Laminates & Panels

Operating earnings, excluding unusual items, for Laminates & Panels were $70 million, up 46 percent on the $48 million in the previous period.

Laminex’s operating earnings were $60 million for the half year which included a $10 million gain on the sale of the Welshpool site in Western Australia, and $5 million in savings against previously established site closure provisions. This compares with earnings of $42 million before unusual items for the 6 months to December 2008.

Volumes were down in Australia and New Zealand, due to the slowdown in both economies, resulting in increased pricing competition. Cost savings were achieved from a significantly lower headcount, reduced resins costs, and stronger Australian and New Zealand currencies, which offset the impact of the lower volumes and pricing pressure.

The closure in July 2009 of the medium density fibreboard plant in Western Australia, and the particleboard facility in Auckland, have proceeded on time and in line with the plan. These restructurings, which have better aligned capacity with domestic demand, were achieved without impacting the supply or distribution of product to domestic customers.

Operating earnings before unusual items for Formica were $10 million, up 67 percent on the prior corresponding period.

In North America, the turn-around in performance was sustained with operating earnings before unusual items of $4 million compared with an operating loss in the prior period of $5 million. In the USA, both the residential and commercial sectors declined sharply with residential activity estimated to be down by around 30 percent, and commercial activity estimated to be down by closer to 40 percent on last year. As a result sales volumes of high pressure laminate were down by 15 percent on the prior year. Pricing remained relatively strong due to product mix and initiatives aimed at improving customer margins.

Operating performance improved significantly with a number of initiatives in the areas of logistics, warehousing and distribution all aimed at improving service while at the same time reducing costs. In addition, the two manufacturing facilities at Ohio in the USA and Quebec, Canada, both experienced significant improvements in labour productivity and material yields.

Formica’s operations in Europe continued to face tough industry conditions, particularly in the UK and Spain. Further restructuring was undertaken during the period to reduce costs and improve efficiencies, particularly in selling and administration costs. Total restructuring costs of $5 million were incurred during the period. As a consequence, an operating loss of $4 million was recorded compared with operating earnings before unusual items of $1 million in the prior period.

Both residential and commercial activity in the UK and Spain was significantly down on last year. Activity levels in the Nordic markets and Benelux countries were also down, although to a lesser extent. Overall sales volumes of high pressure laminate across Europe were down by 16 percent on last year, while price generally remained firm in most key markets.

Formica’s operations in Asia experienced stable market conditions overall, but with some variability across the region. Operating earnings were 6 percent higher at $17 million. Thailand, Singapore, Hong Kong and Taiwan, all remained firm throughout the period. Activity levels in China varied across the country with, demand generally stronger in Northern China, while activity in Southern China was down on last year. Overall volume of high pressure laminate sales across Asia was up slightly on last year. Prices remained firm in most markets but increased competitive pressure, particularly in China saw some weakening over the prior period.

Across all regions, major material input costs were in line with the prior corresponding period, with the exception of resin chemicals which were down on the same period last year.