Synthomer Regulatory News (SYNT)

18 May 2006 12:00

Yule Catto & Co PLC18 May 2006 Yule Catto & Company plc AGM Statement 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 made good progress in 2005 towards the long-term development of thegroup. The strategic development of our water-based Polymer activities movedforward with strong volume growth and improved margins, despite the relentlessrise in petrochemical based raw material prices. Our Pharmaceutical businessesmaintained investment in the future with an enhanced level of drug master fileregistrations and new pilot plant and R&D facilities. The main feature of ourPerformance Chemicals division was the successful execution of a number ofrestructuring initiatives. In general, market conditions were far from easy last year and, therefore, theresults produced by the group we view as satisfactory. Underlying group salesrose by 6% to £532.1m, profit before taxation at £34.5m was up 7% and earningsper share grew by 20% to 16.7p. In addition, our customary focus on cashreduced borrowings by 12% assisted by disposal proceeds of £22m from therestructuring programme within Performance Chemicals. Before proceeding to say a few words on each of our key operating sectors, may Iagain, on behalf of shareholders, pay tribute to our management and employees.It is only through their dedication and effort that we can sustain thedevelopment of Yule Catto. Polymer Chemicals Recent years have been a turbulent period for both the availability and pricevolatility of the raw materials from which our water-based polymers aremanufactured. Throughout this period we have sustained a focus on growing salesvolumes into new markets and territories. This was done with confidence in ourability to develop new product offerings to meet the performance demands of ourcustomers and, over time, enhance unit margins. The benefits of this approach emerged in 2005 with Polymer Chemicals turnover upby 15.4% and operating profit growing by 23.5%. Of particular note in thisperformance was the 35% rise in nitrile latex sold in the Far East to glovedipping customers. The growth of emulsions and latex in Europe by over 8% isalso particularly pleasing given that industry statistics show little or nogrowth for these products in UK and continental Europe. In the early months of 2006 we continue to see satisfactory growth in salesvolumes across the markets we serve. This is particularly true of nitrile latexin the Far East and supports the recently announced expansion of our Malaysianfacility by approximately one third at a cost of £5.5m. Pharma & Fine Chemicals The impact of the normal price erosion as products mature post patent expiry wasagain experienced last year by our Pharma business. Volume growth was achievedacross the range of generic products and process development reduced productcost. However, as expected, this did not provide full mitigation and bothoverall sales value and margin declined. The strategy remains to invest in the creation of a long-term pipeline ofgeneric products and to that end excellent progress was achieved with a 50%increase in registrations in 2005. This new higher level of activity will bepursued in 2006. The timing of the benefits of this programme is difficult to predict, but thenext product to lose patent status in USA is an anti-psychotic, Zolpidem. Thiswas expected to occur in late 2006, but due to the originator of the drugseeking to extend the patent, it may be delayed by some months. Recent investments in R&D and pilot plant facilities are not only supporting theproduct development programme, but are attracting both early stage and lowvolume high value supply contracts from major Pharma companies. One of thesehas resulted in investment in a high potency unit at our Italian facility. Thiswill provide a differentiated offering through an ability to meet the stringentsafety requirements to manufacture ingredients for the new lower dosage highlyactive drugs presently under development by major customers. Performance Chemicals Last year was a period of significant restructuring activity within thePerformance Chemicals operations. Three companies were sold, the closure of twomanufacturing sites in UK announced and Autoclenz, our non-core vehiclepreparation company, was listed on the alternative investment market. Thislatter exercise was particularly successful, grossing £18M. As a consequence of this activity, underlying sales fell by 6% in 2005, butoperating profits benefited and rose 8%. Efforts continue in 2006 to manage change within the remaining PerformanceChemicals operations. William Blythe will consolidate its speciality inorganicsbusiness on to a single manufacturing site, James Robinson will close itsHuddersfield plant with production transferred to Germany and India and theultramarine business is engaged in improving output from the Hull facility. Pensions The subject of company pensions and, more specifically, deficits within UKpension schemes remains a topical subject. As indicated in the annual report,Yule Catto's UK pension fund had a sizeable deficit at 31st December 2005 asmeasured under the IAS19 accounting standard. Outside UK, where the majority ofour business is located, the issue is not significant due to the nature ofpension provisions in place. A full actuarial valuation of the UK fund will take place this year and, inconjunction with the Trustees, we shall be working to develop a balancedapproach to any deficit that may emerge. To monitor the performance of thescheme, a quarterly review is conducted. Interestingly, the first quarter of2006 has seen a sharp reduction in the deficit due to a shift in long-term bondrates reducing liabilities and a further strong return from equity investments. Board Changes We welcome Colin Williams, who joined the Board as an independent non-executivedirector in December 2005 and stands for re-appointment today. Colin was one ofthe most senior executives of SCA, a leading producer of packaging and hygieneproducts. Alex Walker who has been our Chief Executive since 1986 will retire this Augustafter 34 years with the group. This is the last AGM that he will attend as adirector. There has been tremendous change in the activities of the groupduring his time as Chief Executive. I should like to pay tribute to him, onbehalf of the Board and all shareholders, for the skill and dedication withwhich he exercised his responsibilities. Adrian Whitfield joined the group in March as Chief Executive Designate and isdue to take over from Alex Walker in August. Adrian has extensive internationalindustrial management experience, most recently with D S Smith. I am sure hewill make an invaluable contribution to the group and I look forward to workingwith him in his new role. He comes up for re-appointment as a director today. Outlook Sales volumes continue to grow for our Polymer Chemical businesses and rawmaterial price volatility has subsided for the present. That said, worldmarkets remain in uncharted territory with crude oil prices above US$70 perbarrel. The Pharma & Fine Chemical companies have seen a reasonable start tothe year and substantial growth will emerge in time as our investment in thedevelopment portfolio delivers sales of new products. The reshaping of ourother companies continues in the quest for improved results. Group results in the first quarter are slightly ahead of the correspondingperiod last year and looking further forward we remain confident that our basicstrategy remains sound and will deliver long-term shareholder benefit. 18 May 2006 Enquiries: Yule Catto 01279 442791 Alex Walker, Chief ExecutiveSean Cummins, Finance Director College Hill 020 7457 2020 Gareth David This information is provided by RNS The company news service from the London Stock Exchange