Reuters: Hot Stocks: UPDATE 2-Cookson issues profit warning on tough steel markets

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UPDATE 2-Cookson issues profit warning on tough steel markets Oct 8th 2012, 10:55 Mon Oct 8, 2012 6:55am EDT * Company says will miss full-year profit forecasts * Blames worsening steel production markets * Shares fall to 2012 low By Paul Sandle LONDON, Oct 8 (Reuters) - British industrial materials supplier Cookson Group warned that weak trading in its division that makes products for the global steel industry would cause it to miss its profit forecasts for the year. Cookson, which receives about half of its revenue from supplying ceramic products to the steel and foundry casting markets, said trading conditions for its engineered ceramics unit worsened during the summer, particularly in steel production markets that it supplies with consumable products. Shares in the group slid as much as 18 percent to a 2012 low after the bleak forecast. Morgan Crucible, another maker of industrial ceramics, was dragged 9 percent lower. "In light of the conditions being experienced by the engineering ceramics division, full-year performance for the group as a whole is now expected to be materially below the board's previous expectations," the company said on Monday. The downturn in steel production was sharper than normal in July and August, particularly in Europe, where output fell 11 percent, it said, citing data from the World Steel Association, and there were signs of further weakening in September. In September, the association's director general said Europe, which is oversupplied, had responded more promptly than other regions to waning demand by cutting production quicker and shutting down plants. End markets for Cookson's foundry castings, such as heavy trucks, wind turbines and construction, mining and agricultural equipment, had slowed, the company said, and the global solar industry, which it also supplied, remained very depressed. The ceramics division overshadowed a solid performance from Cookson's performance materials and precious metals processing units, where trading was in line with expectations. Cookson has been considering splitting its ceramics and performance materials units since the spring in an effort to improve shareholder returns. It said on Monday that a business review, including the potential demerger, was progressing well and it expected to update shareholders before the end of the year. In the meantime, it was taking steps to respond to the difficult trading conditions, such as reducing temporary working and overtime. More substantial restructuring would be implemented as necessary, it said. Cookson's shares were 13.8 percent down, leading the mid-cap fallers by 1043 GMT. Oriel Securities analyst Harry Philips took his full-year operating profit forecast down to 255 million pounds ($412.92 million), from his current 284 million pounds, which he said carried through to a pretax profit of 228 million pounds. Analysts had been expecting headline pretax profit of 248 million pounds, according to a Thomson Reuters I/B/E/S survey of 17 brokers. "Not great but not a repeat of 2008," Philips said. "In a patchy environment, there will be pluses and minuses and this is evident within Cookson's own portfolio today." Link this Share this Digg this Email Reprints

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