Interim Management Statement

RNS Number : 8268R

Cookson Group PLC

10 November 2011

 



10 November 2011

COOKSON GROUP PLC ("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 2011 to 9 November 2011.

Summary

Overall, trading trends in the Ceramics and Electronics divisions have remained robust throughout the period.

For Ceramics, conditions in the main end-markets of global steel and foundry castings production have been as anticipated in the outlook statement given in the Group's half year results announcement on 2 August 2011.  In the relatively small solar power end-market, the significant fall in demand since mid-year, which we had previously highlighted, has deepened further.  Electronics end-market conditions have been somewhat better than expected.  The Precious Metals division has experienced good trading conditions in Europe but a marked deterioration in US markets.

There have been some recent signs of moderate softening in global steel production volume trends for the fourth quarter, but momentum in foundry and electronics is currently being maintained.

As a result of all of the above, we now expect the Group's overall performance in the second half of the year to be slightly below that of the first half.  This would result in a full year performance substantially ahead of 2010.  Hence 2011 should be another year of strong progress.  

Ceramics

In line with normal seasonality, global steel production in the third quarter of the year declined by some 2% compared to the second quarter (also 2% lower for the world excluding China), although it was 10% higher than the equivalent quarter last year (6% higher for the world excluding China).  There have been recent signs of some moderate softening in steel production volume trends for the remainder of the year, particularly in Europe.  For our foundry castings end-markets, news flow from the ultimate end-markets, such as heavy truck, higher-end automotive, and construction, mining and agricultural equipment, has been mixed.  However, to date there has been no material slow-down in our customers' activity levels.  The planned mid-year selling price increases in our steel and foundry markets have been successfully implemented and are being maintained. 

In the Group's half year results announcement, it was highlighted that our relatively small Solar Crucible^TM business (which comprises around 60% of the Fused Silica business) had been experiencing a marked slow-down in volumes since the mid-year.  This has deepened further and is now expected to continue into 2012.  Steps are being taken to adapt to these market conditions by eliminating temporary workers and adopting some short time working arrangements in Europe and via some permanent workforce reductions in our Chinese operations.  In addition, we are developing some technological innovations which should enable us to significantly reduce production costs and improve competitiveness, as the anticipated recovery in solar market volumes picks up next year.

Compared to the first half, a stronger second half performance from the combined Steel Flow Control, Linings and Foundry businesses is now expected to be offset by a significantly reduced performance from the Fused Silica business.  This will result in the Ceramics division's overall performance in the second half of 2011 being slightly lower than the first half.

Electronics

The Electronics division experienced a strengthening of demand through the period, in line with normal seasonal trends but with the improvement being slightly stronger than previously expected.  It continues to benefit both from its strong market positions in the faster growth market segments within consumer electronics, such as tablets and smartphones, and also the increased market penetration of related, innovative and higher margin products such as advanced solder pastes and 'tape and reel' packaged solder pre-forms. 

The division continues its focus on new product development and on penetrating new markets, including LED, solar and power electronics.  These new products include Ready Ribbon™, a pre-fluxed, solder coated, copper ribbon used for connecting solar cells within a solar panel, and nano-silver die attach products for use in the manufacture of LED lights and power electronics.  Both products have attracted high levels of customer interest ahead of their commercial launch.  Related new production lines for these products have recently been successfully commissioned and commercial sales are expected to commence shortly.  

The division's overall performance in the second half is now expected to be well ahead of the first half and the outlook for the division for 2012 remains positive.

Precious Metals

In the Precious Metals division, the European business has continued to perform well, benefitting from high levels of reclaim activity.  Having operated at around breakeven in the first half, the US business has however incurred losses in the third quarter and is also expected to do so in the fourth quarter.  As a result, the division overall is expected to perform around break even for the second half of the year.  A strategic review of the US business has commenced which is expected to be completed by the time of the Preliminary results announcement in February 2012.  In any event it is clear that a significant downsizing of the US operations will be required to restore the division's profitability and this process has recently been initiated.  This is likely to result in an exceptional restructuring charge being taken in the full year results. 

Financial condition

Net debt is expected to reduce over the second half of the year from £429 million at 30 June 2011, in line with the Group's normal seasonality.  The Group's financial condition is robust with low levels of leverage and ample liquidity headroom under long term financing arrangements. 

Outlook

The Group's effective tax rate* for the full year is now expected to be around 23.5%, marginally lower than previous expectations.

The Group's overall performance in the second half of the year is now expected to be slightly below that of the first half.  This would result in a full year performance substantially ahead of 2010.  Hence 2011 should be another year of strong progress. 

The macroeconomic situation remains uncertain and contingency plans are in place to respond promptly to market conditions.  Feedback from our customers and third party industry forecasts continue to indicate mid-single digit growth in our main end-markets in 2012, albeit with low growth in Europe.  On 12 October, the World Steel Association issued its forecast for apparent steel use** for the full year 2012 which anticipates global growth of 5.4%, but with the European Union only growing 2.5%.  Similarly, on 7 November, Henderson issued its forecast for the global production of electronic equipment for the full year 2012 which anticipates growth of 5.4%.  The medium term outlook in our main end-markets therefore continues to look cautiously positive.  In the relatively smaller solar and precious metal businesses, where market conditions are weak, we are confident we can take the necessary actions to restore profitability next year.  

Hence with leading technologies, strong global market positions, and significant emerging market exposure, the Group expects to continue to deliver a further improvement in performance in 2012.    

* Tax rate on headline profit before tax and before share of post-tax profit of joint ventures.

**Apparent steel use reflects the deliveries of steel to the marketplace from domestic steel producers as well as from importers.  This differs from real steel use, which takes into account steel delivered to, or drawn from, inventories.

Conference call

Nick Salmon (Chief Executive) and Mike Butterworth (Group Finance Director) will be hosting a conference call for analysts and investors at 7.45am (UK time) today (10 November).  To join the call, please use the dial in numbers below:

Conference call:

 [phone] all participants

Confirmation code: 4915995

Please dial in 5 to 10 minutes prior to the scheduled start time.

A replay of the call will be available one hour after the event on the following number:

Replay (available until 24 November 2011):

[phone] non-US participants - confirmation code 4915995#

[phone] US participants - confirmation code 4915995#

Further announcements

Cookson's Preliminary Results for the year ending 31 December 2011 are expected to be announced on 27 February 2012.

For further information please contact:

Shareholder/analyst enquiries: Nick Salmon, Chief Executive Mike Butterworth, Group Finance Director	Cookson Group plc Tel: [phone]
Media enquiries: John Olsen/Anthony Arthur	MHP Communications 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.

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 speciality 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 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 US, the UK, France and Spain, and also has significant precious metal recycling operations in Europe.

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

 

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