Molins operations hit by demand downturn

Click to follow
MOLINS, the troubled tobacco machinery maker, yesterday reported a sharp drop in operating profits and warned that the current year would also be difficult - its sixth warning in the space of a year. The news sent shares in the firm skidding 20p, or 7 per cent, lower to 285p by the close of dealing.

Michael Orr, Molins chairman, said: "Substantial cost reductions have already been made in an effort to underpin profitability. Even so, with sterling remaining strong, we will do well to achieve improved operating results in the current year."

The group fell into a pre-tax loss of pounds 20.1m for 1997 compared with a profit of pounds 33.4m in 1996. Operating profit before exceptional charges was pounds 13.1m compared with pounds 38.3m.

It also said it could not rule out a further reduction in capacity at its tobacco machinery division following the company's decision in November to cut 500 jobs at the division because of slower orders from Asian markets.

Molins blamed the profit downturn on a sharp reduction in demand at its tobacco machinery division and the consequent restructuring. The group took a charge of pounds 31.1m in the 1997 accounts, some pounds 17.9m for restructuring and pounds 13.4m for accounting irregularities.

As a result of the downturn the group cut its final dividend payment to 8.5p per share from 15.5p in the previous year.

Although Molins does not rule out a further reduction capacity, it expects its tobacco machinery division to remain profitable subject to further exceptional costs.

Comments