TIDMCKSN
RNS Number : 5234D
Cookson Group PLC
17 May 2012
17 May 2012
COOKSON GROUP PLC ("Cookson" or "the Group")
INTERIM MANAGEMENT STATEMENT AND INITIATION OF STRATEGIC
REVIEW
Cookson Group plc, a leading materials science company, releases
its Interim Management Statement regarding current trading,
financial position, recent developments and outlook ahead of
today's Annual General Meeting as well as the initiation of a
strategic review. The Statement covers the period from 1 January
2012 to 16 May 2012.
Overview
-- Trading for the first four months for the Group as a whole
has been in line with internal expectations. Despite the previously
identified continuing losses in the Fused Silica business, Group
trading profit was slightly ahead of the equivalent period last
year; management's expectations for the Group's full year
performance in 2012 remain unchanged
-- 'Bolt-on' acquisition of Metallurgica completed on 29 March 2012
-- Disposal of the US operations of the Precious Metals
Processing division completed, as planned, on 1 May 2012
-- Strategic review initiated to consider a number of options,
including a potential demerger or separation of Cookson's two main
divisions
-- Christer Gardell, Managing Partner of Cevian Capital, to join
the Board as a non-executive Director
-- Board remains confident of the Group's ability to achieve
further progress in the current year towards its 2013 targets,
driving further value for shareholders
Engineered Ceramics
The division is the world leader in the supply of advanced
consumable products and systems to the global steel industry (which
accounts for a little over half of revenue) and the global foundry
industry (approximately one third of revenue) and a leading
supplier of speciality products to the glass and solar
industries.
According to the World Steel Association ("WSA"), global steel
production in the first quarter of 2012 was 1.1% higher than the
first quarter of 2011 (unchanged for the world excluding China),
with the EU (27 countries) 3.9% lower, NAFTA 6.7% higher, and China
2.5% higher. This reflects a continuation of the weaker trends seen
in the latter months of 2011, particularly in Europe and China. On
27 April 2012, the WSA issued a new short-range forecast for growth
in global steel use of 3.6% for full year 2012 (3.2% higher for the
world excluding China), with the EU 1.2% lower, NAFTA 5.2% higher,
and China 4.0% higher. Growth in global steel use in 2013 is
forecast to be 4.5%.
Foundry castings end-markets are currently experiencing mixed
conditions. There are encouraging levels of activity in North
America and Northern Europe (notably Germany and Scandinavia), but
relative softness in Southern Europe, Korea and Japan and recent
signs of a pick-up in China.
The performance of the division's three principal businesses
(Steel Flow Control, Advanced Refractories and Foundry
Technologies, together comprising around 95% of the division's
revenue) for the first half of 2012 is expected to be marginally
higher compared to the equivalent period last year and also to
strengthen in the second half of 2012 when the comparatives become
less demanding. As expected, the trading losses in the Fused Silica
business (c.5% of divisional revenue) in the second half of 2011
have continued into this year compared to a profitable first half
of last year. Action plans have been developed to further reduce
costs in this business should the anticipated second half 2012
end-market recovery fail to materialise.
Therefore, due to the relatively weaker performance of the Fused
Silica business, the division's overall first half 2012 performance
continues to be expected to be marginally below that in the first
half of 2011.
The acquisition of Metallurgica was completed on 29 March 2012.
Metallurgica is one of the world's leading suppliers of mould flux
used alongside refractory products in the enclosed continuous
casting steel casting process. The business is being integrated
into the Steel Flow Control business and is already making a
positive contribution.
Performance Materials
The division is a world leading supplier of electronic assembly
materials and advanced surface treatment and plating chemicals. The
electronic equipment production end-market accounts for
approximately three-quarters of revenue with the other quarter
being direct non-electronics applications in automotive and
industrial production.
As anticipated, continued strong performance in the Americas and
Asia-Pacific has more than offset weak end-market conditions in
Europe. The division has continued to benefit from its market
penetration of the higher growth market segments, such as
smartphones and tablets, based on innovative, higher margin
products.
According to recent estimates from Henderson Ventures, global
production of electronic equipment (measured in US dollars at
constant currency) is forecast to grow by 5.4% in 2012 and 6.6% in
2013.
The division's first half performance is expected to be well
ahead of the equivalent period last year, but slightly below the
seasonally stronger second half of 2011.
Precious Metals Processing
The agreement to sell the division's US operations to Richline
(a subsidiary of Berkshire Hathaway Inc.) was signed on 22 February
2012 with the sale being completed, as planned, on 1 May. Over the
first four months of the year up to disposal, the US operations
were modestly profitable.
The European operations have continued to trade well, benefiting
from continuing high levels of reclaimed precious metals processing
and refining activity.
The division's overall first half performance is therefore
expected to be somewhat ahead of the first half of 2011.
Financial condition
Working capital trends in the first four months of 2012 have
reflected normal seasonality with a build-up of working capital
expected in the first half of the year with a corresponding
reduction in the second half. Net debt as at 30 June 2012 will also
reflect (i) the acquisition of Metallurgica in March 2012, (ii) the
purchase by the Employees Benefit Trust in March 2012 of GBP15m of
Cookson shares relating to the award of shares to employees under
Long Term Incentive Plans, and (iii) the buy-out of the property
lease relating to the Performance Materials division's operations
in Woking, UK for GBP20.5m in May 2012. This property had been
subject to a 'sale and leaseback' arrangement (with a twenty-seven
year lease) in 2001, but due to the landlord going into
receivership, an opportunity arose to acquire the property for a
consideration that was significantly lower than the net present
value of the outstanding lease payments.
