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Wednesday Newspaper Review - Irish Business News and International Stories
By Finfacts Team
Mar 1, 2006, 07:44

And the names of two wealthy tillage farmers, who sought to suppress details of their six-figure earnings from Brussels, can now be revealed.

Walter Furlong from Co Wexford receives €263,049 a year from the EU's Single Farm Payment while Cork farmer Terence Coughlan receives €244,857.

Both men objected to having their names and earnings released in a Freedom of Information request by this newspaper, but the Information Commissioner upheld our right to gain access in a recent ruling.

Mr Furlong from Co Wexford is primarily a tillage farmer with about 2,500 acres of land in Wexford and south Kilkenny and he also owns a major chunk of the Target fertiliser company.

Terence Coughlan from Rathcormac in Co Cork is also primarily a tillage farmer with about 2000 acres, the vast majority of which is leased to grow wheat and barley.

Mr Furlong is Ireland's fifth highest earner under the scheme and Mr Coughlan is in seventh place.

The average farmer earns about €11,000 from the system, and the Irish Farmers Association last year called for a cap on the maximum amount which can be received.

The money paid from Common Agricultural Policy funds is based on the level of subsidies paid in the past to farmers.

The system was radically overhauled two years ago so that farmers no longer have to produce any food or animals on their land to receive it.

The aim was to end the system where farmers were producing unprofitable crops purely to receive the highest possible level of subsidy.

The current system is supposed to run until 2013, but it came under strong attack from Britain last year and could face further challenges in the years ahead.

The names of the highest earners were released to the Irish Independent last year by the Department of Agriculture and Food last August, but Mr Furlong and Mr Coughlan objected.

However the Office of the Information Commissioner subsequently upheld the Department's decision to release all the information demanded.

The top 10 recipients are: 1. Irish Agricultural Development €508,390; 2. Kepak Farm €346,118; 3. John O'Shea €304,383; 4. Patrick Reynolds €284,838; 5. Walter Furlong €263,049; 6. Cyril Goode €257,061; 7. Terence Coughlan €244,857; 8. Richard Cope €229,815; 9. Simon Mangan €224,421; 10. Patrick Howard €212,358.

The Irish Independent also  reports that shares of drugmaker Elan fell by as 7.7pc in the US last night, to close at $12.87.

This follows a report from broker Piper Jaffray that said the use of its multiple sclerosis treatment Tysabri will probably be limited if the product is reintroduced.

US doctors would prescribe Elan's Tysabri to 10pc of patients at most, primarily to those who have failed other therapies, according to a new survey of doctors by Piper Jaffray.

Shares in Elan finished in the US down $1.08 and closed down over 4pc at €11.19 in Dublin - on the day that marked the first anniversary of Tysabri's withdrawal from the market by Elan and partner Biogen.

At the time, three cases of the central nervous system disease progressive multifocal leukoencephalopathy (PML) had been detected within the clinical trial population, and a third case was retrospectively discovered.

The survey also found that 57pc of the 140 neurologists said that Tysabri's effectiveness is worth the risk of PML only on patients who have failed other therapies, while 6pc said they would use the drug as first-line therapy.

Over 90pc of doctors said that Tysabri could be a valuable therapy to certain MS patients.

But 52pc added that the drug should not return at this time given that the risk of PML is too great.

This time next week the US Federal Drug Administration (FDA) will review the efficacy of Tysabri, the risks associated with the drug and Elan/Biogen Idec's proposed risk management plan.

Goodbody Stockbrokers analyst Ian Hunter has issued a buy recommendation on Elan.

He said that given the balance between superior efficacy and a reduced risk weighting, he would remain comfortable with the drug returning as a viable alternative rather than as a second line drug.

According to Goodbody, peak sales of Tysabri could reach $1.9bn by 2009.

The Irish Times reports that e-mails, instant communication, and increasing demands from foreign employers are stressing out senior managers in Ireland so much that some have a lower quality of life than the terminally ill, new research has shown.

Ciarαn O'Boyle, professor of psychology at the Royal College of Surgeons in Dublin, examined 23 senior managers and 110 newly appointed managers, using a measure the college pioneered to examine the quality of life of hospital patients.

