18th Jan 2005 07:00
Cookson Group PLC18 January 2005 18 January 2005 FOURTH QUARTER 2004 TRADING UPDATE AND OUTCOME OF STRATEGIC REVIEW Cookson Group plc, the international materials science company, will present theoutcome of its strategic review to analysts and shareholders at 9:30am today. Acopy of the strategy review slides will be available on the Cookson website,www.cooksongroup.co.uk, from 9:30am today. A full archived webcast will beavailable from 3:30pm today. In conjunction with today's presentation, the Company provides the followingcommentary on trading during the fourth quarter of 2004. All financialinformation is preliminary and unaudited; sales and operating profit comparisonsare at constant exchange rates. Fourth Quarter Trading Update Performance for the Group in the fourth quarter of 2004 was consistent with theindication given in the Third Quarter Trading Update issued on 5 November 2004.As a result, profit before tax and exceptional items for the year is expected tobe in line with current market forecasts and significantly higher than 2003.Group sales for the fourth quarter of 2004 were up on both the preceding quarterand the same quarter in 2003 and operating profit also improved over the sameperiods. Cash generation was strongly positive in the fourth quarter and, as aresult, net borrowings at the end of 2004 were lower than at 31 December 2003. Electronics division Fourth quarter sales were similar to the preceding quarter and up on the fourthquarter of 2003. Sales for each sector were also similar to the precedingquarter, with the Assembly Materials and Laminates sectors up on the samequarter in 2003 but marginally lower in Chemistry. As anticipated, year-on-yearsales growth across the division was lower in the fourth quarter than in thefirst three quarters of 2004. This was largely due to the sharp improvementregistered in the last quarter of 2003 which impacted comparisons with the prioryear; this was also in line with the experience of the wider electronicsindustry. Cost saving and efficiency measures ensured that profitability in thefourth quarter continued to improve both sequentially and year-on-year. Ceramics division Sales and operating profits in the fourth quarter improved strongly over boththe preceding quarter and the prior year's fourth quarter. Global steelproduction, the division's main market, remained robust, as did the performanceof the division's Iron & Steel sector, and, collectively, the non-steel sectorsof the division also performed soundly. Precious Metals division The division experienced slower than anticipated peak holiday season sales,reflecting softness in consumer demand in its key US and UK markets.Nevertheless, sales and operating profit in the fourth quarter of 2004 improvedsignificantly over the preceding quarter and, although marginally down on thefourth quarter of 2003, profits for the year were up on 2003. Investments/Restructuring/Disposals Since the Third Quarter Trading Update, further initiatives to increaseoperating efficiency and reduce the cost base have been implemented in theElectronics division. These incorporate additional reductions in the division'soverhead structure, primarily in the USA, and downsizing production at theLaminates sector's US East Coast facility. It is also intended to reduceLaminates capacity in Germany by some 75% and discussions with the local workscouncil are currently underway. The one-off operating exceptional charge forthese initiatives is expected to amount to some £8 million in 2004, of which £5million relates to cash costs. The Group's investment in a 17-year revenue sharing agreement with ElectricLightwave, Inc. relating to a fibre-optic cable network between Portland and LosAngeles in the USA, for which royalties of £0.4 million per annum are currentlyreceived, has been revalued. This followed a reappraisal of the underlyingeconomics of the agreement and results in a non-operating exceptional charge ofsome £18 million in 2004. In December 2004, the Ceramics division sold two underperforming businesseswhich make silica and zircon bricks used in glass melting furnaces with plantsin Belgium and Germany. These businesses had sales of £21 million in 2004. Thecash consideration received of £1 million resulted in a loss on disposal of £33million, including a write-off of goodwill of £8 million. The "fraternity ring" activities of the Precious Metals division's US operations- which had annualised sales in 2004 of c.£3 million - were sold in December2004 for £3 million at a net gain of £1 million. Outlook Based on the first two weeks' trading and current order book levels, it isanticipated that the generally solid trading environment seen in the fourthquarter will continue in the first quarter of 2005. Cookson's preliminary results for 2004 will be announced on 15 March 2005. Outcome of Strategic Review Since July 2004, when Nick Salmon was appointed Chief Executive, the Board hasconducted a detailed review of all Cookson's businesses and the strategicoptions open to the Group for maximising shareholder value. This review has determined that the optimum strategy for realising Cookson'sfull potential is to focus on enhancing the operating performance of Cookson'score businesses, whilst disposing of some non-core elements from within allthree of the Group's divisions. Disposal proceeds from such transactions overthe next two years are expected to be over £100 million. The Board intends to return Cookson to the dividend list as soon as possible,with dividends being funded from free cash flow. Commenting on the strategic review, Cookson Chief Executive Nick Salmon said: "Over the past six months I have been pleased to confirm my initial impressionsthat Cookson has strong market positions in all our business sectors, withhighly competitive products and technology and an excellent geographicfootprint. "We are very confident that the chosen strategy of focusing on enhancing theoperating performance of our core businesses, whilst reducing debt through aprogramme of non-core disposals and improved cash flow, will deliver value toshareholders. "We are already acting decisively in accelerating the rate of change that thisstrategy requires, in restructuring or exiting underperforming businesses,initiating the disposal programme and in driving further costs out of thebusiness." Shareholder/analyst enquiries: Nick Salmon, Chief Executive 020 7061 6500Dennis Millard, Group Finance Director 020 7061 6500Lisa Williams, IR Manager 020 7061 6500 Media enquiries: John Olsen, Hogarth Partnership 020 7357 9477 Note: This announcement contains forward looking statements about Cookson. Althoughthe Company believes its expectations are based on reasonable assumptions, anysuch statements may be influenced by factors that could cause actual outcomesand results to be materially different from those predicted. These forwardlooking statements are subject to numerous risks and uncertainties that couldcause actual results to differ materially from those in such statements, certainof which are beyond the control of Cookson. About Cookson Group Cookson Group is a leading materials science company which provides materials,processes and services to customers worldwide. The Group's operations are formedinto three divisions - Electronics, Ceramics and Precious Metals. TheElectronics division is a leading manufacturer and supplier of materials andservices to the electronics industry, primarily serving fabricators andassemblers of printed circuit boards, assemblers of semiconductor packaging andthe electrical and industrial markets. The Ceramics division is a world leadingsupplier of advanced flow control and refractory products and systems to theiron and steel industry and is also a leading supplier of refractory liningmaterials for iron and steelmaking and other industrial processes. The PreciousMetals division is a leading supplier to the jewellery industry of fabricatedprecious metals products. Headquartered in London, Cookson employs over 16,000 people in more than 35countries and sells its products in over 100 countries. Cookson Group plc, 265 Strand, London WC2R 1DB Tel: 020 7061 6500, Fax: 020 7061 6600 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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