Engineering group’s profits hit by production problems

Castings

Engineering group Castings does not expect any medium-term impact from problems in its automotive components business despite the division’s £1m half-year loss.

CNC Speedwell saw revenues drop 11% after it had “experienced significant issues, including production problems”. Mark Lewis, who headed the business, departed last month.

The group has now identified additional short-term costs, particularly stock obsolescence and the recoverability of tooling costs.

Investment of £2.7m “has been made primarily to support demand from core business customers”, it said.

“The changes being made at the machining operation are not expected to have any meaningful impact on profitability during the remainder of the year,” said Brian Cooke, chairman of Castings.

“However, from the start of 2018/19 we anticipate the machining operation to return to an acceptable level of profitability.”

The vast majority of Castings’ revenues comes from its foundry operations, which contributed £58.5m of the £61.7m total in the six months to September 30. Pre-tax profits were down £1.2m to £5.9m.

Rising steel scrap prices helped to boost revenue, although the problems at CNC Speedwell also created production issues for the foundry business.

The group’s share price dipped temporarily when Lewis’s departure was announced on October 2, but last night’s close of 458p values the group at £200m – 12% higher than a year ago.

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