Rhone-Poulenc warns on profits

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The Independent Online

Rhone-Poulenc, the French chemicals and pharmaceuticals giant, yesterday sent a shudder through the Paris stock market after it warned of lower than expected profits for this year. Shares in the group slid 6.20 francs to Ff100.80 following the announcement - which pinned most of the blame on the economic downturn in the fourth quarter, the French transport strikes and the need to contribute to government efforts to stem the national deficit.

The company said that the pounds 1.8bn acquisition of Fisons by its US subsidiary, Rhone-Poulenc Rorer, would also result in exceptional charges, although these had been foreseen last year.

Brokers saw the warning as a possible prelude to further bad news from France's major companies in the wake of the recent economic squalls. But the main CAC-40 index closed little changed, ending down just 0.27 points at 1,916.29.

Rhone-Poulenc had previously forecast a significant rise in 1995 results, even talking of "double-digit" growth earlier in the year. But yesterday it said: "Based on the first indications of activities in the fourth quarter, and without taking account of possible effects of the Fisons integration, the group is now expecting lower results than previously forecast."

Besides the downturn in the economy from last September, the company said that the transport strike at the end of last year and the exceptional contributions to the social security deficit, had led to the change in forecast. It also said it would be increasing "slightly" the amount of provisions for last year.

A source close to Rhone-Poulenc said: "The 1995 net attributable profit will be at the same level as the 1994 profit. Ff2bn is a maximum." Even at this lower level, the figure will be higher than the Ff1.92bn struck in 1994. Net profits increased 71 per cent to Ff1.96bn for the first nine months of 1995, despite a 17 per cent fall in the third quarter due to higher provisons and tax charges.

The company source said that the downturn in the economy would cost the company Ff300m, with the three week public sector strike - which forced closure of some chemicals production units in the Rhone-Alpes region - adding a further Ff200m.

Meanwhile, the pharmaceutical industry is in negotiations with the government over a Ff2.5bn contribution being sought by the government from the industry to help cut the social security deficit.