He applied the method to analyse the stress of Irish managers for a study he is conducting with the Irish Management Institute.

"For senior managers, the quality of life was lower than any group of patients we looked at, including those who are terminally ill and those with motor-neuron disease," Prof O'Boyle said.

"Newly appointed managers had a lower quality of life than patients with osteo-arthritis and peptic ulcers."

The research comes as Ireland observes Work-Life Balance Day, a Government initiative supported by State agencies that's aimed at encouraging companies to communicate or improve their work-life balance policies for staff. The annual event is chaired by the Department of Enterprise, Trade and Employment and includes representatives from employers' group Ibec, the Equality Authority and other Government departments.

The managers examined for the study "work for global organisations and are so busy responding to demands - they're money rich and time poor", the professor said. "Technology such as Blackberries and e-mail has really allowed the urgency of demands to get the upper hand.

"If a company's parent is based on the west coast of the US, it creates a whole time-lag problem and a need for availability. There is the increasing sense that people are expected to be available 24/7."

As manufacturing decreases in importance in Ireland and the country strives for a knowledge-based economy, people will become companies' most important asset, Prof O'Boyle said. This means that organisations will have to put a far greater focus on "work-life integration", said the professor, who is also head of the school of healthcare management at the college.

The Irish Times also reports that Belgium has brought High Court proceedings against Ryanair for the recovery of more than €2.28 million provided by the Belgian authorities to the private airline for services to and from Charleroi Airport.

The Belgian move follows a decision by the European Commission in February 2004 that many of the financial arrangements agreed between Ryanair and the Walloon region of Belgium constitute state aid incompatible with the common market.

Ryanair yesterday asked the High Court to put a stay on the proceedings by Belgium pending the determination of Ryanair's appeal against the European Commission decision, which is currently before the Court of First Instance of European Communities. Belgium is opposing the stay.

The €2.28 million state aid relates to the launching costs of new routes, hotel and other accomodation, and subsistence for Ryanair staff and associated companies during the development of the base at Charleroi and aid for the recruitment and training of pilots and aircraft staff.

Counsel for Ryanair told the High Court yesterday that, if the proceedings by Belgium are stayed now, the cost to the public purse will be limited.

This was not a case where Ryanair has run away, he said. The airline had an interest in testing the European Commission decision. Money had been paid into an account by Ryanair and, if the airline does not succeed in Europe, the money goes to Belgium.

In an affidavit, the head of regulatory affairs at Ryanair, Jim Callaghan, said that, in the late 1990s, Charleroi Airport had an average of 57 passengers daily. Ryanair decided to set up a base there even though it was a wholly unknown airport and a very risky venture.

Since Ryanair's arrival at Charleroi in 1997, Mr Callaghan said passenger numbers had grown to about two million per annum.

Following an anonymous complaint, the European Commission's director general for transport and energy investigated the incentives offered to Ryanair and "purported to conclude that they constituted a package of both lawful and unlawful State aid", he said.

The European Commission decision has very serious ramifications for Ryanair, Mr Callaghan said. It seriously hampered the ability of state-owned regional airports to compete with monopolistic major airports which were typically extremely expensive to operate from.

On December 22nd, 2004, Ryanair had, under protest and without prejudice to its appeal, lodged €4 million into an escrow account with the government of the Walloon region in respect of the first tranche of the payments that the European Commission has required to be made to Belgium. This was because, he claimed, the Walloon region failed to comply with its own legislation in terms of granting discounts.

The European Commission had rejected back-up documentation provided by Ryanair and demanded that the Walloon region bring these proceedings.

In an affidavit, the director general of legal affairs of the Belgian federal public service Jan Devadder said the appeal process may take some considerable years and a judgment was unlikely to be reached before early 2007.

The Irish Examiner reports that the owners of a medical waste disposal company are in line for multi-million euro windfalls after selling up for around €110 million.

Dublin-based Sterile Technologies Group has agreed a cash and debt takeover offer from the Nasdaq-listed American company Stericycle.

