MARKET REPORT: Tools producer downs profits

By KARL WEST
Updated:


Mid-cap metal bashers were bludgeoned following a shock profits warning from industrial tools producer Charter.

The company warned full-year results would miss expectations by a country mile if the weak trading experienced in May continues. Charter's welding and cutting tool division ESAB said it had seen no evidence of customers starting to place orders again or of any upturn in demand from the clapped out auto industry.

The one bright spot is that its gas-handling equipment division Howden continues to trade in line with forecasts.

All the latest from the London Stock Exchange

All the latest from the London Stock Exchange

As the financial sector implosion reverberates through the rest of the economy, manufacturers and traditional industries are now beginning to feel the pain.

And the future remains shrouded in uncertainty. Charter noted grimly: 'ESAB continues to expect falling shipbuilding activity later in the year and there also remains the possibility that some customers will take extended summer shutdowns.'

The gloomy outlook stunned investors, who dumped the stock in search of a safer punt. It dragged Charter's shares down 87¾p, or 16 per cent, to 476¼p, as it finished bottom of the second liners.

The devastation pushed seven engineering firms into the bottom 20 of the second string, FTSE 250 index. James Fisher & Son fell 18p at 449p, Spectris was 16½p lower at 523p, Bodycote lost 4p at 147¼p, Ultra Electronics was 23p weaker at 1,100p, Rotork fell 24p at 865½p, and Morgan Crucible shed 2¾p at 98p.

At the other end of the spectrum, minerals groups rushed to the Footsie summit as the oil price hit a seven-month high of $71 and the price of copper surged.

Vedanta Resources led the charge, up 139p at 1770p, followed by Kazakh mining group ENRC, 54½p stronger at 730p. In an update, ENRC said a weaker dollar may temporarily lift the price of its most important product, ferrochrome.

Other miners riding the wave of optimism included Xstrata, 50p better at 771½p, Rio Tinto gained 196p at 3,148p, Antofagasta rose 30p at 679p, Fresnillo was 17p to the good at 680p and BHP Billiton up 39p at 1,534p.

Britain's two oil majors also got a lift on the back of the surge in the oil price. Shell gained 13p at 1,684p, while BP was 3¼p firmer at 533p.

The return of the big guns to the top of the blue-chip risers helped to push the FTSE 100 up 31.96 points to close the session at 4,436.75.

The resurgent oil price will not please everyone. Transport groups, particularly airlines, have endured a torrid few years as they have been buffeted by record fuel costs and falling passenger demand. None more so than British Airways, which recently reported a record annual loss of £401million after seeing its fuel bill rise by £1billion to top £3billion.

To make matters worse, BA's high-paying 'premium' passengers are deserting it, as even business travellers trade down to conserve cash.

Andrew Fitchie, analyst at Collins Stewart, reckons premium volumes are down 15 per cent to 20 per cent. He believes that at the current run rate, revenues at BA are set to fall by £1billion this year and that the airline could notch up an operating loss of more than £400million - double the current estimate. BA gave up some early gains to close the session unchanged at 145.6p.

The profit-takers weighed in on Heritage Oil, the fast expanding Iraqi driller tipped to join the FTSE 100 later this year.

After a nose-bleed inducing rise - the share price has more than tripled since the start of the year - the stock went into reverse yesterday as it tumbled 68½p to 534½p.

There are still fans out there, although there was some surprise among the ranks of oil analysts over Heritage's choice of merger partner, revealed to a stunned market on Tuesday.

It is teaming up with Turkey's Genel Enerji in a deal the create the largest prospector in Iraqi Kurdhistan. Credit Suisse lifted its share price target to a bullish 675p a share from 471p, but says the Genel tie up still might not solve long-term funding worries of Heritage.

Private jet hire firm Air Partners encountered more turbulence after broker Charles Stanley said it expected profits to be severely affected by the recession.

The shares edged 5p lower to 490p, and have tumbled almost 13 per cent since company's rather dour and down-beat trading statement last week.

  • Waste recycling group Straight, up 7½p at 63½p, yesterday signed a contract to supply 150,000 households in Hertfordshire with food waste containers. It should encourage householders to separate food waste prior to collection. The government this week revealed its Waste & Resources Action Programme, which backs kerbside waste separation as a preferred approach to recycling household waste. Good news for Straight.

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