Pilkington feels ready to weather recession

Four years of restructuring and cost-cutting has left British glass manufacturer Pilkington at the top of its market and ready to weather the current economic downturn.
Although the company has not q…

Four years of restructuring and cost-cutting has left British glass manufacturer Pilkington at the top of its market and ready to weather the current economic downturn. Although the company has not quite completed the process, it has reached the final stage with the closure of its plants in the US. Finance director Andrew Robb said the company has cut costs significantly, leading to increased margins, and the workforce has been reduced. “If there is a downturn, we are well-placed to weather it because we are rationalizing the group world-wide,” he added. Robb gave an example saying that in the US there was lower demand for its products because of fewer car sales, and the company was shutting plants there so it could resist the downturn. According to Robb, demand in Europe is quite good and the prices have been quite good, too. This is good news for a company which has 57% of its business in this region. Analysts, however, do not share this confidence. At the beginning of October, Goldman Sachs downgraded its recommendation of Pilkington stock, saying the deteriorating climate made the company vulnerable. But Robb denied there would be less demand. He explained that over 50% of the company“s glass production in Europe went to replacing old windows to comply with new housing regulations driving up demand. The areas which promise growth, according to Pilkington, are its new joint venture float glass plant in France, and a new self-cleaning glass. This glass, which is currently being test-marketed in the US, Ireland, and Austria, could be the company“s trump card. Robb explained the self-cleaning glass would be launched in Europe in the new year. He said that, although the glass itself costs four times more than normal, the cost of a full window with all the fittings would only be 15% higher than those now in use. In a trading statement issued in September, chief executive Paolo Scaroni confirmed the company was expecting to report good underlying improvement in its performance. He said: “Pilkington has performed well in the first five months of the year, in line with expectations.”But he cautiously added: “It is too early to predict the impact of the terrorist attack in North America on the economies in which we operate. Subject to this, we continue to expect to report further progress for the year as a whole.”