By Liz White, ERJ staff
Bradford on Avon, UK-Lower automotive production in North America plus high raw materials prices and intense competition have combined to cause Avon Rubber plc to warn that it expects lower profits in its automotive division in the second half of the year than in the first half.
Avon's notice about projected lower profit levels comes despite the expected growth being sustained in Orizaba, Mexico,â€ where it makes automotive hose for the North American market
And recent US approvals for its respirators came late in the group's financial year, so this year's sales may not be as high as anticipated, a statement from the Bradford on Avon-headquartered group commented.
Also, while the expected strong demand for Avon's new flexible storage tanks has come about, resulting in new orders, the group said it is taking some time to achieve the increased rate of manufacture.â€ Nevertheless Avon said it expects to finish the current financial year meeting the increasing demand for these tanks.
In July, Avon's FM12 respirators gained certification for use in Chemical Biological Radiological and Nuclear (CBRN) protection from the National Institute of Safety and Health in the US. Such CBRN approval will allow Avon to sell these masks for industrial and homeland security in North America.
Protection activities are an expanding focus of Avon, in a group headed by Jonty Palmer. In a management restructure which Avon expects will take annual costs of Â£2.5 million (Euro3.6 million) out of the business, Palmer takes over responsibility for all business except automotive. As many functions as possible will be devolved to the businesses,â€ reducing central management, and eliminating the current division structure, said Avon. One-off costs of Â£1 million for the changes have been budgeted for.
Lee Richards will continue to head the Avon Automotive business, and both Richards and Palmer will report directly to new Avon chief executive Terry Stead.
Avon's streamlined board will consist of a chairman, two independent non-executive directors, Stead and new finance director Peter Slabbert chief executive. Steve Stone, currently managing director of Technical Products, is retiring at the end of August, but will remain as a consultant so that his wealth of technical knowledge is not lost,â€ the group said.
Lee Richards has stepped down from the board while deputy chairman Eric Priestley will retire in January 2006.
The picture shows Terry Stead, Avon's nw chief executive (right) looking through an Avon mask with former chief executive Steve Willcox.