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US slump hits Tomkins profits

Profits at US based engineering group Tomkins were hit badly by the downturn in the housing market.

Tomkins’ building products division makes air conditioning systems and bathroom furnishings and has UK based Ruskin Air Management within its portfolio of companies. 

The company, which also has a substantial automotive and industrial division, reported that overall sales in the first six months of the year were down slightly from $2.96 billion in the same period of 2007 to $2.92bill in 2008.

Meanwhile profits were hit hard by a decision to recognise a non-cash impairment of $175.1 million in relation to certain businesses with significant exposures to the automotive and house building markets. This meant operating profit fell from $325 million to $89.2 million.

David Newlands, chairman, said: “The Group continued to face challenging macro economic conditions in the first half of 2008. Two of our US end markets, automotive original equipment and residential housing, have weakened further since our last update.

“Management is continuing to deal with these challenges by driving the three-year performance improvement programme and expanding our presence in emerging markets.”

Within the building products division sales of Air System Components were down from $542.2mill to £521.3mill, with overall sales down to $706.6mill from $808.9mill and profits cut to $14.5mill from $114.6.

The report commented: “Our non-residential business continued to perform well, despite a softening commercial construction market in the US.

“The business further expanded its international presence with new business awards for infrastructure projects in the Middle East and the acquisition of Trion Inc.

“Trion provides ASC with new green product technologies and two facilities in China. ASC made further progress with its expansion plans in India by acquiring a controlling stake in Rolastar, a duct profile manufacturer.

“The residential business continues to be impacted by the slowing US housing market, but was able to reduce the adverse effect of lower volumes through cost control, accelerating transfers to low-cost facilities and improving operational efficiencies through lean manufacturing.”

The company said expanding opportunities in emerging markets was going to taken on growing importance.

The report said: “Emerging markets in Eastern Europe, Asia and South America are expected to be strong in the second half of the year.

“The Board remains confident that the Group’s strategy of expanding in emerging markets, focusing on environmentally friendly products and selective acquisitions will continue to provide resilience in the second half of 2008 and growth opportunities in the future.”