Trading Statement

RNS Number : 3675Y

Morgan Crucible Co PLC

07 July 2008

 

The Morgan Crucible Company plc - Trading Statement, 7th July 2008

The Morgan Crucible Company plc ('Morgan Crucible'), the advanced materials company, issues its trading update ahead of its 2008 half year results to be announced on the 6th August 2008.

• The first half of 2008 has seen turnover increase by c.13% compared to last year. On a like for like basis, excluding acquisitions, revenue growth is expected to be c.10% (c.4% on a constant currency basis). Our organic revenue growth guidance for the full year remains in the 5-6% range on a constant currency basis.
  

• The order books across all our divisions continue to be strong and are well ahead of this time last year. 
  

• Group underlying operating profit margins after restructuring charges and before amortisation of intangible assets (ie goodwill on acquisition) are expected to be in the mid 11% range at the half year which is comparable to the full year 2007 at 11.4%. Underlying operating profit margins in the second half of the year are expected to benefit from having now resolved the armour production constraints, a full 6 month contribution from the Carpenter business and our strong current order book.  
  

• The technical ceramics businesses acquired earlier this year from Carpenter Technology Corporation have made a promising start in terms of order books, revenues and bottom line contribution which are all ahead of previous expectations.
  

• The Group's balance sheet remains robust. In March of this year the UK defined benefit pension risk was substantially reduced following the UK pensioner buy-out announced at that time.
  

• Overall, performance for the full year is anticipated to be in line with expectations.

Commenting on the year to date performance and outlook for the Group, Mark Robertshaw, Chief Executive Officer said:

'The Group has continued to trade well in the first half of 2008. Order books - which give us some 3 to 4 months' visibility - are healthy and at levels well above the same time last year. The recently acquired Carpenter businesses are performing well ahead of expectations for both revenue and profit margin. Looking forward we expect to make margin progression in the second half and we continue to target our medium term goal of mid-teen operating profit margins. The strength of Morgan Crucible's market positions, order book and robust balance sheet enables us to look to the future with confidence.'

Carbon

The Carbon order book entering the second half of 2008 remains well up on last year with particular strength in our armour and high temperature insulating businesses. The production constraints in our US silicon carbide armour business during the first half of the year are now behind us, and our order book is at strong levels as we enter the third quarter. Our electrical and mechanical businesses continue to trade in line with our expectations. We successfully launched a new high temperature insulating product line in the second quarter aimed at the solar energy market. Sales from this new line are accelerating quickly and we have additional capacity planned for the fourth quarter of this year. The NP Aerospace business has continued to trade well with a strong order book as new contracts have been secured with the UK military. We have seen some slowdown in demand from the semiconductor market and we continue to be affected by a 'lock out' situation in one of our India facilities; however, entering July, we believe that solid foundations have been laid for a good second half performance.

Technical Ceramics

The Technical Ceramics business has traded well in the first half of 2008. Order books remain healthy as we enter July and we now expect the next generation of hard disk drive (HDD) business ramp up in 2009. The main driver of the division's performance has been the continued strength of our business in the medical, aerospace and power generation sectors: the continued momentum in these sectors has more than offset some softness in markets related to the building industry and telecoms. The acquisition of the Carpenter businesses was successfully completed at the end of March with encouraging trading so far. Sales and profits from the acquired businesses are ahead of our initial expectations at the half year.

Thermal Ceramics

The Thermal Ceramics business has maintained good top line sales growth on the back of continued buoyancy in the Asian, Middle East and Latin American markets, driven predominantly by the energy, metals and chemical and processing (CPI) sectors. The order book overall, and particularly in these areas, remains high and underscores our confidence in the prospects for this division. Though the more mature markets of North America and Western Europe are showing less growth, the pressure of high energy, oil and raw material prices is stimulating demand on industry to upgrade existing facilities, and thus offering Thermal Ceramics increased opportunities to provide enhanced insulation applications.

The improvement of our fibre product portfolio continues with sales of High Temperature SuperwoolTM commencing in North America from February of this year and the worldwide launch of Superwool Plus in June.  The significantly improved insulation performance of Superwool Plus is specifically targeted at saving energy and offers key advantages over all other existing high temperature fibre products. Furthermore, as part of our increasing investment in the future, our newly constructed global R&D centre in Bromborough, UK was formally opened in June, and will play a fundamental part in our drive to extend our market leadership position.

Molten Metal Systems

Trading conditions in the Molten Metal Systems business remained favourable in the first half, with sales growth in Europe and Asia more than offsetting some weakness in North American demand. The UK manufacturing operation was closed during the second quarter, with capacity expansion in Germany and in India well advanced. Construction of the new factory in Suzhou China remains on schedule for completion by the end of the year.

Financial Position

The balance sheet remains strong and there have been no significant changes in the financial position of the Group since that reported as at 4 January 2008, other than the acquisition of Carpenter noted above (funded through an increase in bank borrowings), c.£12m of share buybacks and LTIP share purchases and the pensioner buy-out transaction that was completed in March. Morgan Crucible made a one-off contribution to the schemes of c.£4 million as part of this pensioner buy-out transaction.

Outlook

The Group is in robust health. The second half is expected to benefit from having now resolved the armour production constraints, a full 6 month contribution from the Carpenter business and our strong current order book Overall, performance for the full year is anticipated to be in line with expectations and the Board looks to the future with confidence.

 

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