Sterile Technologies is one of the biggest players in the medical waste disposal industry, with operations in Ireland and Britain.

Stericycle will spend €95m in cash up front for the Irish firm, with the remaining €14.3m being the assumption of Sterile Technologies debt mountain.

The biggest beneficiaries of the sale will be the well-known financier Paul Coulson and the Rogers family, who set up the company a decade ago.

Mr Coulson, the chairman of the Ardagh glass company, through his Luxembourg-based investment vehicle Yeoman International, owns 45% of Sterile Technologies and will net just under €43m from the takeover.

A similar figures will be received by Desmond Rogers and his family.

Mr Rogers, a 53-year-old Meath-based businessman, founded the company in 1996. He is active in the household and commercial waste industry and has built up the company over the years through acquisitions and expanding outside of the Republic.

Mr Coulson and the Yeoman group came on board as shareholders in 1999. The remaining shares are held by a group of senior executives.

One of the prize assets of Sterile Technologies is its 10-year contract with the Department of Health to dispose of all medical waste from the country's hospitals, which it won in 2003. It also has a similar arrangement in Northern Ireland.

According to the last set of accounts filed by Sterile Technologies at the Companies Registration Office, which cover until the end of 2004, the company had revenues of €34.6m and pre-tax profits of just over €1.6m.

Revenues are thought to have increased to around €37m in 2005, though it is not known if profits have also risen.

In a note to those accounts, chief executive Niall Wall said that following the takeover of Eurocare Environmental Services in 2004, the company was the "market leader in the clinical/healthcare waste processing market in Britain and Ireland."

The company employs more than 300 people. No reduction in the workforce is expected following the takeover.

Based in Illinois, Stericycle is one of the world's largest medical waste management firms with businesses in the US and Europe and 330,000 customers.

In 2005, the company had sales of €510m and net profits of €57m. It said the deal would add it its earnings immediately.

The Financial Times says that the eurozone's economic recovery has pushed confidence to a fresh five-year high while core inflation has tumbled, according to data released on Tuesday.

But the generally upbeat picture provided by the European Commission's sentiment survey was marred by Spain, which has been one of the 12-nation eurozone's best performing economies but where the mood has darkened dramatically.

The survey is the latest evidence that the general economic pick-up in the eurozone over the past six months is gaining momentum, without any serious inflationary impact so far.

"Core" inflation – excluding energy prices – fell unexpectedly sharply in January, according to detailed figures released by Eurostat, the European Union's statistical unit. Inflation excluding energy, food, alcohol and tobacco – a measure watched closely by financial markets – fell from 1.4 per cent in December to 1.2 per cent last month – the lowest since February 2001.

The "core" inflation figures compared with a headline inflation rate of 2.4 per cent in January, up from 2.2 per cent in December.

But the Commission's economic sentiment index for Spain plunged in February to the lowest level since February 1994, largely because of a collapse of confidence in the construction and retail sectors.

Although the country has for many years outperformed the eurozone average, worries have mounted recently about its expanding current account deficit and vulnerability to a house price collapse. Spain's January inflation rate of 4.2 per cent was the highest in the eurozone. The harsh winter might also have hit Spanish confidence, analysts said.

The data comes as the European Central Bank is almost certain to raise its main interest rate on Thursday by a quarter percentage point to 2.5 per cent. Jacques Cailloux, economist at JP Morgan, said that the Commission's survey revealed "nothing that goes against its base-line scenario of a continuation of the eurozone pick-up".

Unlike the US Federal Reserve, the ECB dislikes "core" inflation measures. As such it is likely to express concern about long-run inflation pressures created by high oil prices.

But the still modest underlying inflation pressures, and continuing doubts about the sustainability of the upswing, provided ammunition for those urging the ECB not to rush subsequent interest rate increases.

Jean-Claude Trichet, ECB president, has deliberately avoided sending signals about possible rate rises later this year – again in contrast to the strategy adopted over the past year by the US Fed. Instead, the ECB's governing council is awaiting clearer trends to emerge from "hard" economic statistics, as well as sentiment survey data.

