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Cookson Reports 1H09 Revenue Drop
August 4, 2009 |Estimated reading time: 3 minutes
Highlights 2009 Half Year Financial Report
- Revenue of £929 million, down by one-third on an underlying basis.
- Trading profit of £16.5 million. All divisions profitable.
- Cost-reduction programmes proceeding as planned to reduce annual cost base by over £65 million and headcount by 3,200 (19%) from September 2008 level.
- Exceptional charges (pre tax) of £86 million, including £66 million for restructuring.
- Strong free cash flow of £84 million, compared to £7 million in first half 2008.
- Net debt reduced by £294 million to £438 million, through rights issue and strong cash generation and after £24 million cash outflow for restructuring.
- Some recent signs of recovery in ceramics end-markets; progressively improving trends in electronics end-markets since March continuing into third quarter.
Commenting on the Group's results and outlook, Nick Salmon, Chief Executive, said, "We have faced very tough trading conditions throughout the first half of 2009. However, through the rapid implementation of our cost-reduction programmes all divisions have remained profitable.
"After trading just above break-even levels in the first quarter, trading profit has progressively improved through the second quarter. Our main ceramics end-market of steel production has recently seen some signs of recovery and our electronic materials end-markets have seen progressively increasing levels of activity since late March.
"Combined with the rights issue, a strong focus on cash generation and lower working capital levels has enabled us to make further progress in reducing debt to £438 million, notwithstanding a cash outflow of £24 million for restructuring.
"Whilst the timing and extent of recovery in our end-markets remains very difficult to predict with accuracy, we continue to expect a progressive improvement in our performance in the second half of the year as further cost-reduction benefits materialise and sales volumes improve."
Summary of Group Results
Group revenue in the first half of 2009 of £929 million was 27% lower than the same period last year at constant exchange rates and 12% lower at reported exchange rates. This reflected the severe downturn in the global economy and all of Cookson's end-markets, being only partially offset by a six month contribution from Foseco in the first half of 2009 versus a three month contribution in the prior period. On an underlying basis (as if Foseco had been acquired with effect from January 1, 2008, at constant exchange rates and adjusted for the pass-through of lower metals prices in three of the Electronics and Precious Metals divisions), revenue was down by one-third compared with the same period last year.
Trading profit was £16.5 million (first half 2008: £113.3 million). Almost all of this was earned in the second quarter which benefited from the ongoing cost-reduction programmes, a progressive pick-up in electronics end-markets in Asia since late March and the first signs of a pick up in ceramics end-markets in June. Exceptional charges (pre tax), excluded from headline results, totalled £86.4 million. Net debt as at June 30, 2009 was £438 million, compared to £732 million as at December 31, 2008, as a result of the £241 million net proceeds of the rights issue in March, and reduced levels of working capital and strong cash generation. The net debt to EBITDA ratio was 2.6 times as at June 30, 2009 (compared to the bank covenant requirement of not more than 3.5 times), placing the Group in full compliance with the financial covenants contained within its debt facilities.
Electronics
Revenue of £240 million was 25% lower than that reported for the same period last year. On an underlying basis, at constant exchange rates and adjusted for the pass-through of lower metals prices and precious metal sales, revenue was down 33%. Trading profit was £6.3 million (first half 2008: £29.9 million).
All of the division's key end-markets--electronics, industrial and automotive--were very weak through the first quarter of 2009. Underlying revenue in the first quarter was down 37%, but since late March, electronic materials end-markets (nearly two-thirds of revenue) have progressively improved as the customer de-stocking phase appears to be largely over and end-demand recovers. Industrial and automotive markets (one-third of revenue) have continued to be weak throughout the first half.
The division traded around break-even in January and February, but recorded an increasing month-on-month trend thereafter, both as a result of the improvement in electronics end-markets, but also due to the increasing benefit of the cost-reduction programmes.
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