Synthomer Regulatory News (SYNT)

26 May 2005 12:00

Yule Catto & Co PLC26 May 2005 AGM Statement: "Demand across our major activities is good" Yule Catto is an international producer of speciality chemicals, which aresupplied to global customers, ranging from manufacturers of medical gloves,paint and adhesives to the pharmaceuticals and cosmetics industries At today's Annual General Meeting of Yule Catto & Company plc, AnthonyRichmond-Watson, Chairman, made the following comments: "Yule Catto entered 2004 in the full knowledge that profitability would be lowerthan the prior year, largely due to the changed circumstances for Omeprazole inthe United States as competitors to our major customer entered the market. Wewere also conscious that escalating raw material prices, driven by a rising oilprice, and a weak US Dollar might also place margins under pressure. "These negative factors were a persistent feature throughout the whole year, inaddition to which we faced an extremely tight monomer supply position for ourPolymer chemical operations. Against these headwinds, we therefore view theachievement of £31 million of profit before taxation as a solid performance; andthe 5% rise in turnover (at constant currency), despite the change in theOmeprazole situation, as progress in the underlying development of our business. "This result was achieved through the hard work and commitment of our managementand employees and may I therefore, on behalf of all shareholders, once againformally thank them for their dedication and effort. "Despite the testing market conditions we remain confident in the fundamentalstrategic direction of the group. We continue to push for global growth for ourwater-based polymers, widen the breadth and depth of our pharmaceutical productportfolio and concentrate on developing the most potentially rewarding of ourniche performance chemical businesses. "I shall now make a few comments on each of these three business sectors. Polymer Chemicals "Across our Polymer operations, double-digit volume growth was delivered in2004. Of particular note was the 15% volume rise in the sales of nitrile latexfor use in the manufacture of allergy free gloves. This market remains strongand our Malaysian latex facility is now running at full nameplate capacity. Tomeet this demand, recent product and process engineering developments have beenidentified that will enable capacity to be raised by over 15% with minimalinvestment. "In Europe, sales of emulsions grew satisfactorily, but the rate of growth wasconstrained due to particularly tight raw material supply which accentuated therapid rise of input prices. Inevitably, a disproportionate amount of managementtime was devoted, albeit successfully, to ensuring continuity of supply tocustomers and negotiating selling price revisions. "Overseas, the robust economies of Saudi Arabia, Malaysia and South Africaenabled us to produce improved results in these markets despite similarfeedstock issues. We continue to enjoy good increases in sales volumes in the opening months of2005 but the pressure on margin remains. Selling prices have been successfullyraised but, while monomer availability is somewhat easier, raw material priceshave risen in both the first and second quarters. Pharma and Fine Chemicals "It was no surprise that the sales of our Pharma and Fine Chemicals activitiesfell by 13.5% in 2004 as the full impact of the changes in the US Omeprazolemarket were absorbed. "This product continues to play an important part in our portfolio and gooddevelopment of sales to other territories enabled overall volumes to besustained. In addition, a new patented immediate release product was launchedin the United States for which we hold an exclusive supply contract. Initialsales were more modest than anticipated but new variants being launched in 2005should deliver steady volume growth. "Sales of other generic actives, such as Ranitidine, continue to develop, aidedby development of cost effective production processes. A boost to sales wasalso provided by Ciprofloxacine as it ended patented status in the USA . "The key to the future of this division is the number of generic products we canoffer. It is pleasing to report that last year we successfully accelerated ourdrug master file registration programme. This new level of registrationactivity will continue in 2005. The impact of this investment should be feltprogressively from late 2006 onwards, when the antipsychotic Zolpidem, amongst anumber of other opportunities, is scheduled to come off patent. "In common with other companies involved in supplying major pharmaceuticalmanufacturers, we continue to see delays in the commencement of contracts asthese large scale companies reorganise their activities. However, we did havenotable success last year in rapidly scaling up some complex