(08-14) 07:20 PDT ATLANTA, (AP) —

The Home Depot Inc., the world’s largest home improvement store chain, reported Tuesday a 14.8 percent drop in second-quarter profit as sales slid, particularly at stores open at least a year.

The results beat Wall Street expectations for continuing operations, but Chief Financial Officer Carol Tome warned that Home Depot would reduce by nearly half the size of a previously announced plan to repurchase up to $22.5 billion in company stock if the sale of its wholesale distribution business falls through.

For the three months ended July 29, Home Depot said it earned $1.59 billion, or 81 cents a share, compared with a profit of $1.86 billion, or 90 cents a share, for the same period a year earlier.

The Atlanta-based company said earnings from continuing operations totaled $1.52 billion, or 77 cents a share, in the second quarter. On that basis, analysts surveyed by Thomson Financial were expecting earnings of 72 cents a share.

The results from continuing operations excludes Home Depot’s wholesale distribution unit, HD Supply, which the company has agreed to sell to private equity firms for $10.3 billion.

Revenue in the second quarter fell 1.8 percent to $22.18 billion, compared with $22.59 billion recorded in the same period a year earlier.

Sales at stores open at least a year, a key industry metric, fell 5.2 percent in the quarter, Home Depot said.

The company said it has been hurt by weakness in the housing market, which it expects to continue into next year.

“This is a difficult time and our performance reflects that,” Chief Executive Frank Blake said during a conference call with analysts on Tuesday.

Overall, Home Depot isn’t losing market share as fast as in the past, but Blake said the company’s goal is to gain market share.

Home Depot said last week that it may have to sell its HD Supply unit for less that originally planned. It hopes to close the sale later this year.

The company also said last week that it was lowering payments to shareholders who agree to sell their shares back to the company as part of a tender offer related to the stock repurchase plan.

Proceeds from the sale of HD Supply are expected to be used to partly fund the stock repurchase plan.

Blake declined Tuesday to provide further details about the HD Supply talks.

“I am not in a position to answer the very reasonable questions you may have about what is the likely outcome,” Blake said.

But Tome did address the impact on the stock repurchase program if the deal to sell HD Supply falls through.

“If we have no proceeds from HD Supply … our recap would be reduced to $12 billion,” she said.

For the first half of its fiscal year, Home Depot said it earned $2.63 billion, or $1.34 a share, compared to a profit of $3.35 billion, or $1.60 a share, for the same period a year ago. Six-month revenue fell 3 percent to $40.73 billion, compared to $41.97 billion recorded a year earlier.

Home Depot reiterated that it expects earnings per share from continuing operations to decline by 12 percent to 15 percent for fiscal 2007. Consolidated earnings per share are expected to decline by 15 percent to 18 percent for fiscal 2007, Home Depot said.

The company said its fiscal 2007 outlook does not include the impact of a 53rd sales week. The company projects that the 53rd week will add approximately 3 cents to its earnings per share outlook for fiscal 2007.

Also, Home Depot’s earnings per share outlook does not include any impact of the sale of HD Supply or any earnings per share accretion arising from the company’s plan to repurchase up to $22.5 billion in stock.

The Home Depot operates 2,200 stores in the United States, Canada, Mexico and China.

Shares fell 82 cents to $34.42 in early trading Tuesday.

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On the Net:

The Home Depot Inc.:

«www.homedepot.com»

LONDON: Turkiye Garanti Bankasi is on no ones list of global financial heavyweights. But the Turkish bank is going where the mightiest banks on Wall Street fear to tread.

Garanti is one of three Turkish banks that helped finance the $3.3 billion takeover of Migros, the largest supermarket chain in Turkey, in February. Big U.S. banks, nursing their own weakened finances, balked at the deal.

From the Baltic region to the Mediterranean, small, local banks like Garanti are stepping in to finance corporate buyouts as big multinational banks weather the credit crisis. While the mortgage troubles in the United States have caused problems around the globe - risky mortgage investments have turned up everywhere from Australia to the Norway - many small European lenders have been mostly unscathed so far.

Wall Streets pains have given these smaller lenders an opening.

“The international banks that were prepared to finance the deal were not offering competitive terms,” said Nikos Stathopoulos, a senior partner at BC Partners, the London private equity firm that bought Migros. “Wall Street had no appetite or willingness to finance such a deal.”

These are tough times for the buyout industry, which depends on leverage, or borrowed money, to pay for acquisitions. Big Wall Street banks that happily financed such deals are no longer willing to foot the bill.

