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Baxi looks to UK as pound falls

Baxi is moving more production back to the United Kingdom as the weakness of the pound pushes up costs at its European production facilities.

As the group released its results for the third quarter of 2008, chief executive Martyn Coffey said Baxi was still looking at reducing costs, despite seeing operating profits improve substantially following a restructuring of its UK and French operations.

Mr Coffey said: “It is becoming more expensive to have products sourced from Europe and we are looking at the potential of manufacturing in the UK.

“We have seen an 18 per cent reduction in the pound against the Euro so, with labour and facility costs being paid in local currency, that means we are paying much higher costs if we are importing products.”

In recent years around 60 per cent of production of Baxi’s Band A condensing combi boilers was in the UK, but over the past year this has increased to 70 per cent and is now heading towards 80 per cent.

In the third quarter Baxi reported operating profit was up 58 per cent to £18.5 million compared to the same period last year.

After subtracting interest payments, exceptional charges, goodwill amoritisation, tax and other costs it registered a loss for the financial period of £8.7 million, which took its loss for the first nine months of the year to £52.7 million.

Mr Coffey said this was in line with the strategy of meeting debt and interest payments while reducing the earnings-to-debt ratio.

Last week also saw Baxi sign a preferred supplier agreement with British Gas to distribute the Baxi Ecogen micro-combined heat and power unit.

Mr Coffey said: “Our biggest priority is the development of low carbon technology, whether it is solar, biomass, heat pumps or microCHP. That is going to continue to grow, regardless of market conditions.”