LONDON (Alliance News) - Morgan Advanced Materials PLC Wednesday reported an increase in profit for the first half, despite a drop in revenue following a mixed performance across the business.
The company, which supplies carbon and ceramic products to a number of industries including energy, petrochemical, transportation and healthcare posted pretax profit of GBP37.5 million for the period ended June 30, up from GBP35.7 million a year earlier.
In the previous year the company was hurt by GBP6.7 million in restructuring costs as it attempted to unify the company under a "One Morgan" umbrella. Restructuring costs have since been reduced to GBP2.1 million.
Revenue, however, fell to GBP448.4 million from GBP486.1 million.
Morgan Advanced Materials said its results were impacted by the continued strength of sterling. It said relative to the first half of 2013, the impact of foreign exchange caused a reduction of GBP33.7 million in revenue and GBP5.1 million in earnings before interest, taxation and amortisation.
At an operating level, Morgan Advanced Materials said the strength of its US-based Thermal Ceramics, Electrical Carbon and Seals and Bearings businesses was offset by a softer performance in Technical Ceramics, particularly from the ceramic cores business. The company said this was driven by lower demand in aerospace, as customers destocked, and by low operational yields.
Morgan Advanced Materials said that at constant currency, revenue in the US increased by 1.4% compared with the first half 2013, delivering margins of 15.3%, up from 14.6% a year earlier.
The company said its US order book remained positive through the first-half and "this provides a good base for improving performance through the second half of 2014".
In Europe, the company said trading was broadly stable, with the exception of its Composites and Defence Systems (C&DS) business, where revenue fell by some GBP13.8 million. This was attributed to the exit of low-margin lines of business and the timing of programme orders and shipments. Overall European margins were unchanged at 11.2%.
Morgan Advanced Materials said the outlook for its European arm in the second half is for higher revenue in C&DS with demand in other businesses expected to be broadly similar to the first half of 2014.
Looking ahead, the company said a key element of its strategy continues to be creating sustainable differentiation through "leading-edge materials technology and sophisticated application engineering".
"To this end we are investing organically in research and development, such as the new Centre of Excellence for Structural Ceramics in the UK, and in higher levels of growth capital expenditure, including the new greenfield sites in Dalian, China and Kizad, UAE," Chief Executive Mark Robertshaw said in a statement.
"Our focus remains on self-help initiatives: driving positive mix, delivering cost efficiencies and making continued investments in technology and differentiation," he added.
Despite a mixed performance, the company increased its interim dividend to 3.9 pence, from 3.8 pence a year earlier.
Morgan Advanced Materials shares were quoted up 2.5% at 308.30 pence Wednesday morning.