French industry boasts strong first-half: round-up

18th September 2006, Comments 0 comments

PARIS, Sept 17, 2006 (AFP) - Companies listed on France's CAC 40 stock index have raked in record earnings in the first half of this year, boosted by strong international trade, but analysts warned that second half growth could slow.

PARIS, Sept 17, 2006 (AFP) - Companies listed on France's CAC 40 stock index have raked in record earnings in the first half of this year, boosted by strong international trade, but analysts warned that second half growth could slow.

In the first six months of 2006, the biggest companies on the CAC 40, the 40 most significant values among the 100 highest market caps on the Paris stock exchange, totalled almost EUR 50 billion in profit.

"This half's results are excellent, particularly in the finance sector, in cyclical sectors such as construction or in the area of defence," an analyst said.

Veolia Environnement, which deals in the areas of water, waste management, energy and transport services, is the latest group to announce sparkling first half net profit, up 40 percent at EUR 444.5 million.

Gaz de France, the state-owned gas provider which the government is seeking to privatise in order to facilitate its merger with Suez, surpassed all forecasts bringing in first half profit of EUR 1.7 billion, up 44 percent.

The banking and insurance sector has also put in a solid performance, as demonstrated by insurer Axa's 2.8-billion-euro profit.

There have however been exceptions and in spectacular style. The auto sector has performed particularly badly, crippled by sky high prices for raw materials.

In July, PSA Peugeot Citroen lowered its profit forecast after its first half net profit plunged 60 percent. Shares in the auto manufacturer shed 10 percent.

Exceptions aside, the CAC 40 companies, all present on the international stage, have performed particularly well as they have made the most of rebounding world economic growth, economists said.

"Their profit is not linked to domestic activity but to world business. These groups make 70 to 75 percent of their profit outside France," Jean-François Virolle of Global Equities said.

It is investors who profit the most from the windfall as, more often than not, the money is returned to shareholders rather than reinvested in the company.

"Companies that do not need to invest because of overcapacity now have abundant liquidities and they have increased productivity enormously by sacking staff by the truckload," Virolle explained.

Despite warnings from the International Monetary Fund that the global economy is at risk of a major setback due in part to a forecast slowdown in the US economy, investor morale remains high in the short term.

"We are optimistic," a dealer with a Paris brokerage said.

"Even though the US economy continues to have big impact and its fluctuations strongly influence the rest of the world, the rest of the world is still doing well," an analyst with Ixis said, pointing out that on average only 15 percent of European companies' profits come from the United States.

Year-on-year profit increase is however expected to slow down in the second half of 2006 as companies' growth in the last two quarters of last year was already strong, the analyst explained.

Banking and energy sectors, in particular, are at risk of topping out, Virolle speculated.

Copyright AFP

Subject: French news

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