Castings’ profits take another hit as European demand drops further

Castings has issued a second profit warning as demand for European heavy trucks plummets even further.

The Walsall iron castings manufacturer announced in October that demand for commercial vehicles had dropped 20% on the previous year and expected its results to be below market expectations.

With 75% of revenue for the manufacturer coming from commercial vehicles, Castings saw demand drop further in Q3, leading to the second warning that results will be substantially below market expectations.

Results have been impacted in the second half of the year, due to lower volumes, an increase in power costs due to enforced penalties when forward purchasing electricity that was not required, as well as start-up costs and trading losses with the new business in Scunthorpe. 

The increased electricity costs are not expected to impact profitability during the year ending 31 March 2026 and the Scunthorpe business is anticipated to be profitable in the remaining months of the current year and into the next financial year.

Major customers have recently reported increasing sales orders which are expected to boost Castings’ sales volumes early in the next financial year.

Castings’ board said in the trading update that its balance sheet remains strong, notwithstanding significant capital investment and dividend distributions in the year.

Castings had acquired the fixed assets and stock of Russell Ductile Castings (RDC) from the administrators of Chamberlin for £400k in June.

RDC was an iron foundry serving the capital goods and energy market, with some overlap in products with Castings.

It ceased production in May 2024 when administrators were appointed. Chamberlin and RDC employed 129 staff across its operations in Walsall and Scunthorpe when it appointed administrators at FRP.

The expected cost of the new foundry production line being installed at the Dronfield site in Derbyshire remains in line with budget and is still expected to be complete in early summer 2025.

The new £17m line at its William Lee site in Dronfield will be funded from internal resources and add up to 12,000 tonnes of foundry capacity.

It was hoped the additional facility will enable Castings to meet the demand for its heavy truck parts and take advantage of new market areas such as truck electrification, wind energy and further opportunities in the US.