Cookson electronics and assembly post lower revenue

Electronics division The lower revenue partially reflects the ‘pass through’ to customers of lower tin and silver prices, the Assembly Materials product line’s major raw materials. In 2009, the average prices of tin and silver were respectively 31% and 6% lower than for 2008, such that approximately £42m of the division’s revenue decrease was as a result of these lower metal prices. Excluding both the impact of lower metal prices in Assembly Materials, and precious metal sales and back-to-back electro-plating equipment sales in Chemistry, underlying revenue was 20% lower than 2008 (at constant exchange rates). The slowdown in demand started in the last quarter of 2008 and reflected both a weakening in end-markets (notably for consumer electronics and automotive) and a marked de-stocking of components and finished products within the supply chain. However, since late March, electronic materials end-markets progressively improved as customer de-stocking came to an end and end markets recovered. According to Henderson Ventures, electronic equipment production worldwide, which had experienced high single-digit annual growth rates in the five years preceding the downturn in late 2008, reduced by 11% by value in 2009 compared to 2008. Two of the key products within the consumer electronics market are mobile phone handsets and personal computers. Mobile phone handset volumes were down 3% compared to 2008 (following 7% growth in 2008) whilst personal computer volumes, including laptops and netbooks, were up 5% compared to 2008 (following 8% growth in 2008). Industrial and automotive end-markets remained generally weak throughout 2009. Assembly Materials Revenue for the year at £308m was 29% lower than 2008 at constant exchange rates (20% lower at reported exchange rates). Excluding the impact of passing through lower tin and silver prices in 2009, underlying revenue was 22% lower than last year (at constant exchange rates) reflecting the significant slowdown in the production of electronic equipment which started in the fourth quarter of 2008, combined with the continuation of the strategy to focus on higher margin, more value-added products and reduce sales of more commoditised products. For solder products, sales of higher margin, more value-added products such as solder paste were less affected, with volumes unchanged between years, whereas volumes for the more commoditised products such as bar solder were down 30%. This trend reflected the continuing shift from wave soldering to surface mount technology for the production of PCB’s. The recycling, reclaim business has continued its recent volume growth, particularly in China where the new facility in Guangxi Province became operational at the end of 2008. Underlying revenue was 33% lower in the first half of 2009 compared with the first half of 2008 but increased by 19% in the second half compared to the first half of 2009, reflecting both the improvement in trading conditions and also the normal seasonality of the business. Profit contribution for 2009 was some 41% lower than for 2008 (at constant exchange rates) with a small contribution in the first half but a more substantial contribution in the second half. The transfer of European solder paste production from Ashford, UK to Hungary was completed at the end of the third quarter of 2009.