US tariffs could help our business in the long run, says South West manufacturer

Specialist manufacturer Gooch & Housego today said it would pass on prices rises linked to new US tariffs to its customers, adding that “over time” they could be benefit to parts of the business.

In a half-year trading update to shareholders, the Ilminster, Somerset-based group, which produces precision optical components for the life sciences, industrial, and aerospace and defence industries, said it was seeking to navigate the “rapidly evolving tariff arrangements being implemented by the US administration”.

It said it was also monitoring “the consequent actual or potential retaliatory actions of other nations”, adding it was too early to be definitive on the net impact to the group, which operates from six sites in the US.

The group said its direct exposure to countries that had been subjected to the most significant tariff increases on imports to the US was limited, but it “remained vigilant to the more general inflationary impacts of increasing global tariffs and possible indirect effects”.

It said it was actively re-sourcing its supply of some raw materials needed in its production processes where availability had been restricted by some nations retaliating against the newly imposed tariffs, but intended to pass on cost base increases arising from these developments through higher pricing.

It added: “Given the group’s considerable US-based manufacturing presence the new tariffs could over time be a benefit to some parts of our business against their non-US competitors.”

Group revenue rose by 7.5% to £70.8m during the six months to 31 March. Demand from the group’s aerospace & defence and life sciences markets had been strong and revenues from the its fibre optic products used in subsea data cable networks also grew.

However, activity levels in the group’s industrial laser and semiconductor markets remained subdued.

As well as its HQ in Ilminster and its US bases, Gooch & Housego also has sites in Plymouth producing thin-film coatings, in Torquay making fibre optics and a medical devices facility in Ashford, Kent, along with sales offices in France, Germany and Japan.

The group’s order book increased from £104.5m to £121.5m during the period, with Phoenix Optical, the North Wales business it acquired last October in a deal worth up to £6.75m, bringing in around £7m of this increase.

The order book provided good coverage for its expected second half revenues, it said.

Gooch & Housego said the level of inquiries for its products and services remained high, especially from existing and new defence equipment customers, supported by the broader capability and capacity now available to the group as a result of the acquisition of Phoenix.

The integration of Phoenix was proceeding to plan, it said, and had already allowed the group to secure new customer orders as a result of the newly combined capabilities.

“We are also seeing the benefits of the planned operational synergies due to the combined facility capacity planning between Phoenix and the group’s other precision optics sites,” it said.

Investments in its operations and supply chain teams were bearing fruit, it added, and production yields were “trending positively”.

It was also accelerating the transfer of carefully selected product lines to its contract manufacturing partners in lower-cost regions.

It was also starting to realise the benefits from its newly established medical diagnostic design, development and production facility at its site in Rochester, New York, and had secured some important new customer contracts. The facility was now in volume production for two medical diagnostic instrument programmes, it added.