Titanium division loses pounds 28m at IMI
Wednesday 06 September 1995
IMI yesterday announced a big restructuring of its titanium business after revealing that losses at the division would total pounds 28m this year. The Birmingham metals and engineering group is taking a pounds 20m charge at the year-end to cover withdrawal from unprofitable areas and the cost of 175 redundancies, 20 per cent of the titanium division's workforce.
Gary Allen, chief executive, said the decision resulted from a big review of the operation, which makes high-specification parts for applications ranging from aerospace fan blades to hip replacements. The review followed three years of mounting trading losses, which are this year expected to be twice the 1994 figure of pounds 4m. Mr Allen admitted the problem should have been tackled earlier. "We have travelled hopefully for too long," he said.
Titanium made profits of over pounds 10m at its peak in the late 1980s, but has been hit by over-capacity and a move to end the practice of using scrap material in aerospace components. IMI has been forced to sell its stockpile of scrap at a loss, contributing to a first-half trading deficit of pounds 6m.
The group is now leaving areas including welded titanium tube for power plants, semiconductor wires for body imaging devices and thin alloy sheet. Of the total pounds 20m charge, pounds 12m relates to writing down plant, buildings and stocks, with the rest to cover redundancies. Half the job losses will be at the Witton site, next to IMI's Birmingham headquarters, with the rest going from a plant at Waunarlwydd, near Swansea.
Mr Allen said the business would concentrate on areas of higher technology, such as aerospace. "We are retreating up the pyramid to the apex, where the margins are better. . . .Too much of the titanium business had become a commodity area where we couldn't get the prices from customers to justify the investment."
News of the titanium problems and losses of around pounds 1m in the alloy tubes operation marred what analysts said was otherwise a good set of half-way figures from IMI. The shares added 4p to 321p after the group unveiled pre-tax profits up 32 per cent to pounds 49m for the six months to June. The interim dividend rises 4.5 per cent to 4.6p, payable from earnings per share increased from 7.3p to 9.5p.
Mr Allen said volumes were up 10 per cent on the first half of 1994, with a significant contribution from exports. Sales to the EU jumped more than 40 per cent, with those to the US soaring around 50 per cent.
Building products, where profits leapt from pounds 14.1m to pounds 19m, benefited from rising copper prices, particularly in the group's refining activities. Mr Allen said there were signs of a levelling off in demand in Germany, but the market was going through consolidation after rapid growth last year.
There was a similar flattening in demand for the group's drink-dispensing equipment in the US in the first half. But results were better than expected in the UK after strong demand from Coca-Cola and Pepsi. Profits edged up from pounds 18.6m to pounds 19.9m in the period.
The losses in titanium and tubes pulled the result from special engineering down from pounds 8.6m to pounds 1.4m.
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