Margins hit by higher than expected commodity demand and rising input and energy costs
Insulation manufacturer Superglass has reported a drop in margins as “extremely challenging” UK market conditions impacted average sales prices.
The Stirling-based company reported a 75 per cent slump in annual earnings last November to just £400,000.
Superglass said input costs had continued to rise since last November's update, as had energy costs.
The company said a turnaround investment strategy, called Project Phoenix, “remains on budget and on track for completion during the first half of this year".
Last year Superglass updated the estimated cost savings from the Project Phoenix investment from £3.6 million to £5 million a year.
Explaining the adjustment, the company said: “The increase in savings is predominantly due to the installation of new fiberising technology which, as well as improving our cost base, is enabling us to meet the increasing demands of the marketplace in terms of competitive pricing, product quality and specification.”
Superglass said it has not brought online the first of its upgraded production lines, which is now running at full capacity. The second line is scheduled to be upgraded in the spring.
The first full year of savings is expected to be realised in 2013/2014.
An interim management statement released by Superglass on Monday, covering the period from September 1, 2012, to January 14, 2013, states: “Market conditions in the UK are extremely challenging and remain difficult to predict, as reported in the preliminary results announced on November 22, 2012.
“Since that announcement sales volumes have been steady.
“However, a stronger than anticipated demand for volume commodity products has had a negative impact on our average sales price and overall market conditions are also impacting prices.”
Shares in Superglass dropped six per cent in early trading today on the interim management statement, released ahead of its AGM.