Review of Performance

Powder Metallurgy

  2010 2009
Sales (£m) 759 512
Trading profit (£m) 54 (7)
Trading margin 7.1% (1.4)%

Powder Metallurgy sales were £759 million (2009: £512 million), an increase of 48%. There was no net impact from currency translation. Sales increased in all regions as automotive markets recovered and recent new business wins entered production.

Underlying sales for Sinter Metals increased by 43%, with strong growth achieved in North America, Europe, India and Brazil.

Overall, Hoeganaes’ total tons shipped were 46% higher than in 2009 and underlying sales were 76% higher, the difference reflecting an increase in the commodity metals surcharge passed on to customers as raw material prices increased. A new powder mixing and finishing facility was opened by Hoeganaes, in China, towards the end of the year, to support growth in that rapidly expanding market.

Powder Metallurgy reported a trading profit of £54 million (2009: £7 million trading loss) with a divisional trading margin of 7.1% (2009: (1.4)%).

Increasing trends in industrial and automotive markets to improve fuel efficiency and reduce emissions, such as variable valve timing in engines, high performance gear sets in automatic transmissions and differential gears, are driving the demand for products made by powder metallurgy. During the year approximately £100 million (annualised sales) of new programme business was awarded and more than 30 technical days were hosted for existing and new customers, in order to promote the applicability of powder metallurgy products and applications.

Restructuring costs in 2010 totalled £1 million (2009: £20 million) reflecting the conclusion of the programme.

Capital expenditure on tangible fixed assets was £27 million (2009: £10 million). The ratio of capital expenditure to depreciation was 0.9 times (2009: 0.3 times).

Return on average invested capital was 13.2% (2009: (1.6)%), reflecting the improvement in profitability.