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Pilkington: 1998-1999 results looking up

10 June 1999: Recent press reports have indicated that Pilkington has finally resolved its financial difficulties and is well on the way to recovery.
The British glassmaker recently announced positi…

10 June 1999: Recent press reports have indicated that Pilkington has finally resolved its financial difficulties and is well on the way to recovery. The British glassmaker recently announced positive results for the 1998-1999 fiscal year, with a 20% rise in operating profit and gross profits exceeding market predictions. The London Stock Exchange list reacted favourably to the news, with the company“s share price rising 6.4% to 84 pence. Gross profit from 31 March 1998 to 31 March 1999 had been forecast at UK 120-130 million, but Pilkington actually achieved UK 135 million. Operating profit rose to UK 214 million, though turnover fell by 8% to UK 2.7 billion. The company has been following a severe cost-cutting programme in the last two years aimed at making it more competitive. The overseer of this process has been Paolo Scaroni, the Italian manager chosen by Pilkington Group chairman Nigel Rudd to be chief executive in 1997. Scaroni“s strategy seems to have been particularly successful in the company“s architectural glass division, where turnover rose 11% to UK 1.3 billion and operating profit increased 26% to UK 153 million. The automotive glass division, on the other hand, is still in a recovery phase and restructuring has not been completed yet in the North American branch. The strike at General Motors (by far the most important client) and difficult conditions in Brazil have both contributed to a fall of 6% in turnover to UK 1.21 billion and a decline of 7% in operating profits to UK 63 million in this sector. “Nonetheless, we are extremely satisfied,” Scaroni commented, “when you consider that this is the first time since 1992 that the company is using profits to pay the dividend (5 pence per share), instead of having to dig into its reserve funds.” The group“s chief executive says the promises he made to the shareholders two years ago have been fully adhered to. “In 1997, we set a target of bringing down overhead costs from UK 869 million, as they were then, to UK 734 million in 1999. The final result of UK 707 million surpassed expectations”. According to Scaroni, productivity of flat glass has increased by 16% and that of automotive glass by 13%, but the improvements in efficiency have not been achieved without sacrifices. The group has cut 7,800 jobs so far and another 2,000 are to go by the end of March 2001. This is considerably higher than the original estimate of between 6,000 and 7,500. However, the future targets now being set reflect the new confidence of the company. “We are now looking around for new opportunities, both through the creation of new plants in developing countries and through acquisitions in the industrialized countries,” said Scaroni. As well as geographical expansion, the company also plans to extend its product range with a number of new, high-tech lines. These include reflective car windscreens, for which Pilkington will be investing ItL 60 billion in the Italian plant of San Salvo, near Chieti, central Italy. Scaroni described the San Salvo plant as “the example to which all the Pilkington factories around the world should aspire to for improving efficiency and productivity”.

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