FWEB13 Jan 2012 08:16
Trading update
Trading in the second half in the continuing business has been challenging, with volumes weaker than expected in southern Europe and in construction in North America. Despite this, full year 2011 continuing trading volumes grew by about 3% over the previous year.
The new Geosynthetics division traded in-line with expectations during the period, and both the Boddingtons and Tubex businesses acquired during 2011 delivered the anticipated volume growth. Technical Fabrics saw continuing weak markets in North America and an adverse impact of about £3 million resulting from temporary disruption to sales and additional operating costs during the planned closure of a plant at Königswinter, Germany and the associated transfer of the business to a new line in Berlin. These operational issues are being successfully resolved.
As expected, there was some raw material cost relief during the second half and the Group also benefited from pricing actions, contractual pass through and other cost reduction measures. However, margins in the continuing business were impacted by delays in commissioning the new production line in Berlin and by increases in other input costs.
The Hygiene Business disposal for a total consideration of $286 million has resulted in a much strengthened balance sheet. Following the receipt of cash disposal proceeds of $260 million, the Group is in a net cash position and, as previously announced, also has a $26 million 6% one-year vendor loan note receivable from Petropar, which is classified within other receivables. Net cash after repaying debt, associated break and interest costs, and transaction costs but before any adjustment arising from completion accounts is estimated to be around £10 million.
The disposal and other material changes to the US post-retirement medical benefits scheme has resulted in a significant reduction of about £13 million in the Group's pension deficit and will be partially offset in the second half by actuarial losses resulting from lower discount rates, resulting in an estimated total deficit of about £27 million at the year-end.
The reported results for 2011 for the Continuing Group will be impacted by restructuring costs principally from a cost reduction programme as a result of the disposal. These costs will be treated as a non-underlying charge. Transaction-related costs (including legal costs, adviser fees and taxation) will be charged against the discontinued operation.
The disposal of the hygiene business marks the end of the fundamental transformation of Fiberweb that has been accomplished since 2006. The Group will now focus on industrial specialty materials with the prospect of superior long term growth and returns, supported by a much strengthened balance sheet.
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