Ceramco adjusts to lower level

Press, 3 August 1983, Page 24

Ceramco adjusts to lower level

PA Auckland Ceramco, Ltd’s managing director, Mr Tom Clark, says his company’s returns from think big projects have been disappointing and below expectations.

In his annual review he says Ceramco’s engineering offshoots have been among the more successful in New Zealand in winning contracts for the domestic work content of the major energy projects. “Yet the total amount of work awarded locally and its relatively short-term impact remains disappointing in view of earlier expectations.

“With the procurement programmes for the major projects now more or less complete, the forward order situation is reasonable but demand is much less predictable beyond the current year.”

He says Ceramco’s engineering merchandising activities have been affected by the economic downturn and attention is being directed towards reducing the capital employed in these areas.

The company’s chairman, Mr John Fair, says that no significant profit improvement is expected in the current year (Ceramco’s operating profit fell 20 per cent to $6,784,000 last year because of a worse-than-expected second half). “Those operations that have been most affected by the recession are now adjusted to the lower levels of activity and ready to take advantage of the upturn as soon as it occurs.”

Mr Clark says the recovery of business activity and confidence in New Zealand will be a slow and gradual process.

“There is continuing evi-

dence of a lift in the United States economy, but this could not be expected to have any material impact on New Zealand until at least the 1984-85 financial year. “The energy-based projects will continue to benefit a number of our operations in the current year, but experience has shown that intense international competition for these contracts has often meant that the margins are not entirely acceptable. “Work obtained in these areas has always been regarded by the company as being of a ‘one-off nature — a bonus on top of the company’s base business,” he says.

“Unfortunately, in many cases, it has been a decline in those base businesses that has impacted adversely on our operations,” Mr Clark says.