Profit warning as production issues hit engineering group

Castings group Chamberlin has reiterated its warning that production issues have had a “significant impact” on its margins – and fixing the problem will take longer than it had expected.

The stock market-listed business has been beset by problems with the start-up of its new machining facility.

Chamberlin says it is “actively pursuing” a claim against the supplier of the new machining cells and “expects to reach a satisfactory settlement”.

It made a pre-tax loss of £810,000 in the six months to September – more than double the same period a year ago. That was despite a 22% increase in revenues, to £17.9m.

Some of the impact on the bottom line came from one-off restructuring costs as it closed its Leicester site.

However its underlying performance also weakened because of the production problems.

Chamberlin’s chairman Keith Butler-Wheelhouse said: “We are working closely with the machine and tooling suppliers to resolve the technical problems that have had a significant impact on our foundry margins, however it is now clear that resolution of the technical problems is likely to take longer than expected. 
 
“As a result, cost inefficiencies, including the use of subcontractors and extended cycle times, will adversely affect the Group’s performance. Raw material prices in the foundry operation have also increased.  These costs will be recovered through a customer surcharge mechanism, however there is a short-term negative impact, given the time lag between price increases and their recovery.”