Slowdown in Chinese demand triggers Cookson profit warning
Wednesday 12 November 2008
Cookson issued a profits warning yesterday, blaming the economic situation and the cutbacks in China for weak market conditions it expects will continue into 2009.
The industrial materials group – which is exposed to both the downturn in the steel industry, through its ceramics division, and in consumer spending, through its electronics and precious metals businesses – saw its shares plunge 24.4 per cent to close at 130p yesterday.
Overall performance for this year will still be "significantly ahead" of 2007, boosted by the acquisition of the Foseco foundry business in October 2007 and by currency translation gains. But the results will not meet management expectations, the group said.
"In recent weeks the group has started to see clear evidence of the global financial turmoil impacting its end-markets, particularly global steel production," Cookson said. "Trading performance in 2009 will be dependent upon the depth and duration of the global economic slowdown."
The global market for the company's Steel Flow Control and Linings businesses, for example, was down 3.2 per cent year-on-year, in September, largely because China's steel production was down by 9.1 per cent that month. Although there are not yet figures for October, steel companies across the world have been cutting production and de-stocking inventories to support prices.
Despite the collapsing stock price, not everyone is pessimistic. Harry Philips, at Evolution Securities – who has a "buy" recommendation on the shares – says the market price is assuming a covenant breach that only becomes an issue with a 20 per cent drop in steel production. "The reality is that the company trades comfortably within covenants," Mr Philips said.
- 1 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 Watch: Man takes selfie every mile of 2,600 mile hike, creates amazing timelapse video
- 4 The day I starred in Only Fools and Horses
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Germanwings plane crash: Andreas Lubitz 'had eyesight problems' and woke from nightmares 'screaming we’re going down'
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Revealed: Putin's army of pro-Kremlin bloggers
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...