SOME of the influencing factors which worked to Yorkshire Chemicals'
advantage last year have moved against it in the first half of 1992, not
least the dollar which weakened over the latest period but had gained
16% in the first half of 1991. So the dyes and specialist chemicals
group has seen profits dip 3% from #5.33m to #5.16m before tax on
turnover up 8% at #48.4m.
Around 45% of sales are sensitive to the dollar, either directly or
indirectly. It has meant that, after allowing for currency hedging,
profits would have been around #450,000 higher had 1991 exchange rates
prevailed in 1992.
Given the background of recession, the overall sales performance is
creditable enough as Yorkshire more than maintained sales in its niche
markets, again doing particularly well from Speciality Products and
Yorkshire Australia. It did, though, suffer from fiercely competitive
pricing as well as the weakness of the US dollar and at capacity
constraints at Yorkshire Colours, hence the drop in profits.
However, the interim dividend is still lifted from 2.375p to 2.5p on
earnings per share virtually unchanged at 9.41p against 9.35p. The
shares, though, fell 5p to 313p, which compares with a 1992 'high' of
389p and a 'low' of 277[1/2]p.
Yorkshire Chemicals continues to spend substantially on new plant and
buildings -- just over #5m in the January-June period compared with
#2.6m a year earlier and #1.1m in the corresponding months of 1990.
The company says also that its ability to generate higher sales,
profits and earnings is becoming progressively stronger, increased
capacity for dyestuffs and synthetic tanning agents will be commissioned
by the year end. And the market for these additional volumes has already
been secured.
However, these extra facilities will obviously not come into full play
before 1993 and, meantime, competition remains intense, so that margins
are still pressured. It is to be hoped that next year will see the start
of a cyclical upturn. But hedging or no hedging, exchange rate movements
are a big intangible for a company like Yorkshire Chemicals, which now
derives some 92% of sales outside the UK. It suffered a #1m loss on
exchange movements in 1990 and shareholders must be hoping the current
year will not prove equally as difficult.
That said, the group can still boast a strong balance sheet, despite
increased borrowings to fund its captal spending programme which lifted
interest charges from #490,000 to #563,000 in the first half. Geraing at
the end of June had risen from 13.9% but still only stands at an easily
manageable 17.5%.
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