T&N warns of further fall in European sales: Car parts group says that UK recovery is still shaky

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The Independent Online
THE European car market could follow last year's fall of 20 per cent with a drop of up to 5 per cent in 1994, according to Sir Colin Hope, chairman of the automotive parts and engineering group T&N.

The company's forecast for Europe, its main market, is more pessimistic than the 4 per cent rise projected by the rival automotive components group GKN.

'If we are wrong then we are quids in, since we have put the appropriate cost structure in place. If we are right then we are safe,' said Sir Colin.

He expected the recent surge in US car component demand to continue, while Europe would fall further. He said the UK recovery was still fragile, particularly as so many customers were selling into Continental Europe.

Sir Colin was speaking as T&N reported a 12 per cent increase in pre-tax profits to pounds 70.3m for 1993.

The results were struck after exceptional restructuring and redundancy costs doubled to pounds 22m in a year when T&N cut 3,000 jobs including 1,200 in the UK.

The figure also included a first- time trading profit contribution of pounds 16.5m from Goetze Group, the German piston manufacturer acquired last summer for pounds 107m.

Goetze's profits came free of tax because of past losses. Combined with the one-off benefits from the decision last October to offer an enhanced scrip - equivalent to 10.85p for the entire 1993 dividend - T&N's tax rate fell from 54 per cent to 36 per cent, boosting earnings per share by 52 per cent to 8.8p.

The cost of meeting asbestos disease claims rose from pounds 16.6m to pounds 21.1m. This reflected the bringing forward of new cases, in advance of legal procedures in the US, which is expected to reduce litigation costs over a period of 10 years after an initial transition period.

T&N shares eased 2p to 245p in heavy trading. Sandy Morris, an analyst with NatWest, said he expected the company to underperform. 'The long-term danger is another fund raising,' he said.