8 October 2012
COOKSON GROUP PLC ("Cookson" or "the Group")
INTERIM MANAGEMENT STATEMENT
Cookson Group plc, a leading materials science company, releases the following Interim Management Statement covering current trading, its financial position and outlook. This statement covers the period from 1 July 2012 to 7 October 2012.
The trading performance in the third quarter for the Performance Materials and Precious Metals Processing divisions has been in line with expectations and, for both divisions, the full year outlook remains unchanged.
However, for the Engineered Ceramics division end-market trends and trading performance in the third quarter, and in particular over the last month, have been weaker than previous expectations. Assuming a continuation of current end-market conditions, the Engineered Ceramics division's performance in the second half of 2012 is now expected to be substantially below both the first half and previous expectations.
As a result, full year performance for the Group as a whole is now expected to be materially below the Board's previous expectations.
The division is the world leader in the supply of advanced consumable products and systems to the global steel industry (which accounts for a little over half of revenue) and the global foundry industry (approximately one third of revenue) and a leading supplier of speciality products to the glass and solar industries.
Average monthly steel production volumes in July and August (according to the World Steel Association ("WSA")) declined by some 3% for the world excluding China (1% for the world as a whole) when compared to the average monthly run rate in the first half of the year. Most notably, Europe (27 countries) was 11% lower and the US 3% lower, both slightly more pronounced than the normal seasonal downturn. In September, rather than the normal seasonal strengthening, there have been signs of some further weakening in steel production volume trends, particularly in the US, Europe and Brazil. The performance of our steel-related businesses, Steel Flow Control and Advanced Refractories, has reflected these weak market trends.
For our Foundry castings end-markets, news flow from the ultimate end-markets, such as heavy truck, higher-end automotive, wind turbines, and construction, mining and agricultural equipment, is indicating a further general slowdown in production levels that had started to become evident towards the end of the second quarter. This trend, which has affected the majority of geographic regions, has inevitably led to a further slow-down in demand in our Foundry Technologies business from that experienced in the second quarter.
The global solar industry, which is the key end-market for our Fused Silica business' Solar Crucibles™, continues to be very depressed and selling prices of Solar Crucibles™ continue to be under severe pressure. In July, the closure of the Solar Crucible™ production facility in the Czech Republic was announced, and in view of the continuing weakness in the end-market, the decision has now been taken to also close one of the two Chinese Solar Crucible™ production facilities with immediate effect. This will result in a non-cash asset write off of £16 million together with cash related restructuring costs of £1 million.
More generally, management action has been taken throughout the division's activities to respond to the current difficult trading environment e.g. by reducing temporary workers and overtime, a hiring freeze and curtailment of discretionary costs. In a number of countries negotiations have now been initiated with the relevant authorities regarding government subsidised working hour reduction schemes. More substantial restructuring and cost reduction measures will be implemented as necessary.
The division is a world leading supplier of electronic assembly materials and advanced surface treatment and plating chemicals. The electronic equipment production end-market accounts for approximately three-quarters of revenue with the other quarter being direct, non-electronics, applications in automotive and industrial production.
Overall trading in the third quarter has been in line with expectations. The Assembly Materials business has benefited from second half seasonality in consumer electronics manufacture, augmented by a continuing pick up in smartphone and tablet volumes. Conversely the Surface Chemistries business has seen moderately slowing demand for performance and decorative coatings principally used in the automotive industry (particularly in Europe), and, more recently, products used in the fabrication and packaging of semiconductors.
There continues to be good growth in sales of more recently introduced innovative products such as 'tape and reel' packaged solder pre-forms, immersion tin PCB surface finishes, and PV ribbon. The first confirmed commercial orders for our newly launched Argomax™ nano-silver, low temperature sintering die-attach material have recently been received.
The Board's expectations for full year performance remain unchanged.
Precious Metals Processing
The division is a leading supplier of fabricated precious metals to the jewellery industry in the UK, France and Spain and also has significant precious metals recycling operations.
Trading in the third quarter, which reflected the normal seasonal trends, was satisfactory and expectations for the full year remain unchanged.
In line with the Group's normal seasonality, net debt should reduce significantly over the remainder of the second half of the year from the £451 million as at 30 June 2012, such that previous expectations for net debt at year end remain unchanged. The Group's financial position is robust with low levels of leverage and ample liquidity headroom under long term financing arrangements.
The global macro-economic environment remains uncertain and difficult to predict.
Assuming a continuation of current end-market conditions, the Engineered Ceramics division's performance in the second half of 2012 is now expected to be substantially below both the first half and previous expectations. We continue to expect the Performance Materials division's second half performance to be slightly ahead of the first half, and the Precious Metals Processing division is also expected to deliver a performance in line with previous expectations. The foreign exchange translation impact in the second half of the year is expected to be similar to that experienced in the first half.
In light of the conditions being experienced by the Engineered Ceramics division, full year performance for the Group as a whole is now expected to be materially below the Board's previous expectations.
Further to the update at the time of the 2012 half year results, the review of the strategic portfolio options for the Group, including a potential demerger or separation of Cookson's main divisions, is progressing well. The Board still expects to update shareholders on the outcome of the review before the end of the year.
Nick Salmon (Chief Executive) and Mike Butterworth (Group Finance Director) will be hosting a conference call for analysts and investors at 8am (UK time) today:
+44 (0)203 140 8286 all participants
Confirmation code: 2614520
A replay of the call will be available one hour after the event for two weeks on the following numbers:
+44 (0)203 427 0598 non-US participants
+1 347 366 9565 US participants
Confirmation code: 2614520#
- Ends -
Nick Salmon, Chief Executive Cookson Group plc
Mike Butterworth, Group Finance Director Tel: + 44 (0)20 7822 0000
John Olsen MHP Communications
Andrew Jacques Tel: +44 (0)20 3128 8100
Ian Payne +44 (0)7770 272082
About Cookson Group plc:
Cookson Group plc is a leading materials science company operating on a worldwide basis.
The Engineered 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 speciality products to the glass and solar industries.
The Performance Materials division is a leading supplier of electronic assembly materials and advanced surface treatment and plating chemicals to the electronics, automotive, industrial and construction markets.
The Precious Metals division is a leading supplier of fabricated precious metals (primarily gold, silver and platinum) to the jewellery industry in the UK, France and Spain, and also has significant precious metal recycling operations.
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