The FTSE 250 engineering firm Charter provided one of the few talking points in a dull London market yesterday as its share price swung around violently in reaction to a ruling in the US that could pave the way for legal action against the welding industry.
Charter is exposed to welding through its ESAB subsidiary, which claims to be a market leader in welding and cutting materials. Its shares fell 8% to 289p in early dealings yesterday after a federal court in Cleveland allowed lawyers acting for about 4,500 US workers to argue that manganese welding fumes cause Parkinson's disease.
ESAB is one of several companies, including the industrial gases group BOC, down 5p to 1060p, which have been named as defendants in the Cleveland case, which is due to go before a jury later this year. However, as the session wore on, Charter started to fight back with the help of analysts who played down the significance of the ruling. They pointed out that of the 10 welding fume cases to make it to court the plaintiffs had triumphed just once and there was little scientific evidence to link fumes with Parkinson's disease. Indeed a recent study of 7,800 workers in Denmark found no link.
With those facts in mind Charter shares, which have almost tripled since its rights issue in February of 2004, recovered to close just 12p easier at 306.75p.
In the wider market, leading shares ended lower for the first time in five days and it was all down to the oil company BP. Its fall of 13p to 629.5p - triggered by record half-year figures that still failed to impress - accounted for 11 of the FTSE 100's eventual loss of 14.5 points to 5,256.2.
The rest came from Reuters, the news and financial information group, which fell 30.5p to 381.75p after revealing that its new growth strategy would lop about £70m off trading profits in 2006.
All of which offset a very strong showing from the telecoms sector, which provided three of the FTSE 100's biggest risers yesterday.
Cable & Wireless rose 5.5p to 158.75p on further consideration of its proposed acquisition of Energis, while Vodafone gained 3.5p to 148.75p on news of record subscriber growth at Verizon Wireless, its US joint venture, and BT Group rose 3p to 232.25p ahead of first-quarter figures on Thursday.
Although failing to make the blue-chip leader board, there was also brisk business in the mobile phone operator O2, which improved 1.25p to 142.75p on talk of predatory interest from Europe.
Elsewhere the FTSE 250 fell 5.6 points to 7,493.3, but the FTSE Small Cap index climbed 4.8 points to 2,991.
BPB, the world's biggest plasterboard manufacturer, gained 4.5p to 697p despite a Merrill Lynch downgrade to neutral. The shares were lifted by strong second-quarter figures from its US rival USG Corporation and in particular its prediction that demand for wallboard products would remain strong for the rest of the year.
Traders said the USG comments made it more likely that the French company Saint-Gobain would increase its proposed 675p-a-share cash offer for BPB, which was rebuffed last week.
Rexam, which delivered its 10 billionth drinks can to Red Bull yesterday, was also in demand, rising 6.5p to 488.5p after the stockbroker Cazenove flagged the possibility of a special dividend when the company files half-year figures on August 25.
Elsewhere, Kelda's return to the FTSE 100 after a near two-year absence proved to be something of an anti-climax with its shares gaining just 1.5p to 695.5p.
Lower down the market, the budget airline easyJet lost 2.75p to 257p after the heavyweight broker Merrill Lynch removed the stock from its buy list.
EasyJet shares have risen 28% over the past six months, outperforming the FTSE All-Share index by 18%. As a result Anthony Bor, Merrill's airline analyst, believes they are now fully valued and notes that the recent terror attacks in London could hit earnings.
The chip designer ARM Holdings rose 1.75p to 120.75 on the back of strong results from Texas Instruments - one of its biggest clients.
Among the small caps, the industrial filters specialist Domnick Hunter, stood out, rising 54.25p to 482.5p on news of talks that may lead to a bid for the firm. Marylebone Warwick Balfour was another strong performer, advancing 12.5p to 140p after successfully raising £105m to expand its Malmaison hotel chain. News of the fundraising comes amid speculation that MWB will either sell or float its serviced office business later this year. A flotation could value the division at up to £50m.
The stockbroker Walker, Crips, Weddle, Beck bounced back from Monday's 11% fall after its highly rated fund manager Stephen Bailey followed the lead of the chief executive, Michael Sunderland, and bought stock. Monday's fall was triggered by news that the company had taken legal action to recover £2.5m from two clients. The shares rose 19p to 259p.
Finally, keep an eye on Wigmore, the shell company controlled by the fund manager Jim Mellon. As of this morning the company will have a new name, Speymill Group, and a share price investors can get their heads round thanks to a 1-for-100 consolidation.
The company plans to focus on property in Europe and yesterday appointed the former Conservative MP Howard Flight to chair its new property management subsidiary. Mr Flight will become a non-executive director of the company. Wigmore closed at 0.21p last night.
EBT plans to get mobile
The Chinese equivalent of the Carphone Warehouse is coming to the London market. That was the whisper in the Square Mile yesterday.
City gossips believe EBT, which claims to be one of China's leading mobile phone retailers, is planning to reverse into the Aim-listed shell firm Trading Exchange. The deal, which is expected to be accompanied by a fundraising, is expected to be announced in the next couple of weeks.
