Castings reports sharp decline in full-year profit

(Sharecast News) - Castings reported a sharp decline in full-year profit on Wednesday, as lower demand from heavy truck customers and higher energy costs weighed on performance. Pre-tax profit fell 74% to £5.6m for the year ended 31 March, down from £21.3m a year earlier.

Revenue dropped 21% to £177m, with sales volumes down 19% amid a broader normalisation in demand across European and US truck markets.

Operating profit fell to £4.8m from £19.8m, reflecting the combined impact of falling schedules from OEM customers and a £1.5m hit from electricity penalties on unused forward purchases.

Profit margins were squeezed across the business, with foundry operations in particular seeing a decline in efficiency due to reduced volumes.

Segmental profit in the foundry division dropped to £2.9m from £16.2m.

The group also absorbed a £1.3m operating loss at its newly acquired Scunthorpe operation, Castings Ductile, which included £0.4m of start-up costs.

Despite the initial loss, management said the facility was now established and winning new orders, offering access to new customers and larger casting markets.

The machining division remained more stable, posting a £2m profit on £32.1m in revenue, down 15% year-on-year.

Investment across the group totalled £19.8m, including £10.6m spent on a new foundry production line at the William Lee site, expected to be commissioned by late summer and increase capacity by 15%.

Despite the weaker results, the board recommended maintaining the final dividend at 14.19p per share, taking the total payout to 18.4p, slightly up on the prior year.

Cash reserves more than halved to £15.7m, down from £32.5m, largely due to capital expenditure and dividend payments.

Looking ahead, Castings said it expected continued short-term softness in demand but anticipates an improvement in schedules later in the year.

It also cited opportunities in sectors such as wind energy and agriculture, and further US growth, supported by its expanded foundry capabilities.

However, it warned that UK manufacturers were continuing to face a cost disadvantage due to high energy prices and increased National Insurance costs.

At 0906 BST, shares in Castings were down 2.19% at 267.5p.

Reporting by Josh White for Sharecast.com.