processes,providing us with new product opportunities and helping customers to rationalisetheir manufacturing facilities. "With our three largest pharmaceutical manufacturing sites based in the Eurozoneselling to a US Dollar denominated market, it is of no surprise that performancewill be affected as long as that currency remains weak. Performance Chemicals "The effect of the strength of Sterling on exports and aggressive overseascompetition in the UK market had a disappointing impact on the results from ourPerformance Chemicals operations in 2004. "Considerable effort has been put into reshaping a number of this division'sactivities in recent years. Examples are the establishment of a low costoperating base for photographic developers in India, the investment in state ofthe art environmental equipment in our ultramarine pigment business in Franceand the reduction of the cost base in our speciality inorganics business. "Much of this is bearing fruit, but there is scope for further initiatives toreview under performing and non-core activities. One such review has alreadyresulted in the disposal of Brencliffe, which was involved in supplyinghouse-ware and automotive products to the retail sector. "The start of 2005 is still showing far from easy trading conditions for ourperformance chemical businesses, but performance should improve from the weakresults of the last months of 2004. International Financial Reporting Standards "A feature of the reporting of all UK listed companies in 2005 will be themigration to the new International Financial Reporting Standards. I can confirmthat work is progressing satisfactorily on this complex and time consumingprocess and we are on schedule for the 2004 restated results to be audited priorto their release on 8th September with the 2005 interim figures. Board Changes "I now come to two items regarding your Board. Firstly, I very much regret thatGianni Montezemolo has resigned as a director. Since joining our Board in 2001Gianni moved to Chicago. Unfortunately, owing to a recent illness, he is unableto travel by air for the foreseeable future. We shall miss his input andenthusiasm and wish him a speedy recovery. We will seek to replace him withanother independent non-executive director as soon as possible. "Secondly, Alex Walker, our Chief Executive for the past 19 years, will reachnormal company retirement age in August 2006. To strengthen our seniormanagement, I am pleased to announce that George Letman will join us as ChiefOperating Officer and become a director of the company. He has wide industrialmanagement experience, including senior roles at Siebe and Laporte. Outlook "Demand across our major activities is good. However, margin developmentremains difficult while raw materials continue to rise and the weakness of theUS Dollar offers challenges in some important areas. "We are benefiting from another year of lower capital requirement, but arenevertheless maintaining our focus on careful cash control. As we entered 2005we anticipated a moderation in input cost increases leading to enhancedprofitability and cash generation supporting our development plans andprogressive dividend policy. This has not yet happened and, while things canchange rapidly in today's volatile markets, trading in 2005 is at a similarlevel to that of the second half of last year. "Near term, therefore, we keep all aspects of the business under close review,but are reassured by the higher sales volumes that are being achieved and we areconfident that the strategy for our group remains sound." 26 May 2005 Enquiries: Yule Catto 01279 442791Alex Walker, Chief ExecutiveSean Cummins, Finance Director College Hill 020 7457 2020Gareth David gareth.david@collegehill.com NOTE TO EDITORS: George Letman George Letman will shortly join the Yule Catto Board as Chief Operating Officer.He is 52 years of age and an engineer by background. His career at senior management level began in 1986 with Siebe plc where, over asix-year period, he rose to Divisional Managing Director of the EuropeanPneumatic Controls business. Joining Low & Bonar plc in 1992, he headed aBritish/Austrian joint venture making flexible packaging. In 1996 he assumed the role of a Divisional Managing Director with Laporte plclooking after firstly Industrial Products and later the Global Electronicchemicals activities. This latter business was acquired by a private equityhouse and became Rockwood Inc. The experienced gained led to an approach fromDoncaster Ltd, itself a private equity backed business, where he became CEO ofthe core Power Systems Division. George brings valuable experience over a wide range of international industrialactivities to assist in furthering the development of the Yule Catto Group. This information is provided by RNS The company news service from the London Stock Exchange