Hanson profit up 4.4% as US economy stirs

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The Independent Online
HANSON, the Anglo-American conglomerate, yesterday reported stirrings of recovery in the US, but said Britain remained depressed, as it announced a 4.4 per cent increase in pre-tax profits in its first quarter.

Martin Taylor, vice-chairman, said the improvement in the US was demonstrated at Cavenham, its forest products business, which is benefiting from higher prices for timber. Its customers are mainly in construction, so it should be a good lead indicator for other industries, he said.

He added that last month's decision by Du Pont, the chemicals company, to end price discounting of titanium dioxide - where it is market leader - suggested stabilisation of prices, which should benefit SCM, its chemicals arm.

President Bill Clinton is expected to announce increased spending on the infrastructure when he makes his State of the Union address tonight, which could benefit Grove, the crane business, and Beazer, the aggregates supplier that Hanson acquired in 1991. But he is also warning of increased corporate taxes.

Hanson's tax rate rose from 18 per cent to 27.5 per cent as the windfall benefits achieved by switching to quarterly dividends ended, and it is expected to remain at about that rate. That meant earnings per share fell 10 per cent to 3.5p.

Profits before tax for the three months to December were pounds 236m, up from pounds 226m, on sales 10 per cent ahead at pounds 2.3bn. Lord Hanson, the chairman, said the decline in margins had been expected.

The advance was due to a pounds 20m profit on the sale of Weber Aircraft, which is taken into pre-tax profits under new accounting rules. But the previous year's figures also benefited from an pounds 11m contribution from EverReady, and other businesses that have since been sold.

Lord Hanson said it was too early to talk of signs of recovery in Britain, 'although lower UK interest rates should certainly spark increasing economic activity over time'. Some British businesses had a better quarter - including Imperial Tobacco, the cigarette maker - but this was not recovery-driven.

Hanson's borrowings - pounds 774m at the end of September - are mainly in US dollars and the weakness of sterling means they have risen to about 30 per cent of shareholders' funds, compared with 18 per cent at the last year- end.

The quarterly dividend is 2.85p and will continue at that level until further notice.

The results were in line with the City's expectations, although the shares fell with the market to close 4p lower at 250p.

NatWest Securities is forecasting pounds 1.17bn profits for the full year, down from pounds 1.29bn, and a fall in earnings from 22.2p to 17.5p a share.