Wednesday, engineering firm Charter International plc (CHTR.L) cautioned that it would anticipate 2009 outcome to be materially lower than its previous expectations, if the difficult conditions seen in May persisted.
The company provided a trading update for its two divisions, ESAB and Howden, and said it is continuing to see 2009 results and activities in line with the outlook presented in the interim management statement on April 29, 2009.
The company noted that ESAB, which focuses on welding, cutting and automation, still sees falling shipbuilding activity later in the year, with the possibility that some customers may take extended summer shutdowns. Adding to the division's woes are increasing competitive pressures in some markets.
Charter said that industrial output has continued to decline in European, Russian and Brazilian markets, while India and other emerging markets showed robust growth.
This decline has placed tacks on ESAB's European businesses in May, weakening consumables volumes and lowering prices. Since May, ESAB has also seen a decline in sales of Standard Equipment and reduced order backlog at its Cutting business. The company noted that the Engineered automation business remained relatively strong with good prospects and orders.
After cutting over 1,200 jobs till now to save in excess of GBP 40 million in 2009, ESAB sees additional job cuts, the permanent closure of two factories and the temporary closure of two other factories to cope with the still deteriorating operating environment. Charges of about GBP 20 million are anticipated to result from these actions in 2009.
At its Howden division, which focuses on air and gas handling, Charter stated that sales were softer than prior-year levels, but in line expectations. Howden has already snipped costs by implementing workforce reductions in contract staff and overtime working. The company is therefore using internal subcontracting to maintain the loading of Howden facilities, which might otherwise become short of work.
Charter stated that Howden's trading activities in the remainder of the year is expected in line with expectations.
Additionally, Charter International stated that capital expenditure in 2009 would be below the levels seen in 2007 and 2008, and that the company would focus on cost reduction and efficiency enhancement measures.
CHTR.L is currently trading down 86 pence or 15.25% at 478 pence.
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