6th Dec 2005 07:01
Morgan Crucible Co PLC06 December 2005 6th December 2005 The Morgan Crucible Company plc ("Morgan"), the specialist materials company, isissuing this trading update ahead of its full year results for the year ending4th January 2006, scheduled for 22nd February 2006. Trading Highlights • Sale of the Magnetics division for an enterprise value of c£300 million, comprising £225 million cash and £75 million of pension and other employee liabilities assumed by the purchaser - completion due in December • Morgan has continued to make good progress during the second half of 2005 and expects to announce full-year operating profit in line with the consensus of analysts' expectations for the continuing group (excluding the Magnetics division) • 2005 like-for-like sales growth from continuing businesses is forecast to be c.4% on a constant currency basis • Group operating profit margins are continuing to progress well towards Morgan's publicly stated target of double-digit margins by the end of 2006. Full year 2005 margins on continuing business are expected to be over 8.5% vs 7.2% last year (on an IFRS basis) • Morgan's financial strength will be transformed as a result of the disposal of the Magnetics division, with a zero net debt position at the end of the year Commenting on the results, Chief Executive Officer, Warren Knowlton said: "Morgan has entered a new phase in its performance and prospects. Our financialposition will be transformed by the proceeds from the sale of the Magneticsdivision and our business has been further simplified by the disposal. We nowhave a business that is focused on growing in the areas where our marketposition is strongest. We are continuing to deliver on our profit improvementplan. This strict cost management focus, combined with good organic sales growthand a strong position in the majority of our chosen long term growth markets,means that Morgan is well positioned for the future." Divisional Trading Comment Carbon The Carbon division continued to perform well in the second half of 2005,building on the strong performance in the first half of the year. Marketconditions in the Americas remain robust. Performance has been strong in thetraditional brush and seals and bearings markets and also in the semiconductormarket. Armour sales reduced during the summer period due to changes in thespecifications required by the US military; however these have now beenaddressed and sales are increasing once again. Trading conditions remainrelatively weak in most of Europe, although some sales growth has beengenerated. There is good organic growth across most of the businesses in Asia,particularly in China, and the division is benefiting from the capital andresource investment that continues to be made in the region. The programme ofsite rationalisation, overhead reduction and the move to low cost manufacturingcountries is continuing successfully. Technical Ceramics Trading performance for the Technical Ceramics division has remained strongthroughout the second half of the year. As a result the business continues tomake good progress towards its goals of organic sales growth and marginexpansion, with improvements being seen in all regions. The business hascontinued to achieve cost reductions and these helped to offset raw materialsand energy cost increases. US markets remain strong overall: the telecoms marketin the US suffered in Q3 as last year from some supply chain overstocking, butthis has cleared in Q4 with a return to higher levels of activity. OverallEurope was stable, and in Asia additional capacity is now in place in theYixing, China facility that will allow the division to meet the growing demandfor its thermal processing products in that region. Globally, the piezo ceramicand medical segments continue to show good growth and an investment programmehas recently commenced to expand the piezo business across all regions. Thermal Ceramics The Thermal Ceramics division has continued its positive first half performancewith sales in the second half ahead of the comparative period last year. ThermalCeramics continues to expand in the growth markets of Asia and Latin America,with expansion and modernisation of facilities in China, India, Australia,Brazil and Korea. At the same time the division remains focused on reducing thecost base in Europe and North America to help offset the impact of the costrises in raw materials and more significantly in energy which has put pressureon margins in the second half of the year, particularly in Europe. The launch ofa new high temperature bio-soluble fibre (SuperwoolTM 607HT) during the secondhalf of 2005 is enabling the Thermal Ceramics business to increase its marketshare. Crucibles After a difficult first half, particularly in Europe, overall trading conditionsfor the Crucibles division stabilised during the latter part of the year. Therapid worldwide increases experienced in fuel and energy costs havesignificantly added to our own manufacturing costs and suppressed operatingmargins.Whilst demand in Western Europe remained relatively subdued, some growth wasachieved in parts of Eastern Europe and throughout Asia. Financial Position The sale of the Magnetics division will transform the balance sheet of Morganwith net debt being eliminated. Our intention is to reduce the deficit in the UKpension schemes substantially in Q1 2006. Financial flexibility to acceleratethe strategic development of the Group will also be enhanced by the proceeds ofthe disposal. We are actively pursuing possibilities for bolt-on acquisitions aswell as further investment in growing our core businesses. We will aim for alonger-term net debt position in a range of 1x to 1.5x EBITDA as accretiveinvestments are made. Enquiries For further information, please contact: The Morgan Crucible Company plcVictoria Gould Tel: +44 (0)1753 837 237Director of Group Communications Finsbury GroupRobin Walker Tel: +44 (0) 20 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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