Weak dollar takes toll on Bodycote

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The Independent Online

Bodycote, the metals coating business, yesterday warned that sales in the second half of the year would be about four per cent beneath the first half after its coatings business continued to struggle and the depreciating US currency took its toll.

John Hubbard, the chief executive, said: "The weak link has been our metallurgical coatings ... wet coatings has been weak and it's been weak now for two years. We had expected the second half would see us come to break even but it didn't and it's got worse."

He also said the weakening of the dollar would cut group profits by "a couple of hundred thousand pounds" since around 40 per cent of turnover comes from the US.

The alert sent shares in Bodycote down 14.6 per cent, or 24p, to close at 140p and left City analysts trimming their profit forecasts for this year and next.

The company's broker, Dresdner Kleinwort Wasserstein, cut its profit forecast for the current year by £5m to £32.5m. For the following year, it sliced £8m off its forecast to £36.5m. Bodycote said sales in its main heat treatment division, which makes up about 70 per cent of turnover, were about 6 per cent beneath the level seen in the first half.

It said wet coatings - where its coatings are used to improve corrosion resistance, appearance or wear and tear and which makes up about 10 per cent of turnover - was "problematic".

"It [wet coatings] is a highly fragmented business with low barriers to entry," said Mr Hubbard, adding: "Because it's so fragmented and the competition is so severe, the pricing tends to plummet very easily."