Fall in profits fails to dent Precoat expansion plans

Precoat International, the Anglo-Canadian steel processor and distributor, is bullish about expansion plans in the UK and Europe despite reporting a `difficult’ interim period.

The company plans to set up a plant in southern Germany or Austria to serve local clients such as Bosch.

Chairman Ian Williams said: `The message from our larger customers with factories throughout Europe is that we have to have the capability to supply them wherever they set up.’

Precoat is also considering expanding its plant in South Wales or buying two undisclosed sites elsewhere in the UK.

E-commerce benefits are set to kick in this summer, when the firm will be introducing internet-based software customised for the steel processing industry.

Precoat’s turnover fell to £31.8m, despite an underlying growth of 6% on the back of a recovery among appliance manufacturers and a strengthening Canadian market and dollar.

Expansion costs in Toronto and Montreal, plus the double whammy of higher UK employment costs and rising occupancy costs in Canada, were singled out as factors in a 10% fall in pre-tax profits to £1.77m.

Williams added that a fall in stock levels and delivery backlogs – caused in part by a fire last autumn at the Llanwern cold-rolling mill – had reached `unplanned and unsustainable levels’. But he was optimistic for the second half, with an expected steel price recovery and growing steel demand. `This is a resilient performance in difficult market conditions,’ he said. `Volume growth has accelerated and price levels started to firm up, particularly in Europe.’

Shareholders will be paid an increased interim dividend of 2.7p per share on February 4.