Bottom Line: China Clays' good sense of timing

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The Independent Online
CAMAS shareholders may disagree, but English China Clays appears to have chosen a propitious time to shed its aggregates business. While Camas accompanied its interim results with the gloomy news that trading was worse than expected, ECC is finally seeing signs of an improvement in its markets.

Andrew Teare, ECC's chief executive, is clearly encouraged by the 20 per cent-plus price rises being pushed through by paper and pulp manufacturers - its biggest customers. While he admits that this only moves them from intensive care to a surgical ward, it does make it more likely that ECC will be able to squeeze a price rise out of them.

That is unlikely to happen until next year, and a 5 per cent rise would be generous. In the meantime volume improvements are moving profits ahead nicely. A 6 per cent rise in European mineral sales pushed profits there up 44 per cent to pounds 28.5m despite a pounds 5.7m restructuring charge. Together with the pounds 14m rise in profit from land sales, courtesy of the Higgs & Hill sale earlier this year, that pushed group pre-tax profits 30 per cent higher to pounds 52.2m.

The pounds 3m fall in the contribution from the Americas and the Pacific was disappointing, but the performance is improving and Calgon appears to be living up to its promise. That is just as well - ECC will have to work hard to replace the pounds 20m-plus a year coming in from land sales when the stock runs out in 18 months or so.

If Nomura is right in its forecast that profits from the ongoing businesses will rise from pounds 89m this year to pounds 114m next, it should manage that comfortably. That would make its premium rating of 24 times this year's earnings look almost cheap.