Investment: Pilkington polishes up for clean profits
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.PILKINGTON'S new man Paolo Scaroni has been furiously wielding the knife since he took over at the end of 1997. By the time he's finished, in March 2000 or thereabouts, some 8,200 jobs will have gone at a cost of pounds 225m.
Mr Scaroni says that Pilkington used to be the benchmark for inefficiency among European glass makers. It was apparently so flabby that its rivals could comfortably undercut it and still make a fat profit.
Results for the six months to September show the productivity gap is closing fast. The pounds 7m cost of the strike at General Motors in the US, one of Pilkington's major clients, masks some of the improvement in profits of pounds 66m, up from pounds 33m.
On underlying operating profits of pounds 120m, return on sales of 7.9 per cent begins to compare favourably with its two peers Glaverbel and St Gobain.
That does not mean Pilkington is out of the woods yet. Making glass remains a high fixed-cost business tied in to fluctuations in the global economy.
Mr Scaroni has got those fixed costs down from pounds 870m in 1997/98 to pounds 734m, with an ultimate target of less than pounds 600m, but Pilkington still looks exposed if things globally get sticky.
Prices are also crucial. True, now that the European market consists of just three giants it's hard to see them knocking spots off each other, but if demand falls so will prices. Each 1 per cent price movement equals about pounds 5m in revenue.
Against that is the bull argument that Pilkington could make clean profits this year of pounds 130m. Add in pounds 230m to pounds 240m of cost savings and compared to a market value of pounds 760m at a share price of 66.5p - up 3p on the day - it's a steal.
In essence, it's a toss up. Either it's a global meltdown, which means goodnight Pilkington, or Mr Scaroni delivers and the shares soar.
Let's be generous. Buy.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments