London – Fenner Plc has reported a sharp drop in sales and earnings for its fiscal half-year, as a continuing decline in the mining industry and pressure on sales to the oil & gas sector impacted core businesses.
Revenue for the period, to 29 Feb, was £276.8 million (€356 million) down from £347.6 million for the same period last year.
Also, underlying profit before taxation dropped by 37 percent to £8.1 million from 21.8 million in the first half-year in 2015.
The results marked a continuation of the difficult market conditions of the previous few reporting periods, said Fenner CEO Mark Abrahams, noting the group’s efforts to address the challenges.
“We have now reached a point where our refocusing, restructuring and cost saving programmes are substantially mitigating the ongoing volume challenges we are experiencing,” he noted.
The company’s restructuring programme will, however, continue as it will “rationalise” its South Africa business, following the recent announcement by customers to close or sell coal mines.
There were also problems at Fenner’s advanced engineered products (AEP) unit, where first-half revenue dropped from £134 million to £120.2 million.
This was mainly due to a sharp slowdown in sales to the oil & gas industry. The sector represented 16 percent of the AEP division’s turnover in the latest figures, down from 29-percent share in 2015.
Fenner’s conveyor belting business, engineered conveyor solutions (ECS), posted more than halved to £5.8 million – from £13 million a year ago – as the global mining industry adjusted to lower commodity prices and increased uncertainty over future demand. Revenue for the period dropped to £156.6 million from £205.3 million in 2015.
Australia remained the ECS's strongest region with local production facilities, which allows a shorter order lead-time, and the advantage of weaker Australian dollar which enabled the business to maintain its position in the belt replacement market.
In North America, Fenner launched a major restructuring across its ECS business, closing the majority of one of its two principal belt-making facilities in North America in January.
In this period, said Fenner, the planned headcount reductions in belt manufacturing facilities were largely completed.
“Our fabricated products business is now located on a single site following the closure of the Allison facility,” the company added.
According to Fenner, ECS’s order intake from the US coal industry reduced significantly as a result of the ongoing falls in US coal production, financial difficulties of customers as well as continued destocking.
“Indeed, the increasingly strained financial position of a number of coal mining groups has led us to withdraw from certain customer relationships with ongoing, tight credit management remaining a key focus,” the Fenner statement added. .
In Europe, demand was generally subdued with certain of its markets, such as Russia and Ukraine, remaining very weak.