Kevin O'Toole/LONDON

Gilbert Sedbon/PARIS

THOMSON-CSF BELIEVES that it is now over the worst of the heavy losses it has sustained from its holding in the crisis-torn Credit Lyonnais bank. The optimism raises prospects of privatisation of the state-controlled electronics group.

Alain Gomez, Thomson-CSF chairman, predicts a "return to a positive net result in 1995", provided that the latest Credit Lyonnais salvage plan wins European Commission approval. The group paid a dividend to shareholders.

The forecast comes as the group reveals a net loss of Fr962 million ($196 million) for 1994, broadly in line with analyst expectations, and a major improvement on the Fr2.8 billion lost in the previous year.

The continuing crisis at Credit Lyonnais again dragged down the results, with Thomson-CSF carrying Fr1.55 billion as its share of the bank's deficit. Although the state-owned bank's losses virtually doubled during 1994, Thomson-CSF's had already taken the worst of the hit in 1993 through a Fr3.75 billion provision.

The underlying performance of Thomson-CSF's core aerospace and defence electronics businesses remained steady, despite the headline loss. Pre-tax profits, were kept above the Fr1 billion mark, while the sales grew by 6% to Fr36 billion - again helped by acquisitions.

The stake in Credit Lyonnais, which Thomson-CSF acquired, when its Altus Finance arm was absorbed by the bank, has cast a shadow over the group's share price and raised questions over its potential privatisation.

Gomez confirms that he is in favour of a flotation, which may now be brought closer with the election of Jacques Chirac as the new right-of-centre French president.

Under a complex web of cross-ownership within the French industrial sector, Thomson-CSF is now 58% owned by Thomson SA, its parent state-owned holding company. The remainder of shares, are publicly traded.

The parent company also wholly owns Thomson Multimedia, a world player in consumer electronics. Gomez aims to bring the consumer and defence electronics businesses together into a single company which could then be privatised. In effect this would amount to a reverse take-over of its parent by Thomson-CSF.

Financial analysts, doubt the speed with which this may be accomplished, however, pointing to the large debts held by Thomson SA and its Multimedia arm.

Concerns have also been raised over Thomson-CSF's exposure to a declining defence market. Gomez admits that an undervalued dollar has given US rivals a "30% competitive advantage" and complains about a "protected" US domestic market, but points out that the group managed to hold its own against the similar threat from the influx of Japanese consumer electronics in the 1980s.

Dassault Electronique pushed up net profits by nearly 24% to reach Fr63 million in 1994. The result includes a gain of Fr27 million from the sale of a 15% stake in its telecommunications subsidiary in June. This was offset by charges of Fr41 million to cover retirement provisions. Group sales were up by 3.8% to above Fr4 billion.

Source: Flight International