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19 Nov 2009 07:00
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Press Release
Interim Management Statement
TheΒ Morgan Crucible CompanyΒ plc
Β
The Morgan Crucible Company plc - Interim Management Statement
The Morgan Crucible Company plc ('Morgan Crucible'), the advanced materials company, is issuing today its 'Interim Management Statement' regarding current trading, financial performance and outlook for theΒ fullΒ year 2009. This statement constitutes Morgan Crucible's Interim Management Statement forΒ the period from 5Β JulyΒ toΒ 18Β NovemberΒ 2009 as required by the UK Listing Authority's Disclosure and Transparency Rules.
GroupΒ performanceΒ for the second half of 2009Β isΒ anticipatedΒ to be in line with expectationsΒ
End market demandΒ in general has nowΒ stabilisedΒ having softened further during the summerΒ as we anticipated
TheΒ benefits of the significant cost reductions we have made this year are expected to offset the impact of theseΒ lower revenue levels in the second half of the year
Commenting on the year to date performance and outlook, Mark Robertshaw, Chief Executive Officer, said:
"The Group's performance in the second halfΒ of the yearΒ hasΒ continued to demonstrate the significantly improved quality and resilience of Morgan Crucible's portfolio in what remainsΒ a challenging market environment. Our strategy ofΒ reducing the Group's exposure to economically cyclical markets has significantlyΒ mitigated the worst impacts of the global recession on our business and our margins.
Looking forward, I am cautiously optimistic that end market demand now appears to have stabilised in most areas althoughΒ we think it is premature to suggest that a meaningful recovery is yet underway. Overall conditions in emerging markets, notablyΒ ChinaΒ andΒ India, continue to look healthier than those in theΒ WesternΒ world economies where demand generally remains subdued.
Throughout the year we have taken decisive actions to align our cost base to revenues and we believe these actions position us as a leaner and fitter business for when markets ultimately recover."
Carbon
Traditional Carbon businessΒ revenuesΒ continuedΒ to be impactedΒ during the summer monthsΒ by the economic downturn in our electrical and seal and bearing businesses and in some of our other niche markets, such as semi-conductor. Recent sales levels and order activityΒ in most of our markets haveΒ nowΒ stabilisedΒ and in some there has beenΒ moderateΒ increased activity in recent weeks, though it remains unclear as to whether this represents genuine end market recovery or a supply chain correction. We continue to expand our activities in the renewableΒ energy sectors, with new initiatives in solar, wind and energy storage holding promise for future growth.
US Body armour sales remain considerably below 2008 levels,Β however we haveΒ secured further orders outside of theΒ USΒ for delivery over the coming months.Β
Our aggressive cost reduction actions that began towards the end of 2008 have reduced the impact of the large decline in our end markets. Permanent headcount in theΒ Carbon businessΒ has been reduced by approximately 15% and short time working is in place at a number of sites. Capital expenditure remains very tightly controlled and there is an ongoing focus on working capital reduction to ensure that cash generation is maximised.
NP AerospaceΒ isΒ tradingΒ in line with expectations, as the businessΒ hasΒ continuedΒ to deliver against major vehicle programmes for the UK Ministry of Defence. The currentΒ NP AerospaceΒ order book providesΒ goodΒ visibilityΒ over the coming monthsΒ and there are a number of ongoing initiatives in the UK and overseas that present further opportunitiesΒ to leverage the global reach and materials technology of theΒ business.
Technical CeramicsΒ
During the year, Technical Ceramics has maintained its focus on positive mix shift moving towards higher margin, higher value added end markets such as medical and aerospace. In parallel, our continuousΒ operationalΒ improvement programme, our cost reduction initiatives, and our emphasis on positive price pass throughΒ areΒ all contributingΒ to supportingΒ operating margins in very difficult market conditions.Β
Although the overall marketΒ demand has declinedΒ in 2009 there are some areas that have shown recent signs ofΒ improvement. TheΒ USΒ market appears to haveΒ stabilisedΒ although we continue to watch carefully for any signs of a furtherΒ downturn. Some weakness in the aerospace and industrial gas turbine sector is being offsetΒ by improvements in demand from semi-conductorΒ and telecoms markets. We are also beginning to ramp-upΒ the next generation of Hard Disc drive products. Our European business has had aΒ difficultΒ year being consistently challenged by weak market conditions in general industrial markets and construction. This principally affects our thermal processing business inΒ Germany.Β Since the half yearΒ weΒ have also seenΒ a reduction in Industrial gas turbine demand. In both Europe andΒ North AmericaΒ a highlight of 2009 has been the continuing strength of our medical customers. Developing our exposure to this sector remainsΒ an important focusΒ for theΒ Division.
Work on consolidating our footprintΒ hasΒ continued inΒ the second half of the year. We announced and haveΒ initiatedΒ the move of business from our Auburn site into theΒ HaywardΒ locationΒ inΒ CaliforniaΒ andΒ expect toΒ see the benefits of this during 2010.Β
Insulating Ceramics
As anticipated, overall end-market demand for Thermal Ceramics continued to weaken during theΒ summer months but in recent weeksΒ appearsΒ to be stabilising. Order books in emerging markets, particularlyΒ ChinaΒ andΒ India, have been showing a modestΒ improvementΒ and appear to be flattening out in North America andΒ Europe.
The chemical and petroleum sector remains quite robust withΒ goodΒ demand in the Middle East andΒ Latin America. Iron and steel demand is recovering somewhat from a very low base and so tooΒ sales to theΒ automotiveΒ industry. The majority of other end markets, whilst generally not worsening any further, are as yet showing little sign of recovery.
Cost reduction initiatives have continued into the second half including the successful closure of two small fibre production sites in North America andΒ Europe, which willΒ help mitigate the lower revenues inΒ the second halfΒ of the year.
RevenuesΒ inΒ Molten Metal SystemsΒ (MMS)Β haveΒ improvedΒ in the second half of the year driven by modest recovery in Asia andΒ Europe. MarginsΒ are anticipated toΒ improveΒ over the first half, benefiting from the reduction in operating costs implemented in H1, particularly inΒ Germany.Β The expanded Indian operation, which continues to perform well,Β togetherΒ with the new plant inΒ ChinaΒ means thatΒ MMSΒ is well positioned to benefit from theΒ global recovery with a much reduced fixed cost base.
Financial position
There was no material change in the financial position of the Group during the period.
Our expectation for the full year,Β at present foreign exchange rates,Β is that our net debt/EBITDA ratio will be broadly in line with the 2008 year endΒ and H1 2009 positions.
Outlook
The Group continues to face a challenging economic environment,Β although encouragingly,Β demand now generally appears to have stabilised. We believe that our strategy of focussing on less economically cyclical markets has successfully mitigated the worst impacts of the downturn. Furthermore, the decisive actions on aligning our cost base to revenues leaves us well placed to benefit as markets recover.
For further enquiries:
|
Mark Robertshaw |
Morgan Crucible |
01753 837300 |
|
Kevin Dangerfield |
||
|
Mike Smith /Β ClareΒ Hunt |
Finsbury |
020 7251 3801 |
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