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 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Vivienne Westwood says 'Yes' to Scottish Independence by declaring: 'I hate England'
- 3 Welcome to Cameroon, where drinking Baileys can lead to imprisonment
- 4 Lego breaks out of the toy box and heads for the gallery
- 5 Vogue under fire for 'Big Booty' article
British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Vivienne Westwood says 'Yes' to Scottish Independence by declaring: 'I hate England'
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Piers Morgan attempts to save the Union by promising to go back to the US if Scotland votes 'No' to independence
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...