Engineered Ceramics slow-down hits Cookson

Cookson, which provides materials and know-how to the steel production, foundry castings and eletronics markets, has warned on full year profits after a sticky third quarter for its Engineered Ceramics division.

"In light of the conditions being experienced by the Engineered Ceramics division, full year performance for the group as a whole is now expected to be materially below the board's previous expectations," Cookson revealed. Other parts of the business are ticking over as expected.

Engineered Ceramics divisionThird quarter performance of this division has been below expectations, with the deterioration in end market quickening in September.

"Assuming a continuation of current end-market conditions, the Engineered Ceramics division's performance in the second half of 2012 is now expected to be substantially below both the first half and previous expectations," the company's interim management statement said.

The group said there have been signs of some further weakening in steel production volume trends, particularly in the US, Europe and Brazil, which has knocked the performance of its steel related businesses, Steel Flow Control and Advanced Refractories.

Meanwhile, on Foundry castings end-markets, such as heavy lorries, wind turbines and construction, are also seeing a slow-down in activity.

"This trend, which has affected the majority of geographic regions, has inevitably led to a further slow-down in demand in our Foundry Technologies business from that experienced in the second quarter," the group revealed.

The firm is taking action to respond to the lower levels of demand, and in a number of countries negotiations have been started with the relevant authorities regarding government subsidised working hour reduction schemes.

Performance Materials divisionOverall trading in this division in the third quarter has been in line with expectations.

A seasonal pick-up in demand in consumer electronics manufacturing and the seemingly insatiable appetite of consumers for smartphones has been good for the Assembly Materials division but gains here have been offset by the Surface Chemistries business, where business levels are drifting lower, largely as a result of a slow-down in production in the European car market and, more recently, a tailing off of products used in the fabrication and packaging of semiconductors.

Precious Metals Processing divisionTrading in the third quarter, which reflected the normal seasonal trends, was satisfactory and expectations for the full year remain unchanged.

Financial condition and outlookCookson said net debt should reduce significantly over the rest of the calendar year from £451m at the half-year statement, and previous expectations for year-end net debt levels remain unchanged.

The outlook remains a bit foggy, however. As mentioned, the Engineering Ceramics division is expected to see second half performance below that of the first half and previous expectations, but the Performance Materials division's second half performance should be a bit better than the first half's; the Precious Metals Processing division is on course to deliver a performance in line with previous expectations.

JH