year ended March 31, 1997.
Turning to currencies, Jean-Pierre Halbron, senior executive vice-president, said that Alcatel had benefited from gains in the dollar during the first-half of the year because of its heavy overseas business. The U.S. accounts for about 20% of its telecom sales. In 1997, U.S. telecom sales should total 2.7 billion francs, and in 2000 should total about 4 billion francs.
Alcatel remains confident about its Asian business despite a slowdown in Thailand, Malaysia, Indonesia and the Philippines as those countries raise interest rates.
"Clearly the growth in these countries will slow, but as far as we know the telecom projects are priority projects," Halbron said.
Copyright (c) 1997 Dow Jones & Company, Inc.
All Rights Reserved.
Transmitted: 9/18/97 11:36 AM EDT (L100Ytm8) |