Big banks are sitting on roughly $200 billion of buyout loans that they have been unable to sell. These institutions face rising losses as this debt loses value - perhaps as much as $9 billion during the first half of this year, according to Deutsche Bank.

So deal makers are looking to local banks to help pick up the slack. Danske Bank, a Danish lender, and DnB Nor Bank, the biggest bank in Norway, helped finance the recent takeover of Coor Service Management, a Swedish building services company, by Cinven, a British private equity firm. The price was about $832 million.

And when 3i Group, the big European private equity firm, set out to buy Active Pharmaceuticals of Oslo for $400 million in February, several Scandinavian banks, including Danske, helped pull the financing together.

“The small banks are charging good spreads now and getting a good return on their retail holdings,” said Julian Hirst, a managing partner in London at Tri-Artisan Partners, a merchant bank and takeover advisory firm. “They are getting into a market they werent able to compete in before.”

Banks like Danske are too small to finance giant takeovers. They are more likely to focus on deals worth less than $1 billion. Many of these banks are likely to team up with other lenders to spread the risk, Hirst said.

But these banks strong links with local businesses make them natural allies of buyout firms hunting for acquisitions, said Bernie Schuler, a 3i partner.

“We picked local Nordic banks because they have an interest in the local market,” he said. “If there is a trouble with the business or the deal, local banks can be more supportive.”

Among the big-name buyout firms turning to Turkish banks is Kohlberg Kravis Roberts, which recently bought the Turkish shipping company U.N. Ro-Ro Isletmeleri for $1.3 billion with the help of Garanti and Is Bankasi, the largest Turkish lender.

For the local banks, such deals give them experience in financing takeovers and if all goes well, they stand to increase their profits. But these banks tend to hold buyout loans, rather than sell them, so they are also exposing themselves to risks. And many of them have lowered their expectations for the returns that buyouts generate.

Still, these banks are happy to be at Wall Streets table.

Pedro Fonseca, an analyst at Nomura in London, said the difficult market conditions had “opened a window into a market they could until recently not really compete in.”

(01-22) 14:02 PST HAVANA, Cuba (AP) —

California hopes it can carve out an upscale market for such goodies as pistachios, figs, kiwi fruit and wine in Cuba, the land of ration cards and rice and beans at nearly every meal.

America’s top food-producing state has sent its first official agricultural trade mission to Havana to show its powdered milk and dairy products, as well a wide array of fruits, vegetables, nuts, dates, rice and cotton to the communist government.

California produces 400 types of farm products, but many specialized items Д including raisins, wine and almonds Д are produced in few other parts of America.

“We have a dozen products where we represent 95 percent of total U.S. production. There are many products that could do well here,” California Food and Agriculture Secretary A.G. Kawamura told The Associated Press on Tuesday.

Kawamura follows agricultural secretaries from 18 other states who have visited Cuba in recent years, and acknowledged that California is behind many states in establishing major trade relationships here. Despite being America’s largest generator of agricultural trade, his state shipped only $735,000 worth of farm products to Cuba in 2006, largely powdered milk, rice and wine.

Washington’s embargo prevents U.S. tourists from visiting Cuba and prohibits nearly all trade. But a 2000 law allows the Cuban government to buy U.S. food and agricultural products in cash, and America has been the island’s leading source of food and farm items since 2003.

Including shipping and logistical costs, Cuba imported $600 million worth of U.S. agricultural goods in 2007.

Kawamura said U.S. states that are near Cuba have a natural trade advantage, but that California could supply the $180 million in products that Cuba now imports from around the world.

Kawamura said California’s top sellers in Cuba would be products that can survive long shipping periods Д things like processed tomatoes, and also more expensive items.

“If you’re here, you live here and you’d like to have pistachios, I wonder how many other Cubans would like to have more access to pistachios,” he said. “Great if we can help fill that demand.”

Typical diets on the island include foods available through the government’s ration program: rice, potatoes, beans, small amounts of meat and other basic goods. Fruits and vegetables are often luxuries. While many Cubans receive funds sent by relatives in the United States, few families are likely to have enough money for nuts or figs when the average monthly state salary is about $19.50.

Still, diplomats and other foreigners can already buy some U.S. specialty items such as Tabasco Sauce, Heinz Ketchup and M&M chocolate candies at government-run Cuban supermarkets. Many American goods are sold at triple their normal prices or higher, and in some cases gather dust on the shelves.

But Kawamura said California aspires to be competitive with whatever Cubans are buying.

“California will have products that everyone can afford,” he said. “Even if we will certainly have products that will be expensive to some.”