The industrial materials group, which supplies ceramics to the steel, foundry and solar energy industries, saw a 45% rise in pre-tax profits to £99.1m for the six months to 30 June. Revenues were up 26% to £1,058m. The group will pay an interim dividend of 5.85p, up 38% on last year.
The group bough Foseco last year, which reorientated its business towards more lucrative infrastructure spending rather than the most cyclical electronics and jewellery businesses. Cookson now generates around 75% of its profits from this source. There is increased global demand for infrastructure, particularly in emerging markets. The group continues to increase capacity in China, Poland, the Czech Republic, India and Mexico.
The group expects strong growth in the global production of steel, foundry castings and solar panels to support its business in the second half. Revenues from its electronics division are likely to be flat, while its precious metals group should remain profitable despite weak jewellery markets.
The shares rose 17.5p to 617.5p on the news. They slumped towards the end of 2007 and then saw some recovery in early 2008, only to move back down again over the past month. They now trade on around 8x earnings. The group has relatively low gearing and is exposed to some strong growth markets. It is difficult to see why it should merit such a low rating, unless the market still sees it as an old-fashioned cyclical stock. Either way, it looks cheap at these levels.