Trading Update
16 April 2007
Following a review of trading in the first quarter of 2007, Fiberweb wishes to update the market on a reduction in expectations for the current year.
Current expectations of a significant increase in underlying operating profit and earnings before restructuring in Fiberweb’s American Industrial business in 2007 compared to 2006 will not be attained as planned. There is no material change in trading for the rest of Fiberweb. The American Industrial business accounts for around 20% of Fiberweb’s sales and accounted for around 40% of Fiberweb’s operating profit in 2006.
While sales within the American Industrial business are in line with expectations, operating margin has been seriously affected by a delay in achieving expected improvements in manufacturing efficiencies and margins. Currently, for the full year, operating profit forecasts for this business have been reduced by around £6m, with additional non-recurring costs of around £1m. The impact of these issues will hit the first half of 2007 in particular.
Exchange rates, notably the continuing weakness of the US dollar, will also reduce total reported operating profit for Fiberweb by around £1m from current expectations based on the current $/£ rate of $1.98.
In response to this unacceptable situation, the senior leadership of the American Industrial business has been changed and systems are being strengthened. The business is now in the process of being integrated with Fiberweb’s American Hygiene business, which has largely completed last year’s heavy restructuring programme and is now profitable, to form Fiberweb Americas. The pending sale of the hygiene wipes business, which was announced on 30th March, will assist management in focusing as required on our strategic businesses. Significant cost reductions are expected from the integration and from the actions of new management. An initial assessment of the impact of these actions in 2007 has already been included in the forecasts above, with operating margins in the American Industrial business expected to begin to recover in the second half.
Commenting on today’s update, Daniel Dayan, CEO Fiberweb plc said:
“I am very disappointed to report the delay to Fiberweb’s turnaround due to the unexpected and unacceptable deterioration in the forecast profitability of the important American Industrial business. It is encouraging that sales in this business remain on-track, especially in the segments we have identified for growth - filtration and speciality construction. We have responded swiftly to this situation, changing local management, strengthening key functions and beginning to address the issues described in this update aggressively. The other 80% of Fiberweb’s total business is performing as expected. While this is a significant setback to the turnaround of Fiberweb as a whole, we remain confident that our strategy and longer-term financial goals remain appropriate and achievable.”