Financial review
 
Overview
Sales increased by 6 per cent from the previous year
to £389.2 million. This includes Sasol Servo which was acquired
on 30 June 2004 and
contributed £34.2 million to sales in the second half. After adjusting for the
acquisition and exchange rates, sales increased by 3 per cent at constant currency.
The sales increase was mainly due to higher
volumes at Specialties & Pigments and Specialty Rubber. Marginally higher average
prices for the Group were offset by adverse mix effects.
In terms of geography,
lower volumes in North America and Europe, largely due to the loss of CCA
business in the US and the effect of price increases in Chromium,
were more than offset
by increased volumes into Asia Pacific and the rest of the world.
Operating
profit before goodwill amortisation
and exceptionals was £12.7 million below
previous year at £11.8 million. On a constant
currency basis the decrease was £9.3 million.
The increase in sales was more
than offset by
increases in raw materials, freight costs and energy particularly in the
second half of 2004,
and costs associated with the implementation
of the ERP system.
The operating loss after goodwill amortisation and exceptionals
was £2.5 million (2003: profit of £10.9 million) for the year.
Goodwill amortisation
in the year amounted to £11.4 million (2003: £12.4 million) and operating exceptional
costs
were £2.9 million (2003: £1.2 million).
Specialties & Pigments
| £million |
2004 |
2003 |
 |
| Sales |
238.2 |
209.3 |
|
| Adjusted operating profit* |
15.4 |
17.7 |
|
| Operating profit |
2.4 |
3.8 |
|
* before goodwill amortisation and exceptionals
Sales in Specialties & Pigments increased by
14 per cent to £238.2 million. After adjusting for the business acquired in June
2004, sales in constant currency were 4 per cent higher than previous year. This
was primarily due to increased volumes while higher prices were offset by adverse
mix in the year due to higher sales into lower price geographies, such as Asia
Pacific.
Sales
| |
Sales |
|
Effect of
exchange
|
|
Acquired
in |
|
Increased/
(decreased) |
|
Sales
|
|
| |
2003
£million |
|
rates
£million |
|
2004
£million |
|
2004
£million |
|
2004
£million |
|
|
| Specialties & Pigments |
209.3 |
|
(14.4 |
) |
34.2 |
|
9.1 |
|
238.2 |
|
|
| Chromium |
121.9 |
|
(9.5 |
) |
- |
|
(1.9 |
) |
110.5 |
|
|
| Specialty Rubber |
42.7 |
|
(0.4 |
) |
- |
|
3.6 |
|
45.9 |
|
|
| Inter-company |
(5.7 |
) |
|
|
- |
|
0.3 |
|
(5.4 |
) |
|
| |
368.2 |
|
(24.3 |
) |
34.2 |
|
11.1 |
|
389.2 |
|
|
| |
Operating profit before goodwill amortisation and exceptionals
| |
Operating profit*
2003
£million |
|
Effect of exchange rates
£million |
|
Acquired
in
2004
£million |
|
Increased/ (decreased) 2004
£million |
|
Operating profit*
2004
£million |
|
|
| Specialties & Pigments |
17.7 |
|
(0.5 |
) |
0.9 |
|
(2.7 |
) |
15.4 |
|
|
| Chromium |
6.8 |
|
(2.9 |
) |
- |
|
(7.7 |
) |
(3.8) |
|
|
| Specialty Rubber |
- |
|
- |
|
- |
|
0.2 |
|
0.2 |
|
|
| |
24.5 |
|
(3.4 |
) |
0.9 |
|
(10.2 |
) |
11.8 |
|
|
* before exceptionals
Operating profit before goodwill amortisation and exceptionals
was £2.3 million lower than the
previous year at £15.4 million. After adjusting for acquisitions and currency,
operating profit was £2.7 million lower. Increased volumes were more than offset
by higher raw materials, energy and
fixed costs.
Sales in Elementis Specialties on a constant currency basis excluding
the acquisition were 3 per cent higher than the previous year.
Volumes were up 6 per cent largely due to a strong performance
in the coatings and construction sectors, and included new business
in the growing but lower margin markets in Asia, Latin America
and the Middle East. Increased sales to some larger customers,
where rebates are more prominent, had a mitigating effect on realised
sales values and margins. Prices improved in some key sectors,
but were on average at similar
levels to the previous year.
Operating profit before goodwill amortisation and exceptionals
on a constant currency basis was 5 per cent lower than the previous
year. Higher volumes were offset by adverse mix, planned increases
in the innovation programme
and ERP implementation costs.
Sales in Elementis Pigments on a constant currency basis increased
by 7 per cent due to higher volumes and improved pricing. Operating
profit was however lower than the previous year as higher raw material
costs and start up costs in
TaiCang, offset volume and price improvements.
Elementis Chromium
£million
|
2004
|
|
2003
|
|
|
Sales
|
110.5
|
|
121.9
|
|
|
|
Adjusted operating profit*
|
(3.8
|
) |
6.8
|
|
|
|
Operating profit
|
(5.1
|
) |
7.4
|
|
|
*Before exceptionals
Sales in Elementis Chromium decreased by
9 per cent to £110.5 million and on a constant currency basis decreased by 2
per cent.
Overall volumes which were 3 per cent down in the first half following
an initial round of price increases, recovered strongly in the
second half to be in line with previous year. The loss of CCA business
for residential uses in the US, which
reduced sales by approximately £15.0 million, was offset by strong demand for
chrome oxide and by sales into the Asia Pacific market. Prices were increased
throughout the year and average US Dollar prices were around 10 per cent higher
in December 2004 than twelve months earlier. However average pricing for the
whole year was still marginally below that for the previous year, and accounted
for most of the decrease in
constant currency sales.
The operating loss before exceptionals for the
year was £3.8 million compared to a profit of £6.8 million in the previous year.
The increase in
energy costs was £2.2 million while the weakness of the US Dollar was the main
cause of an adverse
currency impact of £2.9 million. Higher raw material and freight costs accounted
for most
of the remaining reduction.
Financial review
continues on the next page >
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