20 June 2002
20 June 2002
As notified in the AGM statement, IMI plc, the major international engineering
group, is today issuing a trading update in advance of its interim results
announcement for the six months to 30 June 2002, which will be published on 9
General market conditions to date have been much as anticipated with demand
remaining subdued. However, the lows that some of our businesses experienced in
the fourth quarter of 2001 appear to be behind us. We continue to benefit from
recent new product introductions.
We took the view going into 2002 that profit improvement this year would come
largely from the reduction in our cost base. We have pressed ahead with our
restructuring measures and the benefits are now being realised. We are also
continuing our previously announced policy of reinvesting around half of these
savings to stimulate long term growth.
The operational changes are making sound progress. The transfer of
manufacturing activities to lower cost parts of the world is going well with
production capacity accelerating at three new plants in Mexico, expansion at our
Chinese facility and work well under way to open two new plants in the Czech
Businesses earmarked for disposal remain in good shape and continue, for the
most part, to trade well.
Cash flow remains sharply in focus and we expect another good cash performance
in the first half of 2002 and a lower interest charge than the same period last
Overall we would expect profit before restructuring and rationalisation costs
for the first half of 2002 to be around 5% lower than last year and well ahead
of the second half of 2001.
Our Severe Service valves business is in good health. Strong new valve
shipments and a growing order intake give us confidence that the continuing
investment in specialist sales engineers will help us develop its undoubted
potential. Capacity has been expanded by the opening of a new facility in
Tijuana, Mexico and the integration of STI of Italy, purchased earlier in the
year, has gone well.
Although ahead of the fourth quarter of last year, volumes in Fluid Power remain
disappointing and it is expected that sales will be around 7% lower than the
first half of last year. There are some promising signs of recovery in the US
but the picture elsewhere is mixed. The cost reduction initiatives are going
well with manufacturing in Mexico up and running and a further reduction in
headcount of around 200 in the year to date.
As expected, Indoor Climate volumes in Germany were again lower. The downsizing
of the German operations has now been fully negotiated, implementation is
continuing and benefits will materialise in the second half. Elsewhere, volumes
generally are about level with last year. We continued to add to our
commissioning capability and purchased a small French service company in June.
Volumes in Beverage Dispense were boosted in the US by the roll out of a major
order for new frozen carbonated beverage equipment received late last year, most
of which is now shipped. Volumes elsewhere were satisfactory in what continues
to be a challenging market. Margins will not benefit fully from the volume
uplift, with, as fully anticipated, some short term costs and operational
inefficiencies arising from the closure of two US plants and transfer to Mexico
and China; and further investment in our Bevcore parts business. Benefits
arising from this investment will begin to materialise early next year.
Our Merchandising Systems business has not yet seen any tangible recovery from
the 11 September impact. Although there is improved quotation activity, many
brand owners and retailers are yet to release advertising and promotional
expenditure. Nevertheless, we are confident that this business has sound
foundations and continue to look for suitable acquisition opportunities.
In Building Products the core pipe businesses within Polypipe have performed
well to date despite some upward pressure on PVC prices. In Tube and Fittings
the closure of the German manufacturing operations is expected to complete
shortly and the benefits will arise in the second half. In the UK, volumes in
Fittings have generally held up well but in Tube a rising copper price is
putting pressure on margins.
We said in our statement at the AGM in May that it was too early to judge
whether there would be any volume improvements later in the year, and this
remains the situation. However, the benefits arising from our restructuring and
rationalisation programme will come through progressively in the second half and
we expect to show progress for the year as a whole.
- Ends -
For further information contact:
Graham Truscott, Communications Director Tel: 0121 332 2330
Weber Shandwick Square Mile
Ben Padovan / Peter Corbin Tel: 020 7950 2800
This information is provided by RNS
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