Last checked at 19 Nov 2009 07:00
Press Release
Interim Management Statement
The Morgan Crucible Company plc
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 the full year 2009. This statement constitutes Morgan Crucible's Interim Management Statement for the period from 5 July to 18 November 2009 as required by the UK Listing Authority's Disclosure and Transparency Rules.
Group performance for the second half of 2009 is anticipated to be in line with expectations
End market demand in general has now stabilised having softened further during the summer as we anticipated
The benefits of the significant cost reductions we have made this year are expected to offset the impact of these 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 half of the year has continued to demonstrate the significantly improved quality and resilience of Morgan Crucible's portfolio in what remains a challenging market environment. Our strategy of reducing the Group's exposure to economically cyclical markets has significantly 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 although we think it is premature to suggest that a meaningful recovery is yet underway. Overall conditions in emerging markets, notably China and India, continue to look healthier than those in the Western 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 business revenues continued to be impacted during the summer months 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 activity in most of our markets have now stabilised and in some there has been moderate 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 renewable 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, however we have secured further orders outside of the US for delivery over the coming months.
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 the Carbon business 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 Aerospace is trading in line with expectations, as the business has continued to deliver against major vehicle programmes for the UK Ministry of Defence. The current NP Aerospace order book provides good visibility over the coming months and there are a number of ongoing initiatives in the UK and overseas that present further opportunities to leverage the global reach and materials technology of the business.
Technical Ceramics
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 continuous operational improvement programme, our cost reduction initiatives, and our emphasis on positive price pass through are all contributing to supporting operating margins in very difficult market conditions.
Although the overall market demand has declined in 2009 there are some areas that have shown recent signs of improvement. The US market appears to have stabilised although we continue to watch carefully for any signs of a further downturn. Some weakness in the aerospace and industrial gas turbine sector is being offset by improvements in demand from semi-conductor and telecoms markets. We are also beginning to ramp-up the next generation of Hard Disc drive products. Our European business has had a difficult year being consistently challenged by weak market conditions in general industrial markets and construction. This principally affects our thermal processing business in Germany. Since the half year we have also seen a reduction in Industrial gas turbine demand. In both Europe and North America a highlight of 2009 has been the continuing strength of our medical customers. Developing our exposure to this sector remains an important focus for the Division.
Work on consolidating our footprint has continued in the second half of the year. We announced and have initiated the move of business from our Auburn site into the Hayward location in California and expect to see the benefits of this during 2010.
Insulating Ceramics
As anticipated, overall end-market demand for Thermal Ceramics continued to weaken during the summer months but in recent weeks appears to be stabilising. Order books in emerging markets, particularly China and India, have been showing a modest improvement and appear to be flattening out in North America and Europe.
The chemical and petroleum sector remains quite robust with good demand in the Middle East and Latin America. Iron and steel demand is recovering somewhat from a very low base and so too sales to the automotive 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 and Europe, which will help mitigate the lower revenues in the second half of the year.
Revenues in Molten Metal Systems (MMS) have improved in the second half of the year driven by modest recovery in Asia and Europe. Margins are anticipated to improve over the first half, benefiting from the reduction in operating costs implemented in H1, particularly in Germany. The expanded Indian operation, which continues to perform well, together with the new plant in China means that MMS is well positioned to benefit from the 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, at present foreign exchange rates, is that our net debt/EBITDA ratio will be broadly in line with the 2008 year end and H1 2009 positions.
Outlook
The Group continues to face a challenging economic environment, although encouragingly, 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 / Clare Hunt | Finsbury | 020 7251 3801 |