Fenner confident despite rising costs

RAW material costs maybe rising but conveyor belt manufacturer Fenner is confident about the future.

The Hull-based firm said in a trading update today that the group had traded in accordance to expectations with strong performances from its Asia Pacific heavyweight belting business were operations are at capacity.

In Europe, Fenner has worked hard to develop new markets, which too have resulted in positive margins. Its Advanced Engineered products division has also enabled the manufacturer to take advantage of niche markets against a backdrop of weaker underlying markets.

Fenner added that its new acquisitions would help “propel” it into growth markets and that operations acquired in the technical weaving, digital printing, bushing, and conveyor service sectors of our businesses had performed ahead of expectations and were now embedded in their respective divisions.

In June, it announced the acquisition of US and Chilean-based CSC Group – seen as a major strategic advance to its value added mining customer support programme.

Progress has also been achieved in our major capital investment projects, with commissioning of the US wide belt expansion anticipated to be on schedule in the coming months.

However, despite its US business reporting good revenue growth, rapidly rising material costs have put pressure on Fenner to pass increases to its clients.

“While these (costs) are being passed on to our customers there is an inevitable lag constraining margin growth in the very short term,” it warned.

“While medium and longer term prospects remain unchanged the short term opportunities to outperform are more restricted.”

Last week, it announced the disposal of its US-based lightweight conveyor belt operation in a $7.8m (£3.9m) deal.

The sale of the Charlotte, North Carolina operations to Forbo Siegling – a subsidiary of Swiss firm Forbo Holding – further supports Fenner’s strategy of concentrating on its heavyweight conveyor belting business primarily for mining applications in particular coal mining.

“We are mindful of the uncertain economic conditions in some of our industrial markets,” the manufacturer continued.

“However, the energy and commodity markets we serve remain positive, and this, together with our value added strategy, has enabled us to maintain margins, despite rising raw material costs.

“This, underpinned by the resilience of our order books, gives us confidence in our expectations for the current financial year.”