On 2 May 2012, US$190m (GBP119m*) of US Private Placement loan
notes dating from 2000 were repaid on their scheduled maturity
date. Following this repayment, the Group's committed debt
facilities now comprise the GBP600m five year Revolving Credit
facility agreed in April 2011 and US$250m (GBP157m*) of US Private
Placement loan notes which were issued in December 2010 with an
average weighted duration remaining of just over seven years.
The Group is operating well within the stated target of a
leverage ratio (net debt to EBITDA) of not more than 1.5 times at
year-end and 1.75 times at the half year. Hence, the Group's
financial position is strong with a good level of liquidity under
long-term financing arrangements.
Outlook
The outlook for the remainder of 2012 remains in line with that
stated in our 27 February 2012 Preliminary Results
announcement.
While the macro-economic outlook continues to be uncertain,
trading to date and feedback from customers and third party
industry forecasters continues to indicate mid-single digit growth
globally in the Group's main end-markets in 2012, with generally
weaker demand in Europe offset by continued growth in the Americas
and Asia-Pacific. For the small Fused Silica business, we still
anticipate some recovery in the solar panel market in the second
half of 2012, but we will take the necessary action should this not
materialise.
Both the Engineered Ceramics and Performance Materials divisions
are well positioned to deliver further performance improvement
based on their global market coverage, strong presence in higher
growth developing markets, leading technologies and strong new
product pipelines, high technical service element and value selling
competence. The Board remains confident of the Group's ability to
achieve further progress in the current year towards its 2013
targets, driving further value for shareholders.
Strategic review
As part of its continued focus on maximising business
performance and shareholder value, the Board routinely reviews the
potential strategic portfolio options for the Group. The Board
believes that there remains considerable scope to further enhance
performance of the individual businesses and unlock further
shareholder value. Accordingly it has initiated a strategic review
which, over the coming months, will consider a number of options
for the Group.
These options include a potential demerger or separation of
Cookson's main divisions, given the limited operational or
end-market overlap between the Engineered Ceramics division (a
ceramic refractory business) and the Performance Materials division
(a specialty chemicals business). The Board will update
shareholders on the progress of this strategic review as and when
appropriate.
An initial analysis of the frictional costs associated with any
separation has been carried out. Whilst the ultimate quantum of
these costs will depend on the structure of any such separation,
this initial analysis suggests that the likely upfront, one-off
cash costs on any separation (relating, inter alia, to additional
pension contributions, taxation, debt refinancing costs, and
professional fees) would be in the range of GBP50m to GBP70m. The
level of on-going, incremental costs to the businesses resulting
from any separation will continue to be assessed, but the net
present value of these costs (which includes additional head office
and taxation costs) is currently expected to be broadly similar to
the level of the upfront cash costs.
Board changes
Steve Corbett, the Chief Executive of the Performance Materials
division, joined the Board as an executive Director on 1 May 2012
and is standing for election at today's AGM. Dr Emma FitzGerald,
having been appointed after the 2011 AGM, is also standing for
election for the first time today. All other current Directors are
standing for re-election.
The Board is pleased to announce that it has invited Christer
Gardell to join the Board as a non-executive Director with effect
from 1 June 2012. Christer Gardell is Managing Partner of Cevian
Capital which currently owns just over 20% of Cookson's shares.
Mr. Gardell co-founded Cevian Capital in 2002. From 1996 to
2001, he was the Chief Executive Officer of AB Custos, the Swedish
investment company. Prior to joining AB Custos he had been a
Partner of Nordic Capital. Between 1984 and 1995 he worked with
McKinsey & Company, ultimately as a Partner. He has served as
chairman of five companies and as a director of thirteen companies.
Mr. Gardell holds an MSc in Economics and Business Administration
from the Stockholm School of Economics.
Mr. Gardell's extensive international and financial experience
includes sitting as a non-executive director of the global Finnish
technology and services company, Metso Corporation. He was also a
director of AB Lindex until December 2007 and of Tieto Corporation
until March 2012.
There are no further matters to be disclosed pursuant to Listing
Rule 9.6.13 in relation to the appointment of Mr. Gardell.
The outcome of the above mentioned strategic review will, of
course, have a bearing on Board succession planning and the future
composition of the Board or Boards and respective Committees.
Conference call
Nick Salmon (Chief Executive) and Mike Butterworth (Group
Finance Director) will be hosting a conference call for analysts
and investors at 8.00am (UK time) today (17 May). To join the call,
please use the dial in number below:
Conference call:
+44 (0)203 427 1931 all participants
Confirmation code: 6204420
A replay of the call will be available one hour after the event
for two weeks on the following number:
Replay:
+44 (0)203 427 0598 non-US participants
+1 347 366 9565 US participants
Confirmation code: 6204420#
Further announcements
Cookson's half year results for the six months ending 30 June
2012 are expected to be announced in late July 2012.
- Ends -
Notes:
* translated at an exchange rate of US$1.59/GBP1
Shareholder/analyst enquiries:
Nick Salmon, Chief Executive Cookson Group plc
Mike Butterworth, Group Finance Director Tel: + 44 (0)20 7822 0000
Media enquiries:
John Olsen MHP Communications
Anthony Arthur Tel: +44 (0)20 3128 8100
+44 (0)7770 272082
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 Engineered 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 products to the glass and solar industries.
The Performance Materials division is a leading supplier of
electronic assembly materials and advanced surface treatment and
plating chemicals 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 UK, France and Spain, and also has
significant precious metal recycling operations.
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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