Labour market figures also took some of the gloss off Tuesday's economic news. France's unemployment rate in January nudged higher, and Germany saw a much smaller-than-expected fall of 5,000 in its seasonally adjusted unemployment total to 4.695m in February.

But the Commission's survey showed manufacturing and service companies have become more optimistic about their employment expectations. The Commission's eurozone "economic sentiment" index rose from 101.5 in January to 102.7 in February, the highest since June 2001. Economic sentiment improved in Germany, where industrial confidence has soared in recent months, and in France.

The FT reports that the US Supreme Court will on Wednesday consider the constitutionality of billions of dollars in tax breaks that 46 out of 50 states use to lure investment and jobs from competing localities.

Should the court rule against the incentives, the US business community says the potential for political and fiscal fallout is vast.

Although the case before the justices involves DaimlerChrysler and a Jeep plant in Toledo, Ohio, it is a story repeated across the nation. Big companies, many of them carmakers, get billions of dollars each year from states and cities in what critics call an "escalating arms race" of tax incentives.

"No one dares to unilaterally disarm," says Peter Enrich, professor of law at Northeastern University and counsel for a group of plaintiffs who are challenging the tax breaks. "That's where the court comes in."

The debate springs from Daimler's 1996 threat to pull its Jeep operations out of Toledo and move across the border to Michigan. In order to encourage Daimler to remain and expand, Ohio offered a range of incentives, including land and tax breaks. But a group of Ohio taxpayers, Michigan citizens and a small business owner, whose property was taken as part of the deal, challenged it in court, and won. A federal appeals court ruled that one of the tax breaks was an unconstitutional form of discrimination against interstate commerce.

Now the Supreme Court justices must decide whether the federal appeals court was right.

The case has provoked a flurry of lobbying from interest groups that hotly debate not just the constitutionality of tax breaks, but their wisdom as economic and public policy.

Justice Robert Orr, a retired North Carolina Supreme Court justice who has mounted a national campaign against tax incentives and filed a brief to the court arguing against the Daimler credit, says such inducements are a "zero sum game". "We're not talking about creating jobs, we're just talking about shifting jobs from one state to another," he argues.

Greg LeRoy, director of Good Jobs First, an anti-tax break lobby group that also filed a brief, says they are a "tragic waste of money" that drain resources away from spending on the skills and education that alone will bring real development.

Mr Orr says this case is just like last year's controversial case involving some Connecticut homeowners who were forced to sell their homes for economic development – the bottom line is: the government is taking people's money.

But the US business community and several states are lobbying the justices just as vigorously to uphold the tax breaks.

The US Chamber of Commerce, in a brief to the Supreme Court filed jointly with the National Association of Manufacturers, says that unless the Supreme Court overturns the lower court decision, "states will be unable to use their tax systems to encourage development in destitute areas and they will cease to offer incentives designed to 'provide jobs and prosperity to their citizens' , a practice the Supreme Court has emphatically endorsed".

If the justices decide that Ohio's tax incentive is indeed unconstitutional, it could "cause many publicly traded companies to restate their earnings", according to a "tax alert" from the law firm Blank Rome, which argues that Ohio's tax breaks are indistinguishable from those in other parts of the country.

But legal experts say the justices may well never get to the real meat of the case. In order to be able to sue in federal court, plaintiffs must cross a big procedural hurdle. They must have "standing" to sue, a complicated test that involves whether or not they have been directly injured. The plaintiffs in this case may well not be able to pass that test.

Christopher Bartolomucci, a Supreme Court expert at the law firm Hogan & Hartson, says the court may not ever get to the real issue of tax breaks.

"The Supreme Court has set a very high bar for litigants who claim standing on the basis of their status as taxpayers, because otherwise?.?.?.?the floodgates would be open to all kinds of suits over various government programmes [where plaintiffs] are not directly injured by them."

And even if the justices do reach the meat of the case, and rule against tax breaks, Congress is poised to debate legislation that would legalise them yet again. So the dire consequences predicted by parties on both sides may never come to pass.

