Fragile: handle with care

It may be an expert in manufacturing toughened glass but Pilkington’s profits look in danger of shattering as the company is hit by tough economic conditions.

Pilkington this week releases it interim results at a troubled time for the company. The business, which specialises in manufacturing glass for the building, automotive and aerospace industries, has been dragged down by the global manufacturing slump and an increase in competition in the marketplace.

The group has twice warned investors, once at the firm’s agm and again in a trading statement to the market late last month, not to expect too much from its bottom line for the six-month period ending 30 October.

Pilkington insists, however, that it remains on a strong footing, due in part to its improved competitiveness over the past five years, credited to former chief executive Paolo Scaroni.

Scaroni is heralded with rescuing the company from disaster by cutting costs by a third and dramatically increasing productivity and efficiency.

It is now down to current incumbent Stuart Chambers and finance director Andrew Robb to build on the work Scaroni achieved while coping with tough economic conditions.

Chamber himself commented recently: ‘We expected difficult trading conditions in the current year (and) our experience in the first half-year has confirmed this view.’

While the market for building products in the UK remains reasonably strong, the position on the continent is significantly worse. With the European market representing around 60% of the companies building product sales, itself a major part of Pilkington’s business, the knock-on effect could mean a significant shortfall in profits.

‘By contrast with continental Europe the market in the UK has been robust, underpinned by the rapid increase in the use of low emissivity glass in buildings, which has been a legislative requirement since 1 April,’ said Chambers.

‘This has benefited both our primary and processing and merchanting businesses in the UK.’

The company has warned investors not to expect a significant upturn over the remainder of the year, with full-year results not expected to show much improvement unless there is a dramatic pickup in the market.

Investors seem less concerned about the warnings, with share prices remaining steady and even rising over the past month.

This may change however when its figures are finally revealed.

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