| 2010 £m |
2009 £m |
Increase % |
|
|---|---|---|---|
| Welding | 1,015.4 | 846.7 | 19.8 |
| Cutting and automation | 142.2 | 184.7 | (23.0) |
| Revenue | 1,157.6 | 1,031.4 | 12.2 |
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| Welding | 89.7 | 54.7 | 61.3 |
| Cutting and automation | (0.4) | 9.8 | - |
| Operating profit | 89.3 | 64.5 | 35.3 |
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| Share of profits of associates (post tax) | 3.8 | 3.5 | |
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| Capital expenditure | 44.4 | 45.3 | |
| Depreciation | (22.3) | (20.1) | |
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| Operating margin | 7.7% | 4% | |
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| Employees | 8,479 | 8,581 | |
Overview of 2010 performance
ESAB’s results were up on 2009, as the business benefitted from an improved trading environment and the recent restructuring. Revenue for the year was £1,157.6 million (2009: £1,031.4 million), an increase of 12.2 per cent, and adjusted operating profit was £89.3 million (2009: £66.0 million), an increase of 35.3 per cent.
ESAB’s adjusted operating margin for the year increased to 7.7 per cent (2009: 6.4 per cent), which reflected higher volumes. The improvement in operating margin in the first half of the year was not maintained in the second half, due to usual seasonal factors, adverse changes in mix and, in certain instances mainly in Europe, increases in steel prices not being fully recovered through higher selling prices.
The total volumes of welding consumables sold during the year were 465k-tonnes (2009: 405 k-tonnes), an increase of 15 per cent. Within this, volumes of solid welding wire increased by 30 per cent as ESAB increased its market share in the recovering vehicle segment.
By comparison, the volume of electrodes, which are a higher margin product, only grew by 7 per cent. This was as a consequence of certain important users of electrodes, such as the general industrial and construction sectors, being less strong. In most European markets, electrode volumes were static or showed only modest growth. Those regions in which electrodes did show higher growth were generally emerging markets where selling prices and, in some cases margins, are lower.
ESAB was able to deliver higher volumes of welding wire by re-commissioning certain equipment capacity that had been taken out of service during the recession, and by making selective additions to capacity where necessary to alleviate potential shortages. ESAB also out-sourced the production of certain types of welding wire.
Revenue from sales of standard equipment increased by 28 per cent as volumes benefited from higher levels of steel consumption, and also from a new range of equipment introduced during the year. There was a particularly strong performance in South America, with other regions, including Europe and North America, starting to show improvement as the year progressed.
ESAB’s overall profitability was also constrained by the cutting & automation segment, which suffered from low new equipment sales during the year, as traditional customers, such as shipbuilding, remained depressed and as the wind energy industry, which had been an important customer of the automation business in 2009, faced increased uncertainty. Having recorded a loss in the first half of the year the segment’s financial performance improved during the second half, as the restructuring measures completed during the year delivered cost savings and as aftermarket revenues increased. As anticipated, by the year-end the segment had returned to profitability and higher levels of enquiries and order intake suggest that this improvement will be sustained into 2011.