Colours & Coatings

Colours & Coatings Division’s operating profits were 21% down on last year at £25.5 million as the result of intense margin pressure and difficult market conditions, particularly in the third quarter.

The Colours & Coatings Division is one of the world’s leading suppliers of inorganic colours and the associated frits, glazes and enamels by which they are applied to a wide range of substrates.

The division serves a number of markets including automotive, glass, tile, sanitaryware, tableware, plastics, inks and surface coatings. The division is organised into three sectors reflecting its major markets: Structural Ceramics, which combines the Tile, Sanitaryware and Zircon businesses; Glass, which serves the automotive glass, architectural glass and glass packaging markets; and Speciality Coatings, which serves the tableware, plastics and surface coatings industries.

2001/02 saw the completion of expansion projects to serve growth markets in the tile and glass businesses. These are already delivering benefits. However, the sharp decline in the tableware market necessitated a review of the division’s UK business, which will result in the closure of its Meir facility by early 2003. This has led to an exceptional charge of £24 million in the year. This rationalisation will result in savings of £3 million in 2002/03 and £7 million per annum from 2003/04 and should be cash positive following the sale of assets.

Structural Ceramics
The Structural Ceramics sector achieved modest sales growth despite a considerable softening of its market during the second half. However, while the business is well protected in a downturn by having some of the lowest unit costs in the industry, margin pressure was intense, particularly in the frit and zircon businesses, and operating profits fell slightly from last year’s record levels. Work has been completed on the construction of a new highly automated frit manufacturing facility in Spain and the first kilns are now operational. A new frit plant in Brazil is nearing completion and will be operational early in 2002/03. The Brazilian facility will be the first to produce high quality, gas fired frits in the country and will provide both higher product quality and lower production costs. Asian markets slowed during 2001/02, but there was good growth in Eastern Europe. Products currently made by Structural Ceramics on the Meir site will be transferred to Spain and Italy.

Glass
The Glass sector performed well in the face of very difficult market conditions. Sales grew slightly and operating profits were similar to last year. The completion during the year of the business’ £4 million expansion programme at the Glass masterplant in Maastricht enabled it to achieve record output of glass enamels. While both the European and North American markets for automotive black obscuration enamels were slower than in previous years, the business saw good growth in sales of conductive silver pastes. Consolidation of suppliers to the US market place is offering good opportunities to win new business. The business has a strong pipeline of new products and is conducting research into related market niches.

Speciality Coatings
The newly formed Speciality Coatings sector combines the division’s Tableware and Pigments and Dispersions businesses. Its activities remain organised on market facing lines to serve the needs of the tableware, plastics and surface coatings industries. Sales and profits in the Tableware business fell sharply during the year as its market continued to contract, especially in the UK. The closure of the Meir facility will reduce Tableware’s cost base significantly, yet will not significantly impact sales as most production will be relocated to other plants. The business also sold its decal printing facility in Limoges to local management in September as part of a reduction in its global capacity. Outside the UK and US, tableware sales increased slightly. Two important new colour ranges were launched during the year, targeted at the needs of porcelain and stoneware producers, and a new screen printing gold was also introduced to the market. Investment in the decorative gold facility in Royston has progressed well, delivering both a new range of products and environmental benefits. The Pigments and Dispersions business had a difficult year, with a small decline in sales in tough markets. Sales grew in Asia and the USA. Cadmium and transparent iron oxide margins were under pressure, but there was good growth in the Colourplex®, Micraflo® and Timbasol® product groups.

 

Research and Development Research for the Colours & Coatings Division is based at the Johnson Matthey Technology Centre and at the division’s main European facilities. Research activities include fundamental studies into the base chemistry of the businesses’ core products as well as new product development. The introduction of new products and new application effects is an important part of the division’s strategy for growth. Its customer markets are fashion driven and so development programmes are closely linked to the need to develop innovative new ways of using colours and to match changing consumer tastes. Increasing environmental requirements are also leading to the development of heavy metal free ranges for all product areas and an increased focus on recyclability. There is also an increasing focus on new process development as well as new product development. New milling and drying technologies are reducing costs in zircon and glass. UV drying technology is reducing printing times and costs in decal, while a new gelling process has improved our liquid gold products. Good progress is being made on reducing process costs in colour production.