IMS and New Indian Joint Vent

RNS Number : 5918C

Severfield-Rowen PLC

17 November 2009

 

17 November 2009

INTERIM MANAGEMENT STATEMENT

& NEW INDIAN JOINT VENTURE

Severfield-Rowen Plc, the market leading structural steel group, issues this Interim Management Statement covering the period to 17 November 2009.

Current Trading

In the second half of the year all group companies are performing operationally in line with expectations, delivering projects on time, with overall group financial projections emerging slightly ahead of management's expectations. Cash balances have improved in line with predictions. Despite the considerable reduction in some UK steel construction sectors, the company's ambitions of domestic market share growth and overseas development are progressing well.

Cost Reductions

Following the company's announcements on cost reductions and capacities in September, the planned capacity reductions at Atlas Ward Structures (Sherburn) and Severfield-Reeve Structures (Dalton) have been or are being implemented by the end of December 2009.

Atlas Ward Structures has subsequently concluded agreements with the entire workforce on cost cutting measures and salary reductions. Further discussions are taking place with the operational workforce at Severfield-Reeve Structures to conclude cost reduction measures ahead of 2010.

Demand and Orders

UK demand, as anticipated, is poor in several of the key steel sectors and it remains our view that the UK structural steel market will be at its lowest trough in 2010.  The industry is experiencing severe pricing pressure as a result of the imbalance between demand and supply.  

The number of large UK projects will be limited in 2010, but remain important targets.

The current order book stands at a healthy £223m.  Petrochem projects in the Middle East and North Africa are now being released and the company is pleased to announce its first major success in this sector with the award of a large project in Abu Dhabi. It is expected that our offices in Abu Dhabi can build on this success through 2010.

India

Progress remains on plan and within budget to commence operations via our joint venture, JSSL (JSW Severfield Structures Ltd) in July 2010.  

The market prospects in India are strong and continue to grow.

We are also pleased to announce a second and complementary joint venture in India, details of which are attached to this announcement.

Conclusion

The financial year of 2009 is concluding with overall group performance likely to be slightly ahead of expectations.

Whilst the UK market will be very challenging, the company has made evident progress in addressing capacities and costs and is well positioned to grow domestic share. In export markets, the company is demonstrating its competitive capability. 

JSSL (India) will be operational in the second half of 2010, in a robust and growing market with further significant value-adding opportunity.

For further information, please contact:

Severfield-Rowen Plc        Tom Haughey            01845 577896

                                         Chief Executive Officer

                                         Peter Davison            01845 577896

                                         Finance Director

RBS Hoare Govett Ltd    John MacGowan         020 7678 8000

                                       Stephen Bowler           020 7678 8000

Pelham PR                      Alex Walters                0207 337 1500

                                      Francesca Tuckett        0207 337 1500

NEW INDIAN JOINT VENTURE

Severfield-Rowen Plc ("Severfield-Rowen"), the market leading structural steel group is delighted to announce that an agreement has been signed between JSW Severfield Structures Ltd and SMD Asia LLP to jointly establish a structural metal decking business based in Mumbai and Bellary, India.

JSW Severfield Structures Ltd is a 50/50 joint venture company formed between Severfield-Rowen and JSW Steel in November 2008 for the design, production and erection of structural steelwork to principally service the Indian markets. SMD Asia LLP Ltd is a limited liability partnership formed by the directors of SMD Ltd ("SMD") a leading UK company which specialises in the design, production and installation of metal decking for construction projects. In the UK, SMD have full supply chain experience from design and manufacture through to installation and they have a long history of working successfully with Severfield-Rowen.

The agreement sets up a 67:33 joint venture (JSW Severfield Structures Ltd: SMD Asia LLP) company that will design, manufacture and install structural metal decking which is used in flooring solutions in many construction projects. The new company will be called JSW Structural Metal Decking Ltd and will be based in Bellary district. The business will supply both JSW Severfield Structures Ltd and the open market.

The total investment cost of the joint venture is estimated at approximately £3m and will be funded through the formula of two thirds debt and one third equity, with the debt element raised through banks in India. The plant will be sited adjacent to JSW Severfield Structures Ltd and will become operational in spring / summer 2010.

Commenting today, Tom Haughey, Chief Executive of Severfield-Rowen, said:

"We are delighted to have established this joint venture with SMD which will strengthen our operations in India considerably and positions us well to service the very large infrastructure and construction projects which are being developed throughout India. The joint company fits perfectly with our proposed operations which will provide design, fabrication and erection of structural steelwork and we are confident that the combined forces, offering fuller client solutions, will be highly successful".

 

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