A decline in its German business and depressed telecommunications demand in Brazil and Turkey were the root causes of a 33% drop in first-half profit for Alcatel-Alsthom SA – and the company’s half-time report played havoc in markets across Europe yesterday. Trading in Alcatel Alsthom shares on the Paris Bourse was suspended limit-down after they opened at 489 francs, down 13.8%, but when they resumed, they sank to 485.5 francs and had to be suspended again under rules that mandate a suspension after a 10% fall and another after a further 5% fall. And when trading resumed a second time, they just went on falling, reopening at 483.1 francs. The pain was felt across the Rhine, where in Frankfurt, shares in Siemens AG were the most actively traded issue in early trading, losing over 3% from Wednesday’s close in sympathy with Alcatel.The French company warned that the factors that caused all the pain will likely continue their negative impact for the second half of the year, said group chairman Pierre Suard at the announcement Wednesday. The company announced that net profit for the first half of 1994 came to the equivalent of $375m, down from $560m for the first half of last year. Suard estimated that total profit for 1994 would be no more than $755m, a decline steeper than the 10% to 20% drop in profit that Suard had earlier forecast for the year. The three problem subsidiaries are unlikely to improve in the second half, he said. Due to depressed demand and prices, Alcatel SEL AG, the German end of the telecommunications equipment manufacturer, is forecast to lose about $248m this year, despite its plan to cut its 20,000-strong workforce by 20%. Subsidiaries in Brazil and Turkey, where government austerity programmes depressed demand and rising inflation cut the value of contracts, are each expected to lose about $60m. Suard predicted, nonetheless, that 1995 will be a better year, citing the company’s win of over 40% of supply contracts for a cabled telephone network in eastern Germany and significant switching contracts in the US for companies such as Pacific Bell Inc and Bell Atlantic Corp.
