The Gazette from Montreal, Quebec, Canada • 37

THE GAZETTE, MONTREAL, SATURDAY, DECEMBER 14, 1996 Stone-Gonsolidafed announces psice hikes This is no shot across the bow, company president says JAN RAVENSBERGEN THE GAZETTE not entirely convinced the optimal timing is Feb.l." At the Toronto Star, one of the larger newsprint consumers in the country, Jagoda Pike, vice-president (operations and human resources) said "we're skeptical" about whether the proposed increase can be made to stick industry-wide. Bombardier contract worth $97.4 million Bombardier Inc. said yesterday it won a six-year maintenance contract worth $97.4 million with Go Transit, Ontario's commuter-train agency. 'The deal is expected to be signed in early January, said Qrancine Durocher Monin, spokesman for Bombardier's mass-transit division. said Bombardier will repair and maintain the crown agency's rolling stock, which consists of 331 bi-level commuter coaches built by Bombardier, and 49 General Motors locomotives.

The work will be done in Toronto, with engineers assigned from Bombardier's plants in Thunder Bay and Kingston, as well as from its Quebec operations on occasion. 'The contract is scheduled to start on June 1, and a three-year optional extension clause could take it to June 2006. Go Transit system serves 25 million commuters a year and covers about 2.2 million kilometres annually Bombardier's mass-transit division president Michel Bar- il said in a statement that "our Thunder Bay facility has supplied the transportation agency with passenger cars for the last 19 years and this latest contract is a further vote of confidence in our ability" The division is based in Saint-Bruno, and its La Pocatiere plant has built commuter cars for various mass-transit systems around the world, including the New York subway. "The market is not showing the signs for the price to go up and stay up," she said. Terry Pendleton, senior vice-president "At today's level, companies are not (sales arid marketing) making money at Kruger in Montreal, said he wasn't an-OH newsprint." nouncing a price hike at least not yet.

"It's go firm was "not ready to say anything" about its plans "because we haven't yet been able to talk to all our customers." Quebecor has a 62-per-cent voting stake in Donohue and 19 per cent of the equity. It is the largest purely Canadian newsprint player, with annual production capacity of 1,5 million tonnes on an equity basis. The other large producers while in the range of Donohue's total production include significant American operations. Donohue has taken comparatively little downtime this year, Dupras said, just 60,000 tonnes, giving it an annual operating rate of about 96 per cent. That's considerably higher than the industry-wide operating rate this year to the end of October of 91 per cent Including an extended Christmas break that totals 15,000 tonnes of forgone newsprint production, Abitibi has taken 157,000 tonnes of downtime this year, of its annual 1.5-mil-lion-tonne capacity, said Tait, bringing its operating rate below 90 per cent.

At Stone-Consolidated, traditionally with Avenor the industry price-increase leader, Doughan was emphatic: "The statistical environment is very positive for this increase to go through in its entirety. At today's level, companies are not making money on newsprint. They are, in fact, giving away equity "At the prices that we're asking for, we'll still be significantly lower than the $750 (U.S.) price that existed in the first quarter of 1996." Newsprint prices have tumbled 30 per cent since March. Stone-Consolidated Corp. of Montreal fell into step yesterday behind Avenor Inc.

when it proposed a 15-per-cent hike in the price of newsprint to $575 U.S. a tonne, effective Feb. 1. Abitibi-Price Inc. of Toronto, another industry giant, and Montreal-based Kruger Inc.

have decided to hang back, at least for the time being, according to executives. Donohue an arm of the Quebecor Inc. empire, said an announcement could come as early as Monday. "We have started to notify our customers today that, we are going to support the Avenor increase," said Stone-Consolidated president James Doughan. Some financial analysts expressed doubts Thursday that the Avenor increase of $75 US.

a tonne would stick, to which Doughan replied: "We are not in the practice of announcing price increases as a signal, or as a shot across the bow. We only announce price increases when we fully expect to get them." At Abitibi, Robert Tait, manager (investor relations), said that while his firm is looking at an increase, "frankly, we have some doubts about the timing." But by the end of this year, Tait said, Abitibi will have worked down its mill inventories to where it was at the end of 1995, when newsprint prices were buoyant. And the industry is definitely moving toward a price increase, he added, probably sometime in the early part of the new year. But "we're James Doughan Paper company head ing to take at least a week to sort through," headded. He said Kruger's pro- 1 ducer inventories are "very close to normal within our system." The private firm has annual capacity of 921,000 tonnes.

And industry-wide, total producer inventories are generally in the range, Pendleton added "only 170,000 tonnes" ahead of a more normal level of about 500,000 tonnes. Others suggested, however, that the more normal level is closer to 400,000 tonnes. Andre Dupras, vice-president (communications and public affairs) at Donohue, said that Additional Issues PEGAZ ENERGY PEGAZ ENERGY INC. (Oil and gas corporation) FLOW-THROUGH SHARES $15,000,000 SAN FRANCISCO Profits on the wing CONTINUED FROM PAGE C1 executive officer and main shareholder of the chain's parent company, Les Boutiques San Francisco Inc. Ailes is a different way a different style, so we try to promote it differently," added Guy Charron, president and chief operating officer.

