8th Jul 2005 07:00
Morgan Crucible Co PLC08 July 2005 The Morgan Crucible Company plc, ("Morgan") the specialist materials company, isissuing this trading update ahead of its half year results for the period ended4th July 2005, scheduled for 2nd August 2005. Trading Highlights • Morgan has continued to make good progress during the first half of 2005 and expects to announce operating profit results that are in line with the consensus of analysts' expectations. • The European market environment has weakened further in the first half of 2005. This has particularly impacted the Magnetics and Crucibles businesses given their higher proportion of European sales. Nevertheless, the Group has been able to offset this with demand remaining robust in our North American and Asian markets combined with the ongoing success of our profit improvement programme. • Like-for-like sales have continued to grow comfortably ahead of GDP with turnover from continuing business being circa 5% higher in the first six months on a constant currency basis than the equivalent period last year. • Restructuring charges for the six-month period, as part of the profit improvement programme, are in the region of £11m with a cash spend of circa £12m. • Net debt, which is predominantly dollar denominated to provide a natural hedge, is expected to be broadly in line with the equivalent period last year on a constant currency basis. Commenting on the results, Chief Executive Officer, Warren Knowlton said: "Morgan is continuing to deliver on its profit improvement plan while at thesame time posting top-line growth well in advance of GDP. Morgan is benefitingfrom the overall strength of its diversified global portfolio which has helpedto insulate it from the worst effects of a weakening European market witnessedin the first half of this year. It is pleasing that we continue to offset thenegative impacts of raw material and energy price inflation. Overall, we aremaking good progress towards the goal of double-digit operating profit marginsby the end of 2006." For further information please contact: The Morgan Crucible Company plcVictoria Gould, Director of Group Communications 01753 837 000 Finsbury GroupCharlotte Hepburne-Scott / Robin Walker 020 7251 3801 Divisional Trading Comment CarbonThe Carbon division has performed well in the first half of the year compared tothe equivalent period in 2004. Performance has been strong in the traditionalbrush and seals and bearings markets. First half sales in the armour andsemiconductor markets have also been good although the outlook for the secondhalf in these markets is more difficult to predict. The business continues tobenefit from good market conditions in the Americas. Trading conditions havebeen difficult in Europe, although some sales growth has been generated. TheAsian business, particularly in China, has taken advantage of the organic growthin the region and our ongoing investment. The division is benefiting from therecent restructuring plans, including the rationalisation of a number of smallersites, continuing overhead reduction and an ongoing move to low costmanufacturing countries. MagneticsThe Magnetics division has seen continued revenue growth compared to the sameperiod in 2004, however, the European market environment has weakened in thefirst half of 2005 making trading conditions more challenging. In particular,the permanent magnets business has traded below expectations due to the weakdemand for semiconductor applications and customers' loss of their business toAsian competitors. Our joint venture with San Huan, the largest rare earthmagnets producer in China, began trading in May which is expected to help thepermanent magnets business going forward. The materials and parts business hasperformed well driven by strong demand in the electronic article surveillanceapplication. The cores and components business has also performed well throughgood growth in the installation and telecommunication markets compared to 2004and with a strong order book for the second half of the year. Raw material priceincreases in nickel and cobalt in the latter half of 2004 will negatively impactfirst half results; however margins are expected to improve in the second halfas ongoing cost reductions and falling cobalt prices benefit the bottom line. Thermal CeramicsThe Thermal Ceramics division has performed well in the first half of the yearcompared to the equivalent period in 2004. The business has continued to expandits geographic presence with the formation of a 70% Joint Venture with HubeiKailong in China. This, along with expansion and modernisation of facilities inChina, India, Australia and Korea, has enabled the division's growth momentum inAsia to continue in double digits. As a result, the business is well advanced inits goal of balancing its turnover between the trading blocks of Europe,Americas and Asia. In addition the launch of a new high temperature bio-solublefibre (Superwool 607HT) is enabling Thermal to be at the forefront of developingnew products adapted to the needs of current legislative and environmentaldemands of the European and American markets. Crucibles Overall trading conditions worsened for Crucibles in the first half of 2005,against a background of generally poorer economic forecasts and falling demandin Europe. This was exacerbated by rapid rises in raw material prices and fueland energy costs, which put pressure on margins and dented confidence in theprospects for recovery of the foundry sector and its supply chain. This extendedalso to North America, where capital equipment sales faltered and somedestocking by distributors was evident. Asia and South America appeared immuneto this trend and here good progress continues to be made. Technical CeramicsThe Technical Ceramics division is continuing its positive 2004 momentum ofimproving top and bottom line performance. Of particular note was the stronggrowth in the USA in sales for the new generation of computer hard disk drives.This was complemented by significant sales growth into the medical market, aswell as continued demand for laser and power tube products. The move to lowercost manufacturing areas took a further step with the purchase of the minorityshareholding in our joint venture in Yixing, China coupled with the continuedtransfer of selected additional manufacturing operations from Europe to thisregion. Operating profit improvements from the cost reduction plans arecontinuing to come through, including the successful relocation of a major UKmanufacturing site, and the rationalisation of a US distribution site. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Morgan Advanced Materials