Last checked at 15 May 2008 07:00
15 May 2008
INTERIM MANAGEMENT STATEMENT
Cookson Group plc ("Cookson"), a leading materials science company, releases the following Interim Management Statement regarding current trading, financial position and the outlook for the financial year ahead of today's Annual General Meeting. This statement covers the period from 1 January 2008 to 14 May 2008.
Nick Salmon, Chief Executive, commented:
"Cookson's businesses have continued to trade in line with our expectations. The enlarged Ceramics division's end-markets remain robust and the division continues to deliver a significantly improved performance compared to 2007, with the newly-acquired Foseco business performing ahead of our original expectations. The Electronics division is maintaining its performance at 2007 levels in slightly softer end-markets. The Precious Metals division remains profitable despite the difficult retail environment in the United States. The Group is also benefitting from the positive currency translation impact of sterling's recent weakness on reported revenue and profits."
"We continue to anticipate a strong performance in 2008, driven by the enlarged Ceramics division."
Ceramics
Global steel production, the main end-market for our Ceramics division, grew 5.6% in the first quarter of 2008. As expected, steel production grew particularly strongly in NAFTA as imports from China have reduced. Solar Crucible™ demand continues to grow rapidly and our new facility in the Czech Republic started production on schedule in March. Organic revenue growth for the division year to date is running slightly ahead of the growth in worldwide steel production. Operating margins in the Linings business have continued to improve. Overall, the positive trends from last year continue and the division has performed strongly.
The acquisition of Foseco plc ("Foseco") was completed on 4 April. Following a strong performance in 2007, Foseco's results for the first quarter of 2008 were ahead of our expectations when the transaction was announced in October 2007 and this momentum is continuing in the post-acquisition period. The process of integrating Foseco within the Ceramics division is proceeding well.
Electronics
The impact on our Electronics division of the expected slower growth in consumer electronics markets has resulted in marginally lower underlying revenue (being revenue at constant currency and adjusted for the impact of higher metal prices) year to date compared to last year. However, reported revenue continues to be positively impacted by the pass-through of higher metals prices. The product mix trends evident in the second half of 2007 have continued, resulting in slightly improved underlying margins in the Assembly Materials sector with the converse in the Chemistry sector. Overall, the impact of the marginally lower underlying revenue has been broadly offset by the benefits of the restructuring initiatives enacted last year, particularly in the Assembly Materials sector.
Precious Metals
The Precious Metals division's US operations are experiencing a sharp downturn in their market due to widely-reported consumer spending cutbacks. Action to cut costs has been taken to partially mitigate this impact and the business has remained profitable. Actions taken include headcount reductions and the acceleration of the integration of the Leach & Garner business acquired in late 2007. The performance of the European operations continues to improve, benefiting from the restructuring initiatives in the prior year and an increase in precious metal reclaim activity, stimulated by the high price of gold.
Currency
Whilst the Group has little transactional exposure to movements in exchange rates, its reported results are impacted by the translation of overseas results into sterling. Compared to 2007, sterling has weakened significantly year to date against the majority of currencies including, in particular, the euro, the Czech koruna, the Polish zloty and the Chinese renminbi. Assuming exchange rates remain at current levels, this will have a significant beneficial impact on reported results for 2008 compared to 2007.
Financial position
The increase in the Group's net debt since 31 December 2007 principally reflects the acquisition on 4 April 2008 of Foseco for a total consideration of £607 million, being £497 million for the equity plus assumed net debt of approximately £110 million. This transaction was financed by a new five-year, multi-currency, committed bank facility of approximately £750 million entered into on 10 October 2007, in combination with the net proceeds of £151 million from the share placing on 11 October 2007. On the drawing down of the funds for the transaction, around 70% of the Group's gross borrowings were swapped from floating to fixed interest rates resulting in a blended rate on gross borrowings of around 5.5%.
The current net debt position also reflects the normal seasonality of the Group's free cash flows whereby the Group experiences free cash outflows in the first half of the year and inflows in the second half. In the first quarter of 2008, this trend was accentuated by strong organic revenue growth in the Ceramics division combined with continuing high metal prices in the Electronics and Precious Metals division. Inventory levels for certain raw materials in the Ceramics division have also been increased as a precaution against possible restrictions on their production in China to reduce air pollution ahead of the Beijing Olympics.
The Group is expecting the pro-forma net debt to EBITDA ratio at 30 June 2008 to be broadly in line with the previous guidance of 2.5 times.
Outlook
The enlarged Ceramics division's end-markets remain robust and the division continues to deliver a significantly improved performance compared to 2007. The newly-acquired Foseco business is performing ahead of our expectations at the time the transaction was announced in October 2007. The Electronics division is maintaining its performance at 2007 levels in slightly softer end-markets. The Precious Metals division remains profitable despite the difficult retail environment in the United States. The Group is also benefitting from the positive currency translation impact of sterling's recent weakness on reported revenue and profits.
Accordingly, we continue to anticipate a strong performance in 2008, driven by the enlarged Ceramics division.
Further announcements
Cookson's Half Year results for the six months ending 30 June 2008 are expected to be announced on 5 August 2008.
- Ends -
| Shareholder/analyst enquiries: |
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| Nick Salmon, Chief Executive | Cookson Group plc |
| Mike Butterworth, Group Finance Director | Tel: +44 (0)20 7822 0000 |
| Anna Hartropp, Investor Relations Manager | |
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| Media enquiries: |
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| James Longfield/Anthony Arthur | Hogarth Partnership |
| Tel: +44 (0)20 7357 9477 +44 (0)7770 272081 |
About Cookson Group plc:
Cookson Group plc is a leading materials science company operating on a worldwide basis in Ceramics, Electronics and Precious Metals markets.
The Ceramics division is the world leader in the supply of advanced consumable refractory products and systems to the global steel and foundry industries and a leading supplier of specialty ceramic products to the glass and solar industries. It is also a regional leader in the US, UK and Australia in the supply and installation of monolithic refractory linings.
The Electronics division is a leading supplier of advanced surface treatment and plating chemicals and assembly materials to the automotive, industrial, construction and electronics markets.
The Precious Metals division is a leading supplier of fabricated precious metals (primarily gold, silver and platinum) to the jewellery industry in the US, the UK, France and Spain. Products include alloy materials, semi-finished jewellery components and finished jewellery.
Forward looking statements
This announcement contains certain forward looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters.
Statements in this announcement that are not historical facts are hereby identified as "forward looking statements". Such forward looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Cookson, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Cookson and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements. Such forward looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward looking statements include without limitation: economic and business cycles; the terms and conditions of Cookson's financing arrangements; foreign currency rate fluctuations; competition in Cookson's principal markets; acquisitions or disposals of businesses or assets; and trends in Cookson's principal industries.
The foregoing list of important factors is not exhaustive. When relying on forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in documents the Company files with the UK regulator from time to time including its annual reports and accounts.
Such forward looking statements speak only as of the date on which they are made. Except as required by the Rules of the UK Listing Authority and the London Stock Exchange and applicable law, Cookson undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward looking events discussed in this announcement might not occur.
Cookson Group plc, 165 Fleet Street, London EC4A 2AE
Registered in England and Wales No. 251977
www.cooksongroup.co.uk