Chief executive officer (CEO) Gordon Banham cites ‘unprecedented turmoil in the European coke market’ as a reason for closing the facility. Located in Royston, near Barnsley, the site at Monkton has converted coal at high temperatures into compounds used in steel, glass and detergents for the best part of 130 years. Banham says the outcome is regrettable for employees and other stakeholders.
The site’s future was already known to be under threat by investors. In an October 27 missive, a ‘consultation period’ was announced with the running Play of the Week stating the division’s future was being considered in light of weakening customer demand and falling prices.
The unit will be ‘managed to a break-even position’ this year, against a budgeted operating profit target of £2 million. Banham says underlying performance is in line with expectations in the first six months of the year. However he highlights downside risks to profitability including declining earnings visibility, slower than expected sales of thermal coal and financial problems at one of its customers, Hatfield.
With a 'hold' rating on Hargreaves, Jeffries says the unwinding of working capital will mean Hargreaves should be debt free by May 2015, yet the investment bank cuts its price target from 750p to 660p.