Bottom Line: No clear view of Pilkington's chief

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The Independent Online
AFTER nearly a year as chief executive, it should be possible to assess the contribution of Roger Leverton to Pilkington. When he joined there were hopes that he would introduce more realism into the St Helens-based glass maker. But these have yet to be fulfilled.

On the face of it the dividend cut - which brought the payout down to 4p a share - is encouraging. But it was also unavoidable given that profits in Germany have collapsed, borrowings have risen to 88 per cent of shareholders' funds and the tax charge was 113 per cent.

A fall in capital spending could also be seen as a sign of a firm hand at the tiller. But whereas capital spending fell by pounds 29m last year, it had dropped by far more - pounds 112m - in the previous year. And it reflects enormous investment in new plant in earlier years.

The third ground for hope is costs. These came down by pounds 70m last year but this reflected rationalisation in previous years. The number of employees fell by 5 per cent last year but by 18 per cent over the past three years.

One of Mr Leverton's first actions after joining the company was to buy Heywood Williams, the distributor.

While the initial impact has been to boost volumes going through Pilkington's plants, the end result could yet be antagonism from independent distributors worried that Heywood Williams may be able to buy glass cheaper.

To be fair to Mr Leverton and the rest of the management team, they are battling against a horrific market background. Glass prices in the US and UK have fallen by 30 per cent in the past three years and by even more in Germany, where they have yet to turn up.

In the US a 9 per cent increase in October has been diluted to 4 per cent and in the UK an 8 per cent rise introduced in February has stuck.

Few expected Pilkington to ride out the problems of the German car industry but there were hopes that demand for glass for new houses going up in the east would limit the damage. But every other glass maker in Europe saw the opportunity too and they are battling hard for business.

Until they let up on prices, there is little reason to buy the shares, down 6p to 129p yesterday.

Pilkington still has to prove it can get its borrowings down through disposals. It announced the sale of Sola, which makes plastic and glass lenses, in December and expects to complete the deal shortly. Other disposals - interests in Australia and, in time, the contact lens businesses - will take longer to agree.

Meanwhile, interest cover will remain modest and the company has ruled out a share issue.

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