Umeco forecasts lower profits

AEROSPACE supplier Umeco today downgraded full year profit predictions to the lower end of expectations, blaming the continuing economic downturn.

The Warwickshire-based company said the key markets served by its composites business were struggling and this had created a “higher degree of uncertainty” for the full year outlook than would normally be the case at this time of the year.

Revenue for the four months to January 31 is down on the same period last year, but the firm’s order books look a little healthier standing at £225.1m compared with the £213m recorded at the end of September last year.

Clive Snowdon, chief executive, said: “While there continue to be short term challenges for the group and the timing of recovery remains uncertain, we serve growth markets and our medium and long term prospects are robust.

“In the near term, we continue to be vigilant to changing conditions in order to minimise the impact upon the group of the weak economic environment while taking opportunities to enhance our market positions.”
 
Umeco ((UMC) said it expected its tax rate for the years to March 31  2010 and 2011 to be approximately 30.0% as a result of an international corporate restructuring implemented in December.

On the balance sheet, net debt by the end of January stood at £116.7m, up on the £90.6m in September but down on the £152.5m recorded at the end of January last year.

The group said the increasing debt accumulated since September had been expected and reflected seasonality in cash flows.

It said it continued to take action to improve its working capital position and contain capital expenditure.

“It remains our policy to maintain a tight credit control environment and shipments to certain participants in the wind energy sector in particular have been, and continue to be, held back in order to ensure the group’s exposure to credit risk remains at an acceptable level,” said the group in its interim statement.
 
Assuming exchange rates remain at January 31 levels, it expects net debt at March 31 to be close to the level reported in September.

“We remain comfortable with our status against banking covenants and debt levels continue to benefit from management actions to improve working capital ratios.

“Discussions with potential providers of funding have commenced in relation to the $89.0m credit facility that expires in August 2011,” it added.

The group said its supply chain continued to enjoy good demand from its OEM customer base.

Supply chain revenue compared to the same period last year, was slightly lower as weaker aftermarket demand was only partially offset by contracts won during 2008/09.
 
However, it said the civil aircraft backlog remained high and with the successful first flight of the Boeing 787 Dreamliner during the period, there was hope of substantial revenue increases with production volumes forecast to rise gradually from the middle of the year.
 

Demand in the Composites operation continues to be weak, however, it said there were hopes of recovery in the wind energy markets, while orders had been received from motor sport customers, principally Formula 1 teams, which had been deferred from mid-2009.

However, despite these positive factors, composites’ order intake and revenue were below the same period in the prior year, said the group.

The Advanced Composites Group (‘ACG’) benefitted from the stronger Formula 1 sector as concerns about the future of the sport eased.

However, it added that automotive and marine markets remained depressed, while there had been a hiatus in ballistics activity as new contracts came on-stream.
 
Activity  levels at ACG’s small South African operation, which supplies composite parts to the Mercedes McLaren SLR supercar programme, have been reducing as the programme comes to an end. Future options for this business, including divestment, are under review.