TIDMROR
RNS Number : 1298I
Rotork PLC
31 March 2020
Rotork Plc
Responding to COVID-19
31 March 2020
Rotork Plc ("Rotork"), the global flow control and
instrumentation group, today announces the actions it is taking in
response to COVID-19. This announcement contains inside
information.
Responding to COVID-19
Our priority is the health and safety of our colleagues and
their families, our customers, suppliers and all other
stakeholders, and we are taking decisive actions to manage the
situation whilst following the instructions from governments and
health authorities.
Since Rotork reported its Full Year Results on 3 March, the
outlook for 2020 has become considerably more uncertain.
Governments around the world are taking unprecedented measures to
contain the COVID-19 pandemic, including restricting the movement
of people, requiring social distancing and in some cases closing
places of work.
Our ability to deliver products and services to our customers
has remained good considering the demanding environment. However,
in the last few weeks we have started to experience increased
disruption. This is due to our actions to protect our people
(including in our factories, where we have had to change working
practices and conditions, and in some cases have had temporary
closures), our supply chain (where not all of our alternative
suppliers have been able to sufficiently lift production) and
logistics (international transportation is taking longer and has
become more expensive).
-- The initial COVID-19 outbreak in China caused delays in
deliveries and an increase in logistics costs. The Rotork teams
have worked hard to overcome these issues and the output from our
factory in China is now close to back to normal.
-- Whilst our teams in India and Malaysia continue to work
effectively, our factories in these countries are currently closed,
in-line with government instructions.
-- The situation in Italy is now impacting the Group. Rotork has
three manufacturing sites in Italy, and a significant valve-maker
customer base in the country. Our sales people, application
engineers and contracts teams are working from home and remain in
close contact with their customers and their Rotork colleagues
globally. Our factories in Italy are currently all closed, in-line
with government guidance.
-- Our UK factories are now open having been temporarily closed
last week whilst we further strengthened our health and safety
procedures including new work patterns.
-- Our US factories are complying with local government
instructions meaning they are currently open as deemed essential
facilities but operating at reduced capacity. There have been some
additional delays in deliveries from our US factories due to
component shortages resulting from the cancellation of airfreight
from Europe.
Whilst we are planning to keep our sites open, we will not
hesitate to close them again if required or if we believe there is
any risk to our colleagues from them being on site.
Market environment
In light of uncertainty relating to COVID-19, and the near term
requirement to conserve cash, customers in several of our end
markets have announced high level plans to revisit their capital
and operational expenditure commitments. It is too early to fully
assess the impact of these. It is also too early to assess the
impact of lower hydrocarbon prices on our upstream oil & gas
customers. Water & wastewater customers in most regions expect
the sector to remain active. In the short term our customers' focus
is on fulfilling existing commitments, and we in turn are focused
on meeting those needs for both our products and services.
Notwithstanding the short term impact, Rotork products and services
remain pivotal to the safe and efficient running of critical
processes across a wide range of key end markets.
Mitigating actions, 2019 final dividend and balance sheet
Given the high level of uncertainty we currently face due to
COVID-19, we are taking steps to reduce the impact on our business.
Actions taken across the Group include a recruitment freeze,
postponing salary increases including for the Board, restricting
discretionary spending and drawing on government wage replacement
schemes (where these exist) and flexibility within the
workforce.
Our ambitious Growth Acceleration Programme continues to drive
cost benefits from procurement, site improvement, continuous
improvement/lean and organisation change. We are reviewing whether
there are cost benefits we could bring forward or investments we
could delay. We made strong progress on cash generation in 2019 and
this remains a major focus across the Group.
In order to ensure that Rotork can continue to act from a
position of strength, and recognising the exceptional set of
circumstances and the mitigating actions the business is taking,
the Board believes it is appropriate to withdraw the recommendation
to pay the final dividend of 3.9 pence per share, resulting in an
anticipated cash saving of GBP34m, and reassess the position later
in the calendar year when the situation is clearer.
This decision reflects the Board's confidence in the long-term
outlook for Rotork and its Growth Acceleration Programme.
Financial position
Rotork is a highly cash generative business with a robust
balance sheet. The Group had c. GBP110m of net cash as at 29 March
2020 and a GBP60m undrawn revolving committed facility which is
scheduled to mature on 26 August 2020. We are currently in advanced
discussions with the Group's banks to extend this facility and have
also applied to the UK Government's CCFF scheme.
Current trading and guidance
Whilst the activity level for the Group in January and February
was in-line with our expectations, we began to see an impact on
both orders and deliveries in March. Asia Pacific order intake,
however, was broadly in-line with expectations despite softness
early in the period. Given the unprecedented level of uncertainty,
it is not currently possible for the Group to provide guidance for
2020.
Kevin Hostetler, CEO, commented:
"Rotork's products and services are used in critical
applications such as energy, water, power and transportation and in
line with our corporate purpose we are committed to 'keeping the
world flowing for future generations'. Our first priority however
is the health and safety of our colleagues and their families, our
customers, our suppliers and all other stakeholders, and I would
like to recognise the extraordinary fortitude and determination of
all our people at this challenging time.
Whilst there is unprecedented uncertainty on how unfurling
events will directly impact our markets and our businesses, we
enter this period from a position of strength. Rotork has a great
workforce, strong market positions and substantial net cash
resources."
Enquiries:
Rotork plc Tel: +44 (0)1225 733 200
Kevin Hostetler, Chief Executive
Jonathan Davis, Finance Director
Andrew Carter, Investor Relations
Director
FTI Consulting Tel: + 44 (0)20 3727 1340
Nick Hasell / Susanne Yule
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END
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