Tomkins Swings To Loss In H1 - Update

(RTTNews) - Engineering and manufacturing company Tomkins plc (TKS | Quote | Chart | News | PowerRating) Thursday reported a loss for the first half of fiscal 2009, compared with a profit last year, hurt by lower sales and higher restructuring costs. On an adjusted basis, the company reported a profit, which was significantly down year-over-year. The company also said that market conditions remain uncertain and sees some modest improvement in the second half.

The company's first-half loss after tax was $118.1 million, compared with a restated profit of $13.6 million a year ago. Loss for the period attributable to equity shareholders was $123.9 million or 14.07 cents per share, in comparison with a restated profit attributable to equity shareholders of $2.9 million or 0.33 cents per share last year.

The company also reported a loss from continuing operations of $118.1 million, versus a profit from continuing operations of $14.4 million in the prior-year period.

Adjusted operating profit was $82.3 million, a sharp decline from $242.7 million in the prior-year period. Adjusted earnings per share declined to 2.99 cents from 16.84 cents in the previous year.

Tomkins also reported six-month period sales of $2.00 billion, lower than $2.93 billion in the same period last year.

Sales from ongoing segments were $1.97 billion, down from $2.77 billion in the previous year. Most of the group's end markets weakened significantly, leading to a corresponding decline in sales volumes across the group, Tomkins said.

Commenting on the results, David Newlands, Chairman, stated, "Conditions in our end markets continued to deteriorate throughout the first half of 2009 which negatively impacted Group trading."

"The rate of deterioration in some of these markets has slowed as evidenced by trading in June and July, however the outlook remains uncertain. Management continues its disciplined approach to cost containment and restructuring across the Group, which remains on track," Newlands noted.

Based on segments, Industrial & Automotive total sales declined to $1.45 billion from $2.22 billion in the prior-year period. Power Transmission sales were $801.1 million, compared with $1.13 billion a year ago. Fluid Power sales slid to $281.9 million from last year's $443.4 million. Sensors & Valves sales totaled $135 million, down from $225.2 million in the same period last year.

Building Products sales reached $554.8 million, down from last year's $706.6 million. Sales from ongoing segments were $519.6 million, compared with $630.9 million in the previous year. Air Distribution sales dropped to $446.2 million from $521.3 million in the first half of 2008. Bathware sales also were lower at $73.4 million compared with $109.6 million in the previous year.

Tomkins said it incurred restructuring costs of $136.1 million in the first half, compared with $17 million in the previous-year period. These costs are associated with the company's ongoing implementation of the restructuring initiatives. The cash costs relating to the restructuring initiatives were $34.6 million in the first half. The company expects a further $19.8 million of restructuring costs in the second half of the year. Approximately $70 million of cash costs are expected in the second half.

Further, Tomkins said that it took an impairment charge of $33.7 million in the period, down from $175.1 million in the prior-year period. Restructuring initiatives accounted for $21.3 million, with the remaining $12.4 million relating to the loan note taken as part of the consideration on the disposal of Stant and Standard-Thomson.

Tomkins also announced an interim dividend for 2009 of 3.5 cents per share, to be paid on November 19 to shareholders on the register on October 16.

Going ahead, the company said that market conditions remain uncertain. However, the company expects some modest improvement in the second half from a slowdown in the rate of decline in some of its end-markets.

North American industrial markets are expected to be flat, dependent upon the extent and timing of an increase in general industrial activity. European industrial activity is expected to perform in line with the North American markets. Industrial activity across the remainder of the company's geographic markets is expected to be weak, except for markets in China and India, which are expected to show moderate growth supported by stimulus plans.

Further, the company said that global automotive aftermarket is expected to be broadly flat. In North America, automotive original equipment production is expected to increase by 1.5 million units to approximately 5.0 million units, supported by low inventory levels and fewer plant shutdowns. Automotive original equipment production in Europe is expected to increase by approximately 1 million units to approximately 8.7 million units, supported by continued scrappage schemes. While the Chinese and Indian markets are expected to grow by low single digits, the Brazilian market is expected to be flat or down by a low single digit percentage.

In addition, the company projects that US non-residential construction is expected to be marginally lower. Annualised housing starts in the US are expected to be between 550,000 units and 600,000 units.

The Group also expects to make a further reduction of approximately 1,600 employees by the end of the year. The company has announced or completed 28 plant closures so far this year, of which 15 are within the Industrial & Automotive business group and 13 within Building Products. The company's expected annualised savings through these restructuring initiatives remain at $150 million by the end of 2011.

TKS closed Wednesday's trading at $11.66, up $0.06, on a volume of 72,900 shares.

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