Clearly, they're doing something right. "In a retail climate that is considered extremely tight for clothing sales, Les Boutiques San Francisco Inc. has just reported the best third-quarter results in its history sales of $41.1 million (up 30 per cent from 1995) and net earnings of $1.7 million or 29 cents a share (up 80 per cent) in the three-nionth period ended Nov. 2. iThe Boucherville-based company is headed for record annual sales of about $140 million from its 129 Quebec boutiques operating under the San Francisco, L'Officiel, San Francisco Maillots, Frisco, Victoire Delage and West Coast names, plus the huge Les Ailes stores in Laval and Brossard.

Net earnings might also top the previous best of $3.1 million, recorded in 1992. After nine months, the total stands at $2.6 million. The chain was born in 1978, when Roberge, then 34, and his wife, Camille, opened their first store in the Promenades Saint-Bruno mall. called it San Francisco because California influences were very big at that time, the name was trilingual and it was easy to remember," said Roberge, a Quebec City native with a master's degree in marketing who previously was a partner in a group operating a 12-store chain called Expansion 20 Ans Inc. Before that, he'd worked for the Morgan and Bay stores.

San Francisco went public in 1985, when it had expanded to 22 stores and about $9.8 million in annual sales. It kept growing, broadening its product base and market by introducing divisions specializing in children's wear (Frisco), lingerie (Victoire Delage) and men's wear (West Coast). About 75 per cent of the items sold in the boutiques are from house lines manufactured for San Francisco, Roberge said. the summer of 1994, it opened the first Les Ailes de la Mode store in a one-time store in Brossard. (The Les Ailes name was inspired by the San Francisco chain's logo, which features the outstretched wings of an eagle.) An upscale store more than 30 times larger than a typical San Francisco boutique, Les Ailes was designed to appeal to shoppers' sudden passion for large-surface stores and their thirst for old-fashioned, personalized service.

The $12-million store was equipped with a restaurant, shoeshine stand, cloak room, even a piano (played by five hired pianists in the course of the week). Today, you need more than good products to excite clients," said Charron. "The client today wants good service, products and atmosphere. You have to innovate. "For us, service is one of the key elements for success.

At Les Ailes, we spend a lot of time and energy on the person-net We're trying to bring back what traditional shopping was in the big department stores of the past. That's important today." The second Les Ailes store opened last August in a former Pascal outlet in Carrefour Laval. They're going very well. They're already profitable," Roberge said yesterday. "There's a class of customers who hay? money and want this kind of service." Les Ailes has a reputation for being a bit pricey, but Roberge said that's not really the case.

"A lot of people think ifisexpensive, but our average transaction per client is $33." JHe expects to open one or two more superstores in Quebec next few years, then export the concept to Ontario or British Columbia. 1 San Francisco had stores in the Ottawa area at one time, but at present is exclusively in Quebec. 'hUFot us, it's easier at this time to concentrate our marketing tools in Quebec," Char ron said. TttOse tools include producing a weekly TV show Les Ajjes de la Mode aired on the TVA network, and a fashion magazine, also known as Les Ailes, which has 45,000 subscribers. Naturally, the TV show will be doing an extensive report oft today's fashion express from Quebec City.

Hongkong Bank profits up 16 CANADIAN PRESS VANCOUVER Hongkong Bank of Canada, one of the largest foreign-owned banks operating in Canada, reported ISer-cent increase in 1996 profits yesterday rtTJie bank said it earned $118 million for the year ended up 15.8 per cent over 1995. 'The bank also saw its total assets loans, securities and other assets grow by nearly 10 per cent to $21.5 billion. Meanwhile, its return on equity the best measure of a bank's profitability increased to 19.49 per cent from 17.78 percent. STTO are encouraged by these results," Hongkong Bank ptjgident William Dalton said in a statement. "They are evidence that our focus on striving to meet the ever-chang-ingahd diverse needs of our clients is bringing growth to thebank." Ebfcits size, Hongkong Bank's financial performance was en better than that of Royal Bank, the biggest and most pyqfitable of Canada's domestic banks.

Jhe Royal, more than 10 times the size of Hongkong Bank, made a profit of $1.43 billion. But its return on equity of 17.6 percent was nearly 2 percentage points lower than its smaller Competitor. 33alton said Hongkong Bank's net-interest income grew million from $445 million, primarily from expanded mortgage and commercial lending, which offset lower nirgins from falling interest rates and increasing HIGHLIGHTS After-tax cost: 55 Warrants: 3 years, $1.00 Pegaz Energy owns over 225 oil and gas-producing properties Highly qualified management team No administrative expenses. (Net income Net benefit) Well-balanced program for the exploration and development of properties Pegaz will participate in more than 100 drilling activities in the next 1 2 months The dilution of flow-through shares subsequently converted to class A shares following this offering will be only 5, which is exceptional No premium on flow-through shares versus class A shares Listing of Pegaz on the Montreal Exchange INTERNAT SECURITIES INC. Telephone: (514) 842-4111 Toll free: (800) 565-4110 Fax: (514)842-3600.