Gaz de France Raises Outlook as Sales Increase

Gaz de France, the country's main gas provider, posted a surge in fourth-quarter sales on Wednesday and raised its 2007 earnings guidance amid the backdrop of delays to its merger with French utility Suez.

The state-controlled company said fourth-quarter sales rose 13 percent to 9.3 billion euros ($13.48 billion).

"Gaz de France's financial objective for 2007 will be exceeded," the company said.

"Thanks to better cost control, the good overall performance of the business in the second half of 2007 and a normalized rate context, the 2007 EBITDA (earnings before interest, tax, depreciation and amortization) will be significantly higher than that of 2006," it said.

The French state currently owns around 80 percent of GDF's share capital, though its holding will decrease after the Suez merger.

The French government engineered the merger in 2006 in response to the threat of a bid for Suez from Italian utility Enel.

Shares Recover

GDF's higher sales and raised outlook helped its share price recover some of the losses suffered on Tuesday. The stock closed lower by 3.2 percent, while Suez was down by 5.3 percent.

On Tuesday, GDF and Suez shares fell 5.7 percent and 2.5 percent, respectively, after a source close to the situation told Reuters a Paris court had ordered GDF to give its works council more details on the merger, though analysts said it was unlikely to stop the deal closing in the first half of 2008, as expected.

"People are saying that the merger will be delayed. GDF is at a discount to its sector, but for us it looks quite cheap," said Stratege Finance fund manager Valerie Cazaban, who holds GDF shares in her portfolio.

Based on latest prices, GDF shares have fallen around 12 percent since the start of 2008. The stock rose 15 percent last year.