Trading Exchange hit the headlines last summer when the convicted fraudster Terry Ramsden took a 15% stake. Trading in its shares was then suspended at 31.5p in December pending the announcement of a reverse takeover.
EBT, founded in 1996, has 60 stores in the Shanghai and Suzhou region and has big plans to expand.
source: http://www.guardian.co.uk/business/story/0,3604,1536742,00.html 29jul2005
A federal court in Cleveland indicated Sunday that it will allow lawsuits to go forward alleging that fumes from welding products caused workers to develop Parkinson's disease, a debilitating neurological malady. The situation -- somewhat reminiscent of asbestos litigation brought by those who contracted mesothelioma -- raises the possibility of costly legal liabilities for companies involved in making and distributing welding materials. Still, any costs are unlikely to approach those from asbestos and defendants will still be able to challenge any evidence purporting to link the fumes and Parkinson's when individual lawsuits are heard.
Companies have long argued that it is hard to pinpoint the genesis of neurological diseases such as Parkinson's, making it difficult for plaintiffs to prove that these maladies were caused by manganese, a metal used in rods and wires that has been recognized as unhealthy if its fumes are inhaled.
Already, some shares have come under bouts of pressure. Among the big current and former producers of welding materials being targeted in litigation are Lincoln Electric Holdings Inc. of Cleveland, which is the largest maker of welding equipment and rods based on sales; units of Illinois Tool Works Inc.; Charter PLC of London; BOC Group PLC, also of London; Praxair Inc. of Danbury, Conn.; and A.O. Smith Corp. of Milwaukee. Also in focus are companies that distributed welding materials or were big users, such as General Electric Co., Caterpillar Inc. and a former unit of Viacom Inc.
"It is definitely a significant ruling," says Sigurd Sorenson, a lawyer at Clifford Chance US LLP in New York who has defended companies that were involved in asbestos and silica litigation. "Plaintiffs can make the argument that there is a connection between fumes and Parkinson's, and that gives plaintiffs a lot of leverage" to potentially pursue financial settlements.
Welding-fumes cases have become an issue in the legal community, with lawyers placing ads to find workers with potential exposure. Plaintiffs' attorneys say there are abut 10,000 current suits alleging neurological injuries from welding fumes and an estimated 500,000 or more workers with current, or past, exposure to welding fumes. If the problems even come close to those caused by asbestos, shares will suffer. Many companies that had even remote dealings with asbestos have faced heavy legal liabilities from suits related to alleged asbestos-related maladies.
Mr. Sorenson and other attorneys say it is unclear if any of the suits will ever prove successful. For one thing, the Cleveland judicial order simply allows the cases to go forward, and denies the industry's broad attempt to block any suggestion of a link to Parkinson's. The track record of companies in court has been quite good so far. Representatives of the companies say they have no interest in settling any of the cases. Lincoln, for example, says that since 1995 it has seen 5,435 cases against it dismissed, while seven were tried and decided in the company's favor. Two cases resulted in hung juries -- with one of those resulting in a plaintiff's verdict after a retrial, a case being appealed. A dozen cases were settled for "immaterial" amounts, the company says. Lincoln currently faces 8,270 claims.
At the same time, there is some evidence that courts are taking a harder look at the merits of toxic tort case lately, lawyers say. And plaintiff attorneys acknowledge that as many as 10% of the workers who have made claims regarding welding fumes also have brought asbestos-related cases, potentially undercutting claims. Plaintiff attorneys say many workers at shipyards were exposed to both asbestos and were involving in welding. And since the late-1960s welding materials have come with warnings for workers, potentially undercutting any suits they bring; plaintiffs say the warnings weren't sufficient.
Nonetheless, some investors following the cases have shown some jitters. At one point Tuesday, Lincoln Electric fell almost 3% on volume that almost doubled its three-month average after an article in The Wall Street Journal about the court ruling; the stock trimmed its losses later in the day. A number of other shares fell even more for a time. Yesterday, Lincoln, which has a market capitalization of $1.5 billion, fell 25 cents to $36.65 on the Nasdaq Stock Market.
"The litigation could become material, but right now it's not. The industry is successfully defending against the cases, there's insufficient proof that welding fumes have harmed anybody," says Walter Liptak, an analyst at McDonald Investments in Chicago. "But I'd also say there's a cloud over the industry because they've got to defend themselves in litigation." Mr. Liptak has "hold" ratings on Lincoln and Illinois Tool.
Some companies say they have insurance coverage that could cover at least some of any litigation costs. BOC Group says it has "purchased significant amounts of liability insurance."
BOC, which says it hasn't manufactured welding rods in the U.S. since 1986 though it sold welding rods manufactured by others until last year, adds that it "is not aware of any credible scientific evidence" linking welding to neurological damage.
Roy Morrow, a Lincoln spokesman, said any claims won't have a material impact on the company's financial results.
GE and Viacom didn't immediately comment. Other companies referred requests for comment to John Beisner, lead defense attorney for the Cleveland suit's defendants, which include virtually every major player having anything to do with welding. Mr. Beisner argues that the vast majority of the workers that are plaintiffs in the suit aren't sick. The plaintiffs dispute that charge.
Page C1
|
To
send us your comments, questions, and suggestions click
here |