Cookson calms investors' fears over finances

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The Independent Online

Shares in Cookson shot up 19.5 per cent yesterday after the supplier of materials and components moved to calm mounting fears over its financial situation.

Shares in Cookson shot up 19.5 per cent yesterday after the supplier of materials and components moved to calm mounting fears over its financial situation.

The company, whose shares have been under pressure lately on concerns over how it will tackle its £750m debt pile, said first-half sales would total about £900m after a solid second quarter.

Sales in the second quarter to 30 June, the company said, were 7 per cent better than the first quarter thanks to a general uplift across all its divisions. Cookson shares finished up 8.5p at 52p.

Furthermore, the company said operating profits in the first half of the year would be better than the previous six month period thanks to a series of measures to cut costs. Second-quarter profits would also beat the first-quarter figure, it said.

"The benefits of the extensive cost-cutting programmes initiated last year continued to accrue, resulting in an improvement in the group's profitability in the second quarter," it said.

The trading update, which comes ahead of the release of its first-half figures at the end of the month, reassured the market which had become increasingly nervous about the company's prospects.

"Cookson's trading statement was slightly better than expected indicating a sequential improvement in trading and reassurance that debt is under control," said analysts at Dresdner Kleinwort Wasserstein.

The company, which last week said it was reviewing its strategic options, expects net debt to total £750m at the end of June, the same figure as at the end of 2001 and slightly better than analysts' expectations.

"We see this [the debt position] as a good result given that seasonal and other factors usually mean that Cookson is cash negative in H1. The key message we take from this is that even under the toughest trading conditions ever encountered Cookson is not burning cash," analysts at Merrill Lynch said.

Cookson said yesterday sales in its electronics division were up 7 per cent in the second quarter "as the severe global downturn which has affected the electronics industry since the beginning of 2001 continue to abate".

Its ceramics division's sales were 9 per cent higher "in line with stronger US and European steel production volumes" while sales at its precious metals unit were up 4 per cent.

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