Wind and Brazil blowing fair for Cookson

By John O’Doherty
Published: August 6 2008 02:48

The recent surge in wind farm developments and the boom in the Brazilian motor industry helped Cookson lift first-half profits and sales.
The engineering group, which specialises in ceramic components used extensively in the booming steel industry, also revealed a better than expected performance from a recent acquisition. The shares jumped 21p to 621p.

Nick Salmon, chief executive, said: “We’ve seen a big increase in demand for wind turbine components, particularly from western Europe.
“And in Brazil there’s a very vibrant autocomponents industry that is growing rapidly. All the castings that go into that have been fuelling our growth.”
Cookson’s ceramics division, which accounts for more than half of its sales, makes components used in steelmaking and in the production of mould-cast metal components. In steelmaking, Cookson’s ceramic tubes and valves – which are roughly the size of a human arm and have to be replaced every few hours – regulate the flow of molten steel and protect it from exposure to the air.
Cookson’s performance was also helped by its acquisition in April of Foseco, another ceramics maker whose products are used to remove impurities and improve the finish on mould-cast metal products.
“Foseco did even better than we were expecting at the start of the year,” said Mr Salmon.
Correcting for currency fluctuations, Cookson’s revenue for the half year rose 10 per cent to £863.5m, while operating profit rose 5 per cent to £82.3m ($160.9m). Including the Foseco acquisition, revenues gained 26 per cent to £1.1bn and pre-tax profit increased 45 per cent to £99.1m.
The interim dividend is raised 38 per cent to 5.85p on earnings per share of 22.7p (14.1p).
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FT Comment
Cookson has significantly, and sensibly, changed the mix of its business in recent years, shifting away from the electronics market to which it was heavily exposed in the early part of the decade. Ceramics now account for about three-quarters of its profits. Cookson’s fortunes are, therefore, more strongly tied to the steel industry, which is in robust health amid surging demand from developing markets.
While some of this demand is reliant on consumers, most of it is fuelled by big long-term infrastructure developments, which are less vulnerable to a downturn. Among its peers, Cookson has a relatively low forward price/earnings ratio of 7.3, with its shares down more than a third since October. Tuesday’s statement makes that look somewhat overdone.
Copyright The Financial Times Limited 2008