Margin squeeze hits Sheffield Forgemasters
SHEFFIELD Forgemasters has seen annual operating profit slide by more than two-thirds after its margins were squeezed across its markets.
Although operating profit fell by £5.4m to £2.3m in the year to June 30, turnover at the Sheffield-based group increased by £2.7m to £107.5m.
The engineering company, which specialises in a broad range of heavy forged and cast steel products, said the main reason for the fall in operating profit had been because of pre-planned expenditure.
This included investment on research and development, training and apprenticeships, continued capital expenditure and environmental improvements.
Tony Pedder, chairman of Sheffield Forgemasters, said: “This year has seen a continuance of the global economic recession. For our industry, this has led to trading conditions becoming more competitive and margins being squeezed across a number of the markets in which we serve. As a consequence, operating profit for the year reduced on increased turnover.
“Whilst in general market conditions have been challenging, the bright spot has been the offshore sector where order intake and sales through our project management company, Vulcan SFM Limited have been extremely encouraging.”
Mr Pedder said last winter’s lengthy cold snap had also hit operations in Sheffield.
“Given the difficult market conditions, we have redoubled our efforts on containing costs and improving efficiencies whilst maintaining our capital investment programme,” he added.
Mr Pedder said the group welcomed funding support granted under the Regional Growth Fund.
“This new initiative is on a smaller scale to previous discussions we had with the Government but is still aimed at making major plant and equipment improvements to enable us to grow in selected markets, including civil nuclear. We are now in the process of properly re-evaluating this opportunity before being able to proceed towards implementation.”
Since the end of June, Sheffield Forgemasters has increased its order book by 14% to £116m.
