UK group Courtaulds on Wednesday announced a radical restructuring, including a separate listing for its coatings and sealants business, the sale of its polymer products activities and a major cost reduction programme in fibres and chemicals.
The group plans to cut about 500 fibres and chemicals jobs in the UK. It will also keep its global viscose fibre capacity under "constant review" Courtaulds said. The group has agreed to sell to Hoechst its minority stake in an oriented polypropylene (OPP) film joint venture, and to acquire Hoechst's stake in the European fibres joint venture.
Courtaulds' initial announcement did not say if it had a buyer for the polymer products business, which like fibres and chemicals has been hit hard by the
strength of sterling and the Asian economic crisis. Chemicals analyst Michael Eastwood of Dresdner Kleinwort Benson told CNI the sale could raise about £240m. In 1996-97 the business made operating profits of £19m on sales of £228m.
Under the separate listing for the coatings and sealants business, shares will be distributed to existing shareholders. Courtaulds group chief executive Gordon Campbell said the current structure of Courtaulds had impeded efforts to realise shareholder value. "The separation will enable both businesses (coatings and sealants, and fibres and chemicals) to pursue opportunities which would have been difficult for them as part of a more diverse group. Investors and employees will be more able to identify with a clear strategy for each business."
The coatings and sealants business is regarded by most analysts as the most profitable part of Courtaulds. It concentrates primarily on industrial markets and had sales of £983m ($1.61bn) in 1996-97, with operating profits of £85m. It is one of the world's largest industrial coatings businesses and the leader in most of its market sectors.
Campbell said the business would continue to develop these markets and to expand in the emerging geographic areas of the world. "A focused coatings and sealants business will also be more proactive in seeking acquisitions and strategic alliances to accelerate the achievement of these objectives."
Courtaulds blamed the strength of sterling for the continued squeezing of margins and sales. It said economic upheavals in Asia had a direct impact on exports. Tencel fibre is the major product exported to Asia and Courtaulds admitted that recovery in demand from Asia has stalled. Tencel is now expected to be in loss for the year, because of its high investment costs. Expansion plans for a new plant in the region have been put on hold.
The strength of sterling is forecast to reduce the group's operating profit by £34m in 1997-98 compared with the previous year.