Margins maintained in tough raw material markets, Low & Bonar
05 Jul '11
5 min read
Completion of Yarns restructuring The project to restructure manufacturing within the Yarns business was completed last month. As planned, production ceased at Ostend in March and the site was closed in June. The equipment transferred to the Group?s new Abu Dhabi facility is now in normal operation. The business now enjoys a much improved cost base and, with performance improving, we remain very confident that it will be profitable this year.
Operational performance
Performance Technical Textiles (Woven and non-woven fabrics, fibres and yarns for use in the civil engineering, flooring, leisure, construction and industrial sectors).
Sales in the division increased by 22% on a constant currency basis. Operating margins improved to 6.7% from 6.6% last year, benefiting from an improving performance in the restructured Yarns business but have been adversely impacted by high raw material price inflation throughout the first half of the year. Operating margins should improve further in the second half, benefiting from higher selling prices as polymer prices stabilise.
Divisional like-for-like sales grew by 21% in heartland markets and by 25% in emerging markets, adjusting for foreign exchange movements. Sales in the Civil Engineering sector grew strongly as heartland markets improved, buoyed by ongoing growth in emerging markets, particularly in Eastern Europe and Asia. The Flooring sector also continued to experience increased demand driven by improved penetration in Asia and increasing substitution of carpet tiles for other flooring products, particularly in North America.
There was some improvement in Industrial and Building Products sales in Europe, but US sales remain depressed. The restructuring of manufacturing in Yarns restricted sales to the artificial grass market in the first half of the year; this is now complete and we are now well placed to grow sales from a much improved cost base.
The Group's Saudi Arabian joint venture to establish geotextile production for the fast growing civil engineering markets in the Middle East and Indian sub-continent is progressing well.