Severfield-Rowen posts profits despite ‘difficult background’

STRUCTURAL steel manufacturer Severfield-Rowen has reported positive half-year results but said it was undergoing a major review of costs because of challenging market conditions and anticipated reduced margins.

The North Yorkshire-based group saw revenues increase to £200m for the six months to June 30 compared to £173.3m at the same point last year.

Underlying pre-tax profits dipped slightly from £25.3m to £24.6m, while underlying operating profit dropped by 5.8% to £25.4m.

Its order book stands at £256m, a figure the group said was “relatively robust”.

Severfield said it expected its second half trading performance to be ahead of its expectations because of project timing and better than anticipated financial performance.

Projects worked on by the group during the first six months of 2009 include the 2012 Olympic Stadium, Glasgow Riverside Museum, Heron Tower Commerical Office in London, and Dublin Airport.

Chief executive Tom Haughey said: “The company is pleased to have delivered good profits in the first half of this year against a very difficult industry background.

“For some time, we have expressed concerns about the UK market which have materialised, and accordingly we expect UK steel demand and prices to be at significantly reduced levels throughout 2010, which will translate into reduced margins.” 

Mr Haughey said Severfield was gaining UK market share and was “strengthening its efforts” in active sectors such as power and education.

He said the group’s objectives for its joint venture in India with the country’s third largest steel company were on plan and within budget.

He added: “Our sales efforts in targeted export markets are on course but a more competitive cost base in the UK is required to support and sustain these developments. 

“Against the backdrop of challenging UK market conditions and the requirement for competitiveness in export markets, we are concluding a major review of costs and capacity deployment and will be making an announcement, in due course, following the conclusion of the consultation process currently being conducted with our staff and workforce. 

“The company’s finances are robust and debt levels are on target to be at minimal levels by the end of 2009, which will enable it to engage the forecast difficult trading year from a position of relative strength and to maintain its strategic investments overseas.”

He said Severfield’s board and executive management committee had agreed to reduce their basic salaries by 20% from January 1, 2010 following a pay freeze this year.

Finance director Peter Davison is to retire from his position in March next year, it was also announced.

Severfield is to pay an interim dividend of 10p per share.