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[August 2007]
Cookson Group Announces 2007 Interim Results
Highlights from Cookson Group's interim 2007 results statement are as
follows:• Strong improvement in continuing operations (at constant currency):
- Revenue of £785 million, up 4%
- Trading profit of £78 million, up 20%
- Return on sales up 1.3 percentage points to 10.0%
• Very strong performance in Ceramics; division's margin target increased to a range of 14% to 16% • Headline PBT and EPS up 10% and 18% respectively • Strong profit growth in low tax rate jurisdictions reduces the Group's effective tax rate by 5.3 percentage points • Interim dividend of 4.25 pence per share, up 42%.Commenting on the group's results and outlook, Nick Salmon, Chief Executive,
said: “We have continued to make good progress so far in 2007, as these results demonstrate. We now believe that underlying trading profit going forward has greater growth potential than we anticipated in the November 2006 Strategy Update. This improvement is driven by the Ceramics division's performance and prospects and, accordingly, we are raising our margin expectations for this business.“The weakening of the US dollar and other dollar tracker currencies impacts the translation of results into sterling but does not impact our competitiveness or margins. Strong profit growth in low tax jurisdictions has substantially reduced the percentage tax rate and we expect a further reduction in 2008. We therefore anticipate continuing strong improvement in our full year performance.”
The Ceramics division delivered a very strong performance in the first half of 2007. Underlying revenue (at constant currency and adjusted for
disposals) grew 14%, while global steel production, the main end market, grew 8%. This out-performance reflects the progressive increase in the addressable market, as the steel industry in countries such as China, Russia and Ukraine increasingly convert to enclosed continuous casting technology which requires Cookson's flow control products, together with some market share gains.Trading profit at Ceramics was up 30% (at constant exchange rates). The return on sales margin reached 13.6%, ahead of the 13% target for 2008. Accordingly, group expectation for margins for this business has been revised to a range of between 14% to 16%, assuming there is no unexpected major downturn in the end markets.
The profit growth has resulted primarily from revenue growth in high margin product segments, particularly flow control and from the continued turnaround of the linings activity, where the margin reached 7.4% (before central cost allocations), up from 4.1% in the same period in 2006.
With the high underlying growth rates, production capacities are being expanded in certain areas. In respect of previously announced projects, the new slide-gate and linings facilities in Mexico and new glass roller and Solar Crucible™ plants in China were commissioned in the first half of 2007. In the second half of the year, the new slide-gate and Solar Crucible™ plants in Poland will be completed. The foundry crucible plant in China is scheduled to start production in the second quarter of 2008.
Cookson also said that a number of further recently authorised expansion projects were being officially announced, including the acquisition from a local supplier of a linings business in China for a cash consideration of £4 million and the construction of a new linings plant in India. It is also planned to expand the existing Solar Crucible™ plant in the Czech Republic, given the very high growth in demand for this product, as well as a capacity expansion and productivity improvement project for flow control products in continental Europe. The total investment in these projects is expected to be some £20 million.
Further expansion projects in China, India and Russia are under consideration. All projects are subject to careful evaluation to ensure the investments deliver returns well in excess of cost of capital and the group said it had a good track record of completing projects on time and on budget.
Cookson said that all indications are for the Ceramics division's end markets to remain buoyant.
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ENDS