1996 Net Income: FF 2.7 Billion, From Recovery to Growth

Paris (pts006/19.03.1997/16:45) Paris, March 18, 1997 - On March 17, 1997, Serge Tchuruk, CEO, presented the Group's audited financial statements for the year ending December 31, 1996, to Alcatel Alsthom's Board of Directors and reviewed the progress made in the recovery plan.

Net income for 1996 amounted to FF 2.7 billion, slightly higher than estimates communicated on January 30.

Alcatel Alsthom returned to profitability in 1996 due to the beginning of the recovery in the Telecom segment and capital gains realized from the non-strategic asset disposal program. These results are in line with the action plan put into place in the second half 1995, the main objective of which was to restore Alcatel Alsthom's financial performance by 1998.

In view of these results and the outlook as seen today, the Board of Directors will propose to the Annual Shareholders' Meeting on June 19, 1997, a dividend of FF 10.00 per share, to be paid in cash, compared to FF 8.0 per share the previous year, representing a total dividend per share of FF 15.00, including tax credit.

1996 Results

Net sales amounted to FF 162.1 billion in 1996, compared to FF 160.4 billion in the previous year, an increase of 1% over 1995. On a comparable basis, sales were stable compared to the previous year.

Research and development expenses amounted to FF 16.6 billion, representing 10.2% of sales, the same level as last year.

Income from operations, calculated before financial results, reached FF 2.9 billion, compared to FF 0.6 billion in 1995. While showing progress, the level of income from operations remains relatively low and confirms the need to continue the vigorous actions undertaken for the Group's recovery within the established time frame.

After taking into account financial charges, restructuring costs, amortization of goodwill, and capital gains realized from the program of disposal of non-strategic assets, income before taxes amounted to FF 2.7 billion compared to a loss of FF 26.0 billion in 1995.
The objective of raising FF 10.0 billion resulting from asset sales was exceeded with the sale of FF 11.0 billion of assets in 1996, in addition to the FF 1.0 billion sold in the second half 1995. Also, the partial disposal of the Group's participation in Havas was announced at the beginning of 1997, for an amount at least equal to FF 3.4 billion.
Income taxes amounted to FF 0.7 billion in 1996, compared to FF 1.2 billion in 1995. Share in net income of equity affiliates amounted to FF 1.0 billion compared to FF 0.2 billion in 1995. Net income, after minority interests, amounted to FF 2.7 billion compared to FF (25.6) billion in 1995.

The Group's net financial debt decreased to FF 13.1 billion in 1996 from FF 20.0 billion in 1995, after taking into account the disposal of Cofira. Gearing stood at 32% (before appropriation) compared to 61% in 1995, reflecting the return to a low level of debt.

Segment Analysis

The recovery in orders in the Telecom segment (+21% over the previous year) reflects the Group's repositioning in strong growth markets such as transmission, access, mobile infrastructure and space. Sales increased by 6%. Following operating losses in 1995 and in the first half 1996, income from operation returned to a positive level in the second half of the year as indicated in earlier forecasts. For the full year, income from operations amounted to FF (0.8) billion compared to FF (3.3) billion in 1995. This recovery integrates the initial effects of productivity efforts achieved. At the same time, the reorganization of the segment by product line division has resulted in a much more efficient marketing approach.

Sales of the Cables segment decreased by 3% at a comparable structure and constant copper prices. Business was characterized by growth in the fiber optic, data, and high frequency cables sectors, however, a significant loss was incurred in submarine cables. Income from operations amounted to FF 2.1 billion compared to FF 2.3 billion in 1995.

GEC Alsthom's sales increased by 2% in 1996 and included for the last three months of the year the Power Transmission and Distribution activities acquired from AEG. Income from operations amounted to FF 1.4 billion compared to FF 1.3 billion in 1995. GEC Alsthom maintained its level of profitability, one of the highest in its industry.

Sales in the Systems segment increased by 11%, half of which is attributable to the consolidation of AEG's Systems and Automation activities during the last three months of the year. Income from operations amounted to FF (0.2) billion compared to FF (0.4) billion in 1995. This segment is profitable excluding Alcatel Siette (Italy), where losses have nevertheless decreased.

The Batteries segment sales increased by 13% over the previous year. Income from operations amounted to FF 0.3 billion compared to FF 0.2 billion in 1995.

1997/98 Strategy and objectives

Parallel to the restructuring plans in progress, 1997 will be oriented to pursuing other actions to improve productivity: simplifying the Group's organization and its legal structure, optimizing real estate holdings, and reinforcing internal controls, particularly the centralization of the Group's treasury. The reduction of fixed costs which should be realized from these actions should allow annual savings of approximately FF 1.0 billion. In addition, the coordination of purchasing activities will be intensified.
As a result of actions taken during the last months and the policy of maintaining research and development efforts, the Group is now positioned to benefit from the expected growth in the telecommunications market, resulting, in particular, from the very high demand in mobile communications and the explosion of the Internet.
Alcatel possesses both specific and complementary strengths which gives it a decisive advantage: the world's largest installed switching base, a leading position in synchronous transmission in Europe as well in the United States, the most complete line of access products, a strong presence in telecommunication satellites, and the world leadership in submarine cables. In all of these businesses, profitability should improve as a result of volume increase and the launch of new products benefiting from a more favorable cost structure.
In the Cables segment, the telecommunication cable markets (fiber optic, data cables, high frequency and mobile accessories) should continue to grow significantly due to continuing demand in Europe and the United States.
The actions, already achieved or in progress, as well as our knowledge of developments in the Group's main markets, underpin the objective of a return to a satisfactory level of profitability by 1998.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements relating to the Group's expectations for an improvement in profitability for 1997 and 1998. Such expectations assume that (I) efforts to simplify the Group's organization and increase internal controls will reduce fixed costs by FF 1.0 billion, (ii) the Group will benefit from growth in the telecommunications market, and (iii) the Group's sales volume will increase in several product markets. Actual results could differ materially from the above as a result of these or other factors.
Contact : Press Office Tel : +33 1 40 76 12 03

Aussender:	Alcatel Austria AG
Ansprechpartner:	Dr. Anton Bum/Alcatel Austria AG, email: anton.bum@aut.alcat
Website:	www.alcatel.at/