Asbestos cloud still hangs over T&N

T & N, the engineering group formerly known as Turner & Newall, is making much of what it claims is a new chapter in the long-running saga of its asbestos claims.

Certainly the sale of the last remaining mining interests earlier this week and last December's US court ruling throwing out Chase Manhattan's claim for contamination of its head office appeared to draw a line under two aspects of the sorry affair. But an asbestos cloud will continue to hang over the group well into the next century.

Whatever happens, the problem will remain for some time. Yesterday's figures for the 12 months to December, which saw profits leap from pounds 10.7m to pounds 120m, were again littered with provisions for asbestos claims, albeit cut from pounds 140m to pounds 51.3m.

Underlying provisions of pounds 45m are likely to continue at the same level in the current year and even optimists believe they could still be running at pounds 30m by the millenium.

Positive cash flow of pounds 14.8m last year after asbestos provisions and a pounds 19m uplift in capital expenditure to pounds 152m was an impressive performance. But with close to 60 per cent of sales related to the car industry, the group looks exposed in its core business. The US market is expected to be down 10 per cent in the first quarter and Europe is not likely to be far behind.

That and asbestosis will continue to hit sentiment in the short term, even if T&N hits Merrill Lynch's pounds 138m profit forecast this year. Down 6p at 165p, the shares, sitting on a meagre forward multiple of 10, are a raging buy only for the brave.