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Monday, 26 June, 2000, 16:16 GMT 17:16 UK
Europe's corporate giants
Vodafone has grown by acquistion to the largest
Vodafone has grown by acquistion to the largest
A new list of Europe's largest companies shows the growing disparity between the stock market worth of a company and its size in terms of sales.

Despite the recent falls in technology stocks, European stock markets continue to value telecoms shares very highly, while the huge banking and industrial giants of central Europe have a much lower stock market rating.

By sales, six out of ten of Europe's biggest companies are German, including the two biggest car companies (DaimlerChrysler and Volkswagen), the biggest bank and insurer (Allianz) and the biggest utility (Veba) which is merging with rival Viag.

Europe's biggest companies - by sales
DaimlerChrysler: $140bn
BP Amoco: $77.8bn
Axa: $77.5bn
Volkswagen: $70.1bn
Allianz: $65.6bn
Siemens: $64bn
Royal Dutch Shell: $55bn
Deutsche Bank: $53bn
Ifi (FIAT): $52bn
Veba: $45.7bn

French insurer Axa, Italian holding company Ifi which controls Fiat, and two UK oil companies, BP Amoco and Royal Dutch Shell, complete the list.

But German companies fare less favourably on the stock market.

Of course, traditionally Continental companies relied more on loans from banks rather than stock market flotations.

And in terms of profits, the industrial giants, especially the car companies, have been sagging.

Market's different view

However, the differences are striking. The only German firms among the top ten companies by market capitalisation are Deutsche Telekom and its rival Mannesmann, the German telecoms firm which recently merged with Britain's Vodafone Airtouch.

Europe's biggest companies - by market value
Vodafone Airtouch: $264bn
Nokia: $254bn
BP Amoco: $210bn
Deutsche Telekom: $177bn
France Telecom: $144bn
Ericsson: $142bn
Royal Dutch Shell: $136.6bn
Mannesmann: $125bn
Total Fina: $112bn
Glaxo Wellcome: $108bn

The list of biggest companies by market capitalisation is dominated by the telecoms sector, with the two biggest mobile phone makers (Ericsson and Nokia), the two biggest fixed line operators (Deutsche Telekom and France Telecom), and the two biggest mobile phone companies (Vodafone and Mannesmann) dominating the list.

Many of these companies have demonstrated rapid rises in profitability, with Vodafone and Nokia's profits nearly doubling in the past year.

Oil companies make up three of the remaining four places in the top ten, with the pharmaceutical sector - once the darling of growth stocks - managing only one place.

Three more pharmaceutical companies - Novartis, Hoffman LaRoche and AstraZeneca - are in the top twenty, as are two more telecoms companies (British Telecom and Telecom Italia) and several financial institutions.

But noticeably, there is only one industrial company, Germany's electrical giant Siemens, in the top twenty by market value, at number 16.

DaimlerChrysler, with the largest sales of any European company, only ranks 26th in market value at $58bn.

Vodafone, meanwhile, the largest company in Europe on the stock market, ranks only 270th by sales.

And an even starker contrast is Fiat. The Italian car company, the ninth largest in Europe by sales, showed a 43% decline in profits, and a market value of just $1.5bn. This spring, the Agnelli family was forced to sell a major stake in Fiat to General Motors.

UK contrasts

In the United Kingdom, there is a similar contrast.

The largest companies by sales are dominated by the financial sector, including companies like CGU, Prudential, Legal and General, Royal and Sun Alliance, and HSBC Holdings. Oil companies and supermarkets are also among the top companies by revenues.

But the largest companies by stock market capitalisation are telecoms and pharmaceutical companies. The banks, in contrast, are out of favour after a wave of mergers and takeovers driven by the belief that their profits are under-performing.

That may be one of the keys to the contrasts.

Stock market valuations change very quickly, with the banks dominating the UK stock market just a few years ago.

Sales, and to a lesser extent profits, however, take many years to build up - and there are much smaller fluctuations year-by-year.

The volatility of the UK tech sector was demonstrated this year when nine new tech stocks were admitted to the FTSE 100 list of the largest companies in March, only for half of them to fall out of the index in June.

But some companies with large sales - for example Arcadia, which owns a string of high street clothing shops - have few profits and a very low stock market value.

Nevertheless, the figures will give much to ponder in the debate over the "new economy" in Europe.

Sceptics will argue that the market is dramatically under-valuing Europe's strong industrial base.

But advocates who believe that old economy companies are bound to be replaced by the new world of high tech will take heart from the fact that European stock markets seem to agree with them.

The survey was conducted by Germany's business newspaper Handelsblatt, and is based on sales in 1999, and stock market values in the middle of May.

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See also:

23 May 00 | Business
Tech stocks set to exit FTSE
08 Mar 00 | Business
Shake-up for UK share index
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Soros warns on tech stocks
19 May 00 | Business
Tech stocks slump again
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