But either way, the battle over state tax incentives is likely to continue, in the courts and in Congress.

The New York Times reports that Google's share price tumbled more than 7 percent yesterday after the chief financial officer told investors that the company saw few further advances in a technology that had allowed a substantial increase in its advertising revenue.

But late in the day, moving to reassure investors, Google issued a statement that appeared to contradict the executive's remarks.

Initially yesterday morning, the shares fell nearly $52, or 13 percent, after the comments by the finance executive, George Reyes, at a New York conference held by Merrill Lynch. They rebounded somewhat to close at $362.62, down $27.76.

Google's stock had shot up from an initial public offering price of $85 in August 2004, reaching a closing high early this year of $471.63.

Since late January, when the company reported modestly disappointing earnings, its shares have been volatile. Investors were also shaken by negative reviews of its entry into the online video market.

"Google investors are particularly emotional," said Jordan Rohan, an analyst with RBC Capital Markets. "Some of it has to do with the notion that companies like this could exist in 1999, but are impossible today."

He added later, "When Google investors hear the C.F.O. make any comment that can be contorted to be pessimistic, they overreact."

Google has, in fact, done more to provoke anxiety among investors than to calm them. It has said it will not provide guidance about its financial results, and it has been more reluctant than other companies to meet with investors or answer their questions. Its chief executive, Eric E. Schmidt, alienated many on Wall Street last month when he told Time magazine, "The company is not run for the long-term value of our shareholders, but for the long-term value of our end users."

At Merrill's conference yesterday, Mr. Reyes said Google's revenue growth rate was going to slow from its torrid pace. In response to a question from an investor, he said the company was no longer seeing additional financial benefits from advances in technology that it developed to select the advertisements to display on a given page of search results. This system, which analyzes millions of pieces of data, has allowed Google far more advertising revenue than other search engines from each page shown.

For 18 months, Google reaped the efforts of "a team of really very bright technical engineers that were trying to tweak and optimize the ad system," Mr. Reyes said, according to a transcript of his remarks by Piper Jaffray & Company. That system has become so effective, he added, that "most of what's left is organic growth, which means you have to grow your traffic."

Mr. Reyes also told investors that Google's wide-ranging experimentation in new products would soon start to contribute to its growth.

"Clearly, our growth rates are slowing," he said, "and you see that each and every quarter. And we're going to have to find other ways to monetize the business."

He went on to say: "I am not turning bearish at all. I think we have a lot of growth ahead of us. The question is, at what rate?"

After the close of regular trading yesterday, Google issued a statement "to clarify and provide further information" on Mr. Reyes's remarks. It affirmed that "monetization improvements" — the efforts to derive gains from technical advances — "continue to be a key factor in driving future revenue growth." The statement had relatively little effect on the shares after hours; they settled up $1.37, at $363.99.

Whatever the further advances in its technology, Google is gaining in its core search business. Safa Rashtchy, a Piper Jaffray analyst, issued a note to investors citing new figures from comScore Networks that show Google was used for 41.4 percent of American searches in January, up from 40 percent in December.

And even at its current stock price, Google is worth $107 billion, making it the most valuable media company. Its shares trade for more than 60 times existing earnings, a rich level.

Google will face investors tomorrow at its second annual all-day meeting for analysts at company headquarters in Mountain View, Calif. Last year, many were disappointed at how little useful information it provided, and analysts say they expect little more than a recitation of recently introduced products.

Among the moves to "monetize the business," as Mr. Reyes put it, is a test that Google began last week on a payment system that would let its users buy items that are listed on the GoogleBase classified system. It is expanding its paid video offerings and testing a system that connects its users with advertisers by telephone rather than on a Web page. And it is bidding in partnership with EarthLink to build a wireless Internet system in San Francisco.

Steve Weinstein, an analyst with Pacific Crest Securities, said yesterday's comments did not change his opinion of Google's prospects. He estimates that Google's gross revenue will increase 61 percent this year, compared with 93 percent last year.

"A company this size can't compound at the growth rate they had in 2005," he said. "What is very hard to get your hands around is what is the magnitude of that deceleration."