Chamberlin optimism despite pretax loss
Jun 4 2009 by Anna Blackaby, Birmingham Post
Walsall-based foundries and engineering company Chamberlin dipped into a pretax loss last year but said it saw the first signs that customers had finished destocking and demand could start picking up.
The firm posted an underlying pretax profit of £259,000 for the year ended March 31 but severance costs due to last year’s restructuring programme and other exceptional costs resulted in a statutory pretax loss of £498,000.
Chamberlin chairman Tom Brown said that although the year started well the second half had been much tougher. He said: “After a two-year period of fundamental change at Chamberlin, during which the new management team substantially restructured and reorganised the business, modernising systems and business practices, the benefits were becoming evident in Chamberlin’s financial results.
“The first half of the year had a significant improvement in profitability. However, the autumn saw the most dramatic decline in the engineering economy in modern times and the second half of last year proved to be extremely difficult.
“As a result, the achievements of the first half were reversed by the severe downturn in the second half.”
Chamberlin remains a technically strong, well-managed group, with a sound balance sheet. “Although the short term will continue to be very challenging we believe there will be opportunities for organic and acquisitive growth in the medium term,” Mr Brown said.
The firm said in recent months its main markets had been severely distorted by destocking and, as a result, orders had fallen to an “excessively low level” which was well below the level of sales of finished products to end customers. Mr Brown said: “Inevitably there is a limit to this process as stocks are consumed. We are now seeing the first signs that some of our customers appear to have reached this point and we expect to see a progressive increase in sales in the coming months, assuming end-user demand remains at current levels.
“In addition, with capital spending now reduced, we expect the business to generate cash during the coming year so long as there is no further worsening in the economic situation.”
The company was still intent on pursuing its acquisition strategy, despite the recession, and was looking at engineering companies that fit its principle of “difficult things done well.”
In the first half of the year the firm, which supplies iron castings and engineered products to industries worldwide, made some indicative offers for these kinds of firms but the price expectations of vendors had proved “excessive”.
Mr Brown said: “Lately our focus has had to be on the existing businesses but we will again look actively for acquisitions as the economy becomes more stable and expect to see a wider range of more sensibly priced opportunities.”
