Fenner suffers £5m half-year loss

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Conveyor belt maker ​Fenner​ reported a £5m half-year loss, down from a £17.6m profit last year, following restructuring costs, impairment charges and the global decline in power prices.

The Hessle-based company has been hit by a fall in demand for its conveyor belts from coal customers who are themselves having to deal with a fall in coal exports.

Fenner’s CEO Nicholas Hobson said the group’s Engineered Conveyor Solutions division is likely to see a continuation of difficult trading conditions across all regions.

Costs are being cut and a restructuring has been announced including plans to make around 60 redundancies at its Fenner Dunlop plant in Hull, which employs 127 staff.

Fenner is in consultation with employees and said it anticipates that up to half the workforce could be affected.

It said that the Hull operation has been significantly hit by the demise of the UK coal industry and reduced orders from Ukraine and Russia.

Over recent months the site has been operating on shorter working hours in the hope that the business will return. However, the group said there has been no upturn and none is anticipated in the foreseeable future.

Fenner said it is committed to continuing production at the site and maintaining its technical capability.

The group reported weak market conditions at its US conveyor belt business as a result of falling demand from coal mining customers as they battle against falling natural gas prices, decreased coal exports and the impact of a relatively mild winter.

In Australia the business faced pricing pressure whilst also experiencing reduced demand for belting products and services as mining customers looked to reduce their operating costs in response to continuing weakness in commodity prices.

In China the division put in a “satisfactory performance” although the market remains intensely competitive.

Growth anticipated in newer markets such as West Africa failed to materialise as the mining industry was hit by the outbreak of Ebola and lower commodity prices.

In Europe demand was subdued although in South Africa the division saw a recovery after the industrial action seen across the mining industry last year.

In contrast, Fenner’s other division, Advanced Engineered Products, reported a rise in revenue, higher underlying operating profit and an increased margin as a result of strong performances by most of its businesses.

The division’s industrial, medical and other non-oil speciality polymer businesses generated 70 per cent of revenue.

Fenner said strong contributions were made by Secant Medical, Fenner Drives and Fenner Precision which all reported growth in revenue, operating profit and margins.

Group revenue in the half-year to February 28 fell three per cent to £348m and underlying pre-tax profit fell 26 per cent to £21.8m.

The group was hit by £20m in exceptional charges including £5m in restructuring costs and £15m of impairments of goodwill and intangible assets acquired.

Analyst Michael Blogg at Investec said: “Fenner’s Engineered Conveyor Solutions business has been under pressure for the last two years but the oil and gas downturn is expected to affect Advanced Engineered Products results in the second half. While this was already signalled, the interims were somewhat weaker than we anticipated.”