Interim Management Statement

RNS Number : 5477O

Morgan Crucible Co PLC

12 October 2012

 



Press Release

Interim Management Statement 

The Morgan Crucible Company plc

12^th October 2012

The Morgan Crucible Company plc ('Morgan Crucible'), the advanced materials company, is today issuing its 'Interim Management Statement' regarding trading from 1^st July 2012 to 11^th October 2012.

·      Trading conditions have deteriorated across most geographies in the third quarter of the year, particularly in Europe and China

·      The slowdown in demand has been most pronounced in the Advanced Materials and Technology (AM&T) business. The Ceramics Division and Molten Metal Systems, comprising over 70% of the Group, have been more resilient, with margins remaining in our target mid-teen range

·      Group revenue in the third quarter weakened and was c10% below first half average levels on a constant currency basis. Based on order intake in the third quarter the Group expects this reduced level of trading to continue for the rest of the year

·      Given the weakened demand environment, a number of actions are being undertaken across the Group to reduce the cost base, particularly in the AM&T business. We would anticipate Group one-off costs  in 2012 to be in the region of c£15 million, of which the cash costs will be c£10 million, with annualised benefits of c£7-8 million

·      The Group's cash generation is robust and the expected net debt to EBITDA ratio for 2012 year end remains low at 1.2 to 1.3 times.

Mark Robertshaw, CEO commented:

"With a weaker market environment Group performance for the full year is likely to be materially below the Board's previous expectations. We are taking firm action to reduce our cost base to protect profitability and are reviewing further structural actions. In line with our strategy the Group continues to invest for the future both in new product development and capital expenditure in higher margin business areas."

Ceramics Division

The Ceramics Division consists of the Technical and Thermal Ceramics businesses.

Both the Technical and Thermal businesses saw some deterioration in trading across most geographies, in particular in Asia and Europe, partially offset by good performance in Thermal in North America.

In North America, aerospace, medical, and the chemical processing sector have remained relatively resilient.  However in Europe we have experienced reduced demand for our Fibre products that go into automotive and iron & steel markets.  In China the weakness in industrial demand reported at the half year has continued and as yet shows no signs of improvement.  Based on third quarter trading, and no change to market conditions in the short term, Divisional performance in the second half of the year is expected to be somewhat below the first half.

In response the Division has reviewed its cost base and geographical footprint and is taking a number of restructuring actions to mitigate the effects of this slowdown. The Division continues to invest in its planned capital expenditure programme, including for example the Superwool conversion and geographic expansion into growth markets.

Engineered Materials Division

The Engineered Materials Division consists of the Advanced Materials and Technology (AM&T) business, including NP Aerospace, and the Molten Metal Systems (MMS) business.

The third quarter of 2012 saw a further softening of trading in AM&T with revenue significantly down compared to the third quarter in 2011. Given current trading conditions second half results are now expected to fall well below the first half of the year. The business continues to be impacted by the slowing Chinese economy and the global downturn in the clean energy sector. Our seals & bearings business saw its trading contract through the third quarter beyond the normal seasonal drop after five consecutive half year periods of solid growth. Additionally, body armour contracts that were expected in the second half have been delayed into 2013. Trading conditions in our electrical business continued to deteriorate in the third quarter and are expected to remain suppressed through the end of the year, as Western economies remain sluggish and China remains depressed. Actions are underway to reduce AM&T's cost base with particular emphasis on our Electrical business in Europe.

The expectation for full year NP Aerospace revenue is now c£60 million with phasing of certain second half contracts potentially being delayed into 2013.

MMS performance is expected to continue in line with the first half of this year, with Asia and the US ahead of 2011 trading levels offsetting headwinds in Europe.

Financial position

There were no significant events or transactions during the period which resulted in a material impact on the financial position of the Group.

Progress has been made with respect to further tax planning initiatives and as a result the expected full year effective tax rate for the Group is c27% compared to the previously guided 29%.

The Group's financial position is robust with low gearing and good cash generation.

For further enquiries:

Mark Robertshaw	Morgan Crucible	01753 837000
Kevin Dangerfield	Morgan Crucible	01753 837000
Mike Smith/Will Carnwath	Brunswick	0207 404 5959

This statement constitutes Morgan Crucible's Interim Management Statement for the period from 1^st July 2012 to 11^th October 2012 as required by the UK Listing Authority's Disclosure and Transparency Rules.

 

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