European Drug, Chemical Shares Decline as Dollar Plunges
Bloomberg News
October 8, 1998, 11:53 a.m. ET
European Drug, Chemical Shares Decline as Dollar Plunges
Zurich, Oct. 8 (Bloomberg) - Glaxo Wellcome Plc and other
European drug and chemicals shares fell as the dollar plunged,
amid concern that companies already hit by slowing economies in
Asia will suffer further from exchange-rate movements.
Glaxo Wellcome, the world's no. 2 drugmaker, dropped 111
pence, or 6.8 percent, to 1,508p. Switzerland's Clariant AG, the
world's largest specialty-chemicals maker, fell 25 Swiss francs,
or 4 percent, to 590 francs. Rival Ciba Specialty Chemicals AG
dropped 5.5 francs, or 5.2 percent, to 101.25 francs.
Shares slid throughout the region as major currencies
including the German mark and the Swiss franc soared against the
dollar. A falling dollar cuts the value of European companies'
revenue from the U.S., the world's biggest economy.
''The German chemicals industry situation has fallen
dramatically in the current year,'' said Hans-Dietrich Winkhaus,
chief executive of Henkel KGaA, Germany's fourth-largest
chemicals and consumer-products company.
Winkhaus, speaking at a briefing by the German Chemical
Industry Association, also said the association expects German
chemical production for 1998 to be little changed from a year
earlier economic weakness in Asia dampens demand worldwide. A
declining dollar may aggravate chemicals and drugs makers'
problems, analysts said.
''We'll have to revise down earnings estimates across the
board,'' said Beat Alpiger, an analyst at Bank Julius Baer & Co.
AG in Zurich. ''For this year, the impact will be limited, but
the outlook for next year has certainly changed.''
European Currencies Strengthen
This year, the Swiss franc has risen 12.94 percent against
the dollar and the German mark has gained 11.72 percent. Seven
of the ten strongest performers against the dollar this year are
European currencies.
In Germany, BASF AG fell 4.5 percent to 57.01 marks, and
Hoechst AG fell as much as 3.8 percent to 61.00 marks.
Belgian chemicals maker Solvay SA slid 125 Belgian francs,
or 5.3 percent, to 2,240 francs, while Swedish drugmaker Astra
AB fell 7 kronor, or 5.6 percent, to 119 kronor. In France,
drugmaker Sanofi SA fell 58 French francs, or 7.1 percent, to
760 francs.
In contrast, U.S. companies such as Pfizer Inc., the
world's sixth-biggest drugmaker and maker of blockbuster
impotence drug Viagra, and Johnson & Johnson, which ranks No. 5
among world drugmakers, may benefit from the weakness of the
dollar, analysts said.
''This is one of the best times,'' said David Saks, an
analyst at Gruntal & Co. ''I'm very bullish, I'm buying.''
European exports to the U.S. become more expensive as
currencies in Europe appreciate. That adds to the pressure
European companies are feeling because of declines in the value
of Asian currencies, which made Asian exports more competitive
relative to goods from Europe.
''Some Asian countries seem to be on an export offensive,''
Henkel's Winkhaus said at a press conference in Berlin, adding
to the export-dependent industry's woes.
The German chemicals group said exports to Asia fell 8
percent in the first half of 1998, while chemicals imports from
that region rose 19.5 percent.
--Theresa Waldrop in the Zurich newsroom (41-1) 224 4111, with |
