Pilkington Interim Results
Pilkington Interim Results for the Six Months to 30 September 2002Pilkington
plc announced on 30th October the interim results for the six months to
30th September 2002.
Key features:
* Results in line with recent Trading Update
- turnover £1.4 billion (2001 - £1.47 billion)
- operating profit £110 million (2001 - £138 million)
- profit before amortisation of goodwill, exceptional items and taxation
£76 million (2001 - £107 million)
- earnings per share before exceptional items 2.7 pence (2001 - 4.2 pence)
* Net cash inflow before dividends £50 million (2001 - £8
million)
Chairman, Sir Nigel Rudd, commented:
'As anticipated, market conditions in the first half were very challenging.
In spite of this, Pilkington achieved positive free cash flow - a reflection
of management's determination to focus on cash generation now that the
bulk of restructuring is complete.
As we enter the second half, we expect market conditions to remain challenging.
Against this background, management's emphasis on improving the competitiveness
of Pilkington's manufacturing base, through overhead reduction and increasing
efficiencies, continues. This, together with Pilkington's portfolio of
innovative products, will help to ensure that the Group remains resilient
in these testing markets.'
Statement by the Chairman, Sir Nigel Rudd:
The Group's results in the first six months of the year confirm the expectations
we set out in our previous statements, and reflect difficult trading conditions
in most of the markets in which the Group operates. The attainment of
positive free cash flow in the first half year represents an important
achievement. It is clear that the benefits produced by the extensive restructuring
of the last five years are showing through in operational efficiencies
and cash generation, putting Pilkington in a strong position to withstand
the testing trading conditions we expect to continue in the next half
year.
Accounting treatment of redundancy and restructuring costs
As announced at the presentation of the Group's annual results for the
year to 31st March 2002, the treatment of redundancy and restructuring
costs has been revised such that in future these items will not in general
be disclosed separately as an exceptional component of operating profit.
Comparative figures in this half year statement have been re-presented
on a consistent basis. Given the regular nature and amounts of redundancy
and restructuring costs expected, the Board considers the revised disclosure
is more appropriate. Further details are included in note 12 to the financial
statements.
Results
Turnover in the first half year was £1.40 billion, a reduction of
five per cent on the £1.47 billion achieved last year. Operating
profits of Group businesses were £87 million, down from £115
million last year. Operating profits of joint ventures and associates
were maintained at £23 million.
Profit before goodwill amortisation, exceptional items and taxation was
£76 million, down from £107 million for the same period last
year but on a par with last year's second half. Shareholders will recall
that the results for the first half of 2002 were the best for a decade.
Net cash flow from operating activities was £154 million, £10
million better than last year. Cash flow before dividends, the management
of liquid resources and financing improved from £8 million last
year to £50 million this year and clearly demonstrates the focus
that management is now placing on cash. Net debt at £689 million
has declined by £15 million in the first half year.
Earnings and Dividend
Earnings per share fell from 4.2 pence to 2.8 pence. The interim dividend
has been maintained at 1.75 pence per share. The dividend will be paid
on 20th December 2002 to shareholders on the register at 6th December
2002. A scrip alternative will again be offered to shareholders. The scrip
dividend share value will be calculated on the basis of the average of
the middle market quotation of Pilkington shares on the London Stock Exchange
for the five dealing days commencing on 4th December 2002 and ending on
10th December 2002. The last date for the cancellation of an existing
scrip dividend mandate and for the completion and return to the Registrars
of a new scrip dividend mandate is 12th December 2002.
Hyperinflationary Accounting in Argentina
Following the collapse of the Argentinean peso last January, Argentina's
inflation rate has increased dramatically to the extent that conditions
now meet the criteria set out in UITF 9 for hyperinflation accounting.
Consequently the results of the Group's Argentinean businesses have been
accounted for in accordance with the indexation rules under UITF 9. This
has reduced profit before tax for the first half year by £5 million
and increased equity shareholders' funds by £10 million at 1st April
2002, as compared to historical cost accounting rules.
Review of Operations
Building Products
As anticipated, markets for Building Products remain difficult, with the
exception of the United Kingdom and Australia, where demand has been strong.
The restructuring actions taken over the past few years have significantly
strengthened Pilkington's ability to compete in these testing market conditions.
