Morgan shares plummet on profit warning
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Your support makes all the difference.SHOCK WAVES reverberated through the engineering sector yesterday after Morgan Crucible, the industrial ceramics group, issued a profits warning and announced 1,000 jobs losses worldwide.
The warning sent Morgan Crucible shares down by 30 per cent and prompted sharp falls in other engineering stocks, the worst hit being other companies exposed to overseas markets.
Morgan Crucible said that profits for the year just ended would be 15- 20 per cent lower than the pounds 108m recorded in the previous year. The group said it was responding with a "major attack" on overheads and manning levels and the disposal of businesses with combined turnover of pounds 200m- pounds 300m a year.
The 1,000 redundancies will cost the group pounds 15m and will be spread across Europe, Asia and America. The group declined to say how may job losses there would be the UK where it employs 4,000 out of a group total of 15,000.
Vic Maundrell, the board director running the group's technical ceramics division, is also stepping down and is in line for a pay-off of up to pounds 360,000. He is on a two-year contract and earned pounds 180,000 last year.
Ian Norris, chief executive, said that the group had been hit by a downturn in orders from several of its major customers, including the steel, semiconductor, car and aerospace industries. However, Morgan Crucible is maintaining its dividend and says it is optimistic that profits will increase in the second half of this year.
Morgan Crucible shares fell 70p to 183.5p, wiping pounds 182m from its market capitalisation. Other engineering stocks fell in its wake, with Bodycote off by 9 per cent, IMI off by 8 per cent, Cookson by 7 per cent and Johnson Matthey by 6 per cent.
November and December are usually highly profitable months for Morgan Crucible but last year the group was hit by cuts in inventory levels and deferment or order into the new year.
In the US, the influx of Asian steel imports meant that fewer blast furnace refurbishments were carried out, reducing demand for Morgan Crucible's refractory products.
The group was also affected by the rescheduling of component orders following the General Motors strike and production problems at Boeing. In semiconductors, destocking and deferral of orders led to a pounds 12m reduction in business while currency translation knocked another pounds 3.5m off profits because of the strong pound.
Morgan Crucible said the downturn had been "swift and savage," adding that the cost-cutting measures it had now put in place would hit profits in the first half of the current year.
But it forecast that benefits would begin to flow through in the second six months and would then add "significantly" to profits in future years, provided that there was no further marked deterioration in trading.
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