Bloomberg News

Cookson Can Avoid Second Rights Offer, Chief Executive Says

August 04, 2009

Cookson Group Plc (CKSN), the world’s biggest maker of ceramic linings for metal smelters, has no plan to ask shareholders for more cash as steel production shows “improving trends,” Chief Executive Officer Nick Salmon said.

“If the current rising trends continue then we’ll be fine,” Salmon said, referring to the company’s bank-loan terms. “I don’t see us going to shareholders as the solution. In the unlikely event we needed more headroom, we’d negotiate with our banks to redefine our terms.”

World steel production fell 16 percent in June from a year earlier, after declines of 21 to 24 percent from December through May, according to the World Steel Association. Steel producers represent about half the ceramics division’s sales.

Passing the covenant tests is “still not a foregone conclusion,” UBS analyst Stephen Swanton said in a note today, adding that he views the “probability as weighted to the positive, rather than negative.”

Cookson is allowed net debt of as much as 3.5 times earnings before interest, taxes, depreciation and amortization under its loan terms. The level at June 30 was 2.6 times. The group’s Ebitda was 4.6 times its interest on borrowings, above the minimum of 4 required by the banks, Salmon said. The group raised 241 million pounds ($408 million) through a rights offer in March, helping to reduce the level of debt.

The company’s headcount by the end of 2009 will be down by about 19 percent, or 3,200 workers, from September 2008, the CEO said. No further reductions are expected, Salmon said.

Cookson shares rose 4.6 percent to 358.6 pence as of 11:10 a.m. in London. The stock has gained 88 percent this year, raising the company’s market value to 991 million pounds.

Foseco Integration

The purchase of Foseco for 497 million pounds in 2007 added 29 plants in 17 countries including Russia, Poland and Turkey, as well as products that purify steel. Cookson has now fully integrated Foseco through the cost-reduction program it launched in April 2008, the company said.

Salmon, CEO since 2004, expanded in ceramics to make London-based Cookson less dependent on the consumer-electronics and precious-metals markets. Supplying fire-proof casings for molten steel has become Cookson’s most profitable business as Chinese and Ukrainian makers move from making lower-quality construction steel to higher grades used in car production.

To contact the reporter on this story: Tim Barwell in London on

To contact the editor responsible for this story: Andrew Noel in London on

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