London – Fenner plc has repositioned its various businesses and is set to capitalise on improved market dynamics for both its Engineered Conveyor Solutions (ECS) and Advanced Engineered Products (AEP) divisions, according to CEO Mark Abrahams.
Announcing the UK group’s full-year 2016 results on 16 Nov, Abrahams struck a “cautiously optimistic” note despite a significant drop in sales and operating profit over the last 12 months.
In particular, Fenner’s boss pointed to strong business developments within AEPs medical products activities – including new tissue-engineering and biomedical products – and signs of a major pick-up in its sealing-products business, driven by pent-up demand in the oil & gas sector.
In ECS, meanwhile, he said the business was now less reliant on the US coal sector and, with a reduced cost-base, and poised to grow margins in both the industrial and energy markets over the next three years.
That said, both Fenner divisions have a lot of catching up to do.
Sales at the ECS division fell by 21% in 2016 to £321.8 (€374.2 million), while underlying operating profit for the segment fell 40% to £14.2 million.
Noting these sharp declines, Abrahams said management actions in the second half of the year had steadied the performance of both the ECS and AEP segments.
At ECS, a refocusing – to bulk materials from coal – and restructuring in North America was “delivering to plan", while Australia saw further progress in its restructuring.
Figures, although in negative, were slightly better in AEP, with revenue falling 10% to £250.7 million. Underlying profit fell 32% to £29.9 million.
"The group's results were ahead of our expectations at the time of the annual general meeting in January 2016, assisted by currency,” said Abrahams, adding “management actions have started to outweigh market pressures.
Fenner, he noted, has started the new financial year “with a substantially reduced cost-base and with several of the leading indicators for the group's businesses showing a more positive trend.”
In addition, the UK group is experiencing a tailwind from the translation of overseas earnings into Sterling.
Fenner estimates the year-on-year impact on underlying operating profit from currency movements to be £4 million, based on exchange rates during the early part of the new financial year.
Both of the group’s business units have been under heavy pressure by declines in the mining and oil & gas markets.
Since last year, the company has embarked on a number of “rationalisation” programmes in its ECS business in China, Australia and the US.
In its half-year report earlier in April, Fenner said Australia remained the ECS’s strongest region with local production facilities, which allows a shorter order lead-time.
In North America, Fenner launched a major restructuring across its ECS business, closing the majority of one of its two principal belt-making facilities there in January.