Interim Management Statement

RNS Number : 8712H

Cookson Group PLC

11 November 2008

 



11 November 2008

INTERIM MANAGEMENT STATEMENT

Cookson Group plc ('Cookson' or 'the Group'), a leading materials science company, releases the following Interim Management Statement regarding current trading, its financial position and the outlook for 2008 and 2009. This statement covers the period from 1 July 2008 to 10 November 2008.

Introduction

In recent weeks the Group has started to see clear evidence of the global financial turmoil impacting its end-markets, particularly global steel production. These weakening market conditions are being reflected in industry statistics and recent equity analysts' research. As a result, although overall performance for the year will still be significantly ahead of 2007 reflecting the addition of Foseco's contribution and continuing currency translation gains, full year performance for 2008 is now anticipated to be below management's earlier expectations.

The weaker end-market conditions are expected to prevail throughout the fourth quarter and into 2009, and management has initiated appropriate and decisive actions across the Group to mitigate the effects of this slowdown.

Ceramics

According to the latest World Steel Association statistics, global steel production, the main end-market for our Steel Flow Control and Linings businesses, fell 3.2% in September compared to the same month last year, giving a growth rate for the nine months year to date of 4.6%. The sharply declining growth rate was principally driven by China where production in September was 9.1% lower than the same month last year. Global steel production figures are not yet available for October, but in recent weeks producers in most regions have been announcing production cuts to reduce inventories and to support prices for finished steel. The duration of these production cuts is as yet unclear and, as a result, it is not possible to gauge the likely level of steel production in the full year 2009, but we are encouraged that the global steel industry appears to be reacting much more quickly to the slowing demand than in previous downturns. The division is managing its operations on the assumption of a significant reduction in global steel production in the remainder of 2008 and in the first quarter of 2009.  

The Foseco Foundry business has recently seen some slowing in activity compared with the high levels experienced over the first nine months of the year and, given the current difficult economic environment, weaker growth is expected in the fourth quarter of 2008. The integration of Foseco continues to make good progress and is on track to deliver the targeted synergy cost savings of £6 million in 2008 and a further £12 million in 2009.

Fused Silica growth remains strong, driven by demand for Solar Crucibles™ used in the production of solar cells.

For the Ceramics division as a whole, underlying performance for the full year 2008 (on a pro forma basis for Foseco and at constant currency) is now expected to be in line with 2007.

Electronics

Consumer electronics end-markets remain flat and automotive end-markets (representing approximately 15% of the division's revenue) are weakening. As a result of these trends, underlying performance for the division for the full year 2008 is now expected to be slightly down on last year.

Reported revenue will also be reduced by the pass-through of the lower current cost of tin and silver used in our solder products, the prices for which are now significantly below the levels at the mid-year. This pass-through effect does not impact underlying profit. 

Precious Metals

Retail jewellery end-market trends remain very weak for both our US and European operations, although this has partially been offset by increased precious metal reclaim activity in Europe and strong demand from the US Mint for gold coin blanks. Due to our cost cutting programmes over the last eighteen months, particularly the ongoing transfer of activity from the UK and the US into our low labour cost facilities in Thailand and the Dominican Republic, the division is expected to remain profitable on an underlying basis in 2008 despite the difficult end-markets.

Currency

Whilst the Group has little transactional exposure to movements in exchange rates, its reported results are impacted by the translation of non-UK results into sterling. Compared to 2007, sterling has weakened significantly against the majority of currencies and, for the first half 2008 results, this had the effect of increasing reported trading profit by 12%. Since then sterling has continued to weaken, particularly against the euro, US dollar and Chinese renminbi, such that if exchange rates remain at current levels the increase in reported trading profit would be around 14% for the full year 2008. Conversely this weakening of sterling has an adverse impact on the Group's level of reported net debt through the translation impact on non-sterling denominated debt.

Financial position

Following the refinancing undertaken at the time of the acquisition of Foseco, the Group has two principal committed borrowing facilities which together total £1 billion, namely the US Private Placement Loan Notes and the £770 million syndicated bank facility. The maturity of these facilities is included in detail in Appendix One and it can be seen that the principal amount of the maturities of the two facilities is not until 2012.

As a result of the adverse translation impact of the weakening of sterling on the non-sterling denominated debt, year-end net debt is expected to be slightly higher than the £706 million reported at 30 June 2008. 

Outlook

The weaker end-market conditions experienced since the end of the third quarter are expected to prevail through the fourth quarter and into 2009.

As a result, full year performance for 2008 is now anticipated to be below management's earlier expectations.

Overall performance for the year will still be significantly ahead of 2007, reflecting the addition of Foseco's contribution and continuing currency translation gains.

Trading performance in 2009 will be dependent upon the depth and duration of the global economic slowdown. Management has initiated a programme of appropriate actions across the Group to take account of the current and anticipated slowdown, and will continue to act decisively to adapt the business to market conditions as they evolve. The Group's performance in 2009 will benefit from these actions, from a full year contribution from Foseco (versus only nine months in 2008) and from the progressive realisation of the Foseco integration synergies. The reported results will also benefit from currency translation gains if sterling remains weaker than average 2008 levels.

  - Ends -

APPENDIX ONE:

COMMITTED DEBT FACILITIES - MATURITY PROFILE
			US Private Placement		Syndicated bank			TOTAL COMMITTED
			Loan notes		facility			FACILITIES
			£m		£m			£m
2008:
								0
			0		0			0
2009:
	November ($40m)*		25					25
			25		0			25
2010:
	May ($135m)*		85					85
	October (£75m)				75			75
	October (Euro 37.5m)*				30			30
			85		105			190
2011:
	October (£75m)				75			75
	October (Euro 37.5m)*				30			30
			0		105			105
2012:
	May ($190m)*		120					120
	October (£500m)				500			500
	October (Euro 75m)*				61			61
			120		561			681
			230		771			1,001
	* translated at £1/US$1.58 and £1/euro 1.23

Shareholder/analyst enquiries: Nick Salmon, Chief Executive Mike Butterworth, Group Finance Director Anna Hartropp, Investor Relations Manager	Cookson Group plc Tel: [phone]
Media enquiries: John Olsen/Anthony Arthur	Hogarth Partnership Tel: [phone]

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.  

Trading under the Vesuvius and Foseco brand names, the Ceramics division is the world leader in the supply of advanced consumable products and systems to the global steel and foundry industries and a leading supplier of speciality products to the glass and solar industries.

The Electronics division is a world leading supplier of advanced surface treatment and plating chemicals and assembly materials to the electronics, automotive 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 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.  Nothing in this announcement should be construed as a profit forecast.

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 

 

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