Building Products sales, including joint ventures and associates, were
£744 million, down one per cent. Operating profit before amortisation
of goodwill of £84 million was £33 million down on the same
period last year.
Our European Building Products business, representing around 60 per cent
of Building Products sales in total, continues to be affected by the slowdown
in continental European markets. Float selling prices were under pressure,
but have now stabilised at a level around 10-12 per cent below the average
for last year. In response to the reduced level of demand we extended
the planned shutdown for cold repairs of our float glass plants at Gladbeck
in Germany and at Venice, Italy. Both plants are now back in full production.
In contrast, the market in the United Kingdom has been robust, underpinned
by the rapid increase in the use of low emissivity glass in buildings,
a legislative requirement since 1st April 2002. This has benefited both
our primary and our processing and merchanting businesses in the UK.
Pilkington Activ™ self-cleaning glass has now been launched in all
our principal European markets. Market reaction to the new product has
been very positive, although uptake is slower than anticipated, reflecting
reduced activity in markets overall.
Building Products North America, accounting for approximately 15 per cent
of Building Products sales, has been affected by the contraction in commercial
building, which is its prime focus, although the residential market has
been strong. In July, the Ottawa float plant was taken down for repair
early and is now back in full production.
Sales of our 35 per cent owned Mexican associate Vitro Plan SA de CV (VVP)
were similar to last year, with the consolidation of a full period's results
from Cristal Glass in Spain, offsetting the impact of the softness of
the US economy and consequent pressure on prices, especially on the West
Coast. Results were also affected by the temporary shut down of one float
furnace, and operating profits in sterling terms were approximately 30
per cent below those of the first half of last year.
Our South American operations have performed well despite economic recession,
currency devaluation and hyperinflation in Argentina, and devaluations
and political uncertainty in Brazil, which made trading in these markets
difficult.
Results for the year to date of our Australian business, representing
approximately 10 per cent of Building Products sales, are very encouraging.
The Australian housing market continues to be strong, with some glass
products in short supply.
Sales of our 19 per cent owned associate in China, SYP, continue to grow,
though pressure from new competitive floats has resulted in lower profits
than the first half of last year.
Automotive Products
Automotive Products sales, including associates and joint ventures, were
£648 million, a reduction of two per cent on the first half of last
year. Operating profit before amortisation of goodwill was £43 million,
up 13 per cent on the equivalent period in 2001.
European light vehicle sales and production were around four per cent
down on the first half of last year, with only the UK market showing signs
of growth. Despite this lower vehicle production, our European Automotive
glass business, accounting for approximately half the Group's Automotive
glass sales, has held up well, due to new model introductions and solid
Automotive Glass Replacement (AGR) sales. Demand for buses, coaches and
trucks in Europe is beginning to improve and aftermarket AGR demand continues
to be firm.
Profits from the European Automotive business have been sustained at around
the level of last year, reflecting the continuing benefits from the restructuring
actions of recent years, combined with an on-going improvement programme.
In North America, light vehicle sales have been maintained, assisted by
Original Equipment (OE) manufacturers' incentive programmes. Vehicle production
is five per cent higher than last year, in a flat sales market, as vehicle
inventories are replenished. In the AGR market demand has softened.
Profits from the North American Automotive business are ahead of last
year, reflecting the benefits of the restructuring programmes and operational
improvements. This improvement in margin was accomplished despite a reduction
in sales, which was largely due to the end of the Ford supply contract.
VVP's automotive glass sales have held up well overall as an increase
in sales in the AGR market largely compensated for the impact of the slower
OE segment. Plant productivity gains have improved profitability.
Demand for vehicles in South America has fallen with the economic recession.
Nevertheless, operating profits have been maintained. The results of our
Automotive OE business in Australia have improved significantly.
The slump in civil aviation markets continues to affect Pilkington Aerospace's
business, but sales and operating profits have, nevertheless, been maintained
at last year's levels.
Outlook
As we anticipated in our statements over the past year, the challenging
market conditions experienced in the second half of 2002 have continued
into the first half of the current financial year. We expect these conditions
to continue into the second half of this year. The significant improvement
in our competitiveness achieved over the last five years is helping to
mitigate the impact of these tough markets.
Email: mailto:contact@pilkington.com
Web: http://www.pilkington.com
