28th Jun 2006 07:01
Morgan Crucible Co PLC28 June 2006 28th June 2006 The Morgan Crucible Company plc ("Morgan"), the specialist materials company, isissuing this trading update ahead of its half year results to be announced on3rd August 2006. Trading Highlights • The transformation of Morgan has continued in the first half of 2006 with operating profit before restructuring costs at the half year anticipated to be somewhat ahead of expectations • The first six months of 2006 like-for-like sales growth from continuing businesses is forecast to be c. 7% on a constant currency basis, and higher than this based on actual exchange rates, with the Technical Ceramics business experiencing particularly strong top-line growth • Group operating profit margins have continued to show strong improvement and are expected to be approaching 10.5% for the half year • The balance sheet remains robust and the Group pension deficit has been substantially reduced following a £40m top-up injection into the UK schemes in March • Morgan's financial strength is being used to finance profitable growth with five small bolt-on acquisitions or JVs made in the first half of 2006 • Mark Robertshaw will take over as Chief Executive from 4 August and the Board is also pleased to announce that Kevin Dangerfield, currently Group Financial Controller, will become CFO on the same date. Commenting on the results, Chief Executive, Warren Knowlton said: "We have delivered on the promises that I made just over three years ago: todeliver double digit margins, to simplify the Morgan group, and to ensure thatMorgan is in a strong financial position from which to grow. Our forthcomingresults will reflect that Morgan has successfully been transformed from thecompany it was when I took over in early 2003 and is now very well placed topursue its new goal of targeting mid-teen operating profit margins." Enquiries: The Morgan Crucible Company plc 01753 837000Warren Knowlton - Chief Executive OfficerMark Robertshaw - Chief Financial Officer Finsbury 020 7251 3801Rupert YoungerRobin Walker Divisional Trading Comment Carbon The Carbon division has performed well in the first half of the year compared tothe equivalent period in 2005 with progress in both top line growth andincreased operating margins. Performance has been robust across almost allregions and markets. The Americas remain strong and there have been encouragingsigns of improvement in some European markets. The Asian business, particularlyin China, has benefited from our ongoing investment and taken advantage ofstrong demand in the region to deliver good growth. Sales in the traditionalbrush, seals and bearings markets are up on last year and the order books looksolid. Sales in the armour market are increasing and more capacity is beinginstalled to take advantage of the opportunities in both North America andEurope. The profits of the division are further benefiting from the variousrestructuring plans that have been implemented in recent years, leading to theclosure of a number of sites, overhead reduction and an increasing presence inlow cost manufacturing locations. Technical Ceramics Building on the results of 2005, the Technical Ceramics division has started2006 with a strong trading performance. The division has continued to focus onniche new business opportunities within its selected markets, and this continuesto drive above-GDP sales growth. Operating margins showed a healthy increase ascosts were controlled whilst the top line was grown. New product introductionshave helped to offset the effect of raw materials and energy cost increases andhave more than replaced declining or commoditised products at the end of theirlife. US markets remain strong overall with supplies to the telecoms marketcontinuing the improvement we saw at the end of last year. We are alsoseeing good levels of demand for our products from the Aerospace market.Overall our markets in Europe were stable to positive. In Asia demand from localcustomers and the transfer of mature products from Western sites is leading tothe full utilisation of expanded facilities. Thermal Ceramics The Thermal Ceramics division has experienced strong sales growth in many of itsmarkets in the first half of 2006, with the order backlog increasing over theperiod. Sales performance in the Asia, Latin and North American markets hasoffset disappointing demand in Europe. However, the expectation is that Europewill improve through the remainder of the year, as export orders for aluminiumand petrochemical markets come through. Input costs, in particular energy and transport, have risen dramatically overthe last year. To counter this, we have introduced further cost reductionprogrammes and price increases were implemented in January 2006 which will befollowed by further rises in July 2006. The bolt-on acquisition of Vesuvius was successfully completed in April withintegration proceeding according to plan. In addition three new joint ventureshave been signed of which two are in China and one in Russia. This will enableThermal to increase its manufacturing presence close to the customer in highgrowth markets. Following the Vesuvius acquisition we have commenced additionalrestructuring within the division to streamline our infrastructure and ensurethat our main European and American facilities become the lowest cost producersin their respective markets. The overall cost reduction programme to counter higher input costs and fullyleverage the Vesuvius acquisition has resulted in further restructuring costs ofc. £8 million for an expected annualised benefit of £8 million. Crucibles Overall trading conditions improved for the Crucibles division in the first halfof the year, with all regions exhibiting some gains over the previous period.Demand in the Americas was particularly strong, with escalating fuel and energyprices stimulating further interest in energy efficient metal melting systems.Consolidation of our Indian operations was achieved by the purchase of theremaining equity owned by our joint venture partner and by the subsequentacquisition of the Diamond Crucible Company in Gujarat. These investments nowleave us well placed to exploit continuing growth in the Indian market and toprovide additional manufacturing capacity to service a wider export base.Elsewhere in Asia, additional sales and marketing resources were deployed inanticipation of further market growth in the region. Financial Position The balance sheet of Morgan has been transformed over the past twelve monthswith net debt being eliminated. The deficit in our UK pension schemes has beensubstantially reduced by a £40 million cash injection in March and by changes toemployee benefits where we agreed a move from a final salary to a career averagescheme in the UK. The resulting balance sheet strength is being put to good useas we actively pursue bolt-on acquisitions as well as making further organicinvestment in growing our core businesses. In total we have made five bolt-onacquisitions or JVs so far this year focused on the Insulating Ceramicsdivision. Following the Vesuvius transaction, we have commenced additionalrestructuring within the Thermal Ceramics business. As a Group we are expectingto charge c. £20 million of restructuring costs to the income statement in 2006which includes the extra Thermal spend of c. £8 million. In summary, strong progress continues to be shown in the Group's performance. Inearly 2004 we set ourselves a goal of hitting double digit operating profitmargins on a run-rate basis by the end of 2006 and have hit these targets wellahead of schedule. We look forward to further progress in the second half of the year. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Morgan Advanced Materials