Pilkington vow to slash debt cheers market: Profits double on strong US growth

PILKINGTON, the glass maker, promised yesterday that debts would fall by pounds 200m within the next two years, putting an end to rumours in the City that a rights issue was imminent.

The market reacted warmly to the news and better than expected half-year figures, pushing the shares 11p higher to 168p. Profits doubled in the six months to September, with strong growth in the US and South America making up for a sharp decline in Europe.

But Sir Anthony Pilkington, chairman, warned that the Continent was likely to remain in recession in the short term and said there were medium-term doubts about economic performance there in the face of rising unemployment.

Pre-tax profits of pounds 30.5m compared with pounds 15.1m, from sales of pounds 1.40bn ( pounds 1.20bn). Earnings per share were 0.4p (loss of 0.8p) and the dividend was reduced from 2.93p to 1.5p to rebalance the interim and final payments. The full- year total is expected to be maintained at 4p.

Building products, the bigger of Pilkington's two main divisions, saw profits slip to pounds 28.2m ( pounds 30.5m) despite the inclusion for the first time of the former Heywood Williams distribution business, acquired in April.

Prices of architectural glass continued to slip in Germany in spite of rising demand following unification. Sir Anthony said the European glass industry was running at only 85 per cent of capacity, not enough to allow price rises to stick. In the US, Australia and South America sales volumes increased, which together with firmer prices improved profits.

The second leg, transport products, suffered from an estimated 20 per cent decline in car production in Germany and cutbacks by Ford and Nissan in the UK.

However, profits almost doubled from pounds 14.9m to pounds 29m. Sales volumes to US car makers were 6 per cent higher and in Argentina car production reached record levels.

Profits from Argentina, Brazil and Australia, rose from pounds 19.1m to pounds 25.3m. In North America they jumped from pounds 2.5m to pounds 15.4m, while in Europe they slipped from pounds 23.8m to pounds 16.5m.

Following the disposal in September of Sola, Pilkington's spectacle glass manufacturer, borrowings fell from more than pounds 1bn at the end of the first half (gearing of 87 per cent) to pounds 815m (67 per cent).

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