“The weakness in some markets and in some geographies was offset by continued rising demand in marine newbuilding and protective coatings.”
It was another highly successful year, despite our first fall in revenue (6 percent overall) for a number of years. We experienced relatively healthy demand, particularly in China, the Middle East, India and other parts of Asia. This was accompanied by the twin benefits of new product introductions and lower raw material costs, which, coupled with internal cost-cutting, underpinned a strong set of results. The performance remained robust.
Overall sales revenue held steady during the first half of the year compared with the first half of 2008. The weakness in some markets and in some geographies was offset by continued rising demand in marine newbuilding and protective coatings. But in the second half, revenue fell by around 10 percent as the weakness in Europe and the Americas more than offset the growth elsewhere.
There was great uncertainty about the level of demand, the financial solidity of some customers, the direction of a number of volatile currencies and the movement in raw material prices – particularly metals such as copper and zinc. During this turbulence it was important to reduce our costs without reducing our customer service levels, or our ability to take advantage of some limited growth opportunities. Due to the deteriorating financial climate, we needed to reduce our operating working capital and generate cash. We had been improving our position gradually – but continuously – for a number of years, but a quantum change in performance was required. A thorough review of processes and procedures resulted in a number of breakthroughs in performance level and the achievement of the stretch targets. Operating working capital as a percentage of sales now stands at an historic low.
We saw some weakening in our yacht and aerospace markets in mid-2008 and, in response, took action to reduce our cost base during the following months. In September 2008, we activated the initial phase of our contingency plans for all market sectors, which were then implemented over a six-month period.
We completed the acquisition and integration of the Enviroline specialist protective coatings business in the US. This has increased our capability in the high performance tank linings market for oil and gas, chemical processing and the waste and water industries. We also purchased the remaining shares in our joint venture company in South Africa from Freeworld, and reached an agreement to acquire the assets of a privately run distributor in Canada. In addition, we secured the supply of specialist coatings for five of the main stadia being used for the 2010 soccer World Cup, and invested in a new antifouling development laboratory in Singapore. With regards to sustainability, we recorded significant improvements in our HSE metrics overall, along with reductions in VOC emissions and in waste.
Our groundbreaking Intersleek 900 foul release coating won the prestigious Lloyd’s List Global Award in the Clean Seas category and was featured in the Discovery Channel series Industrial Junkie. Our Aerospace Coatings business also introduced a novel peelable coating, Intergard 10220, for military use as a temporary camouflage coating with chemical agent absorbing properties. Although developed for the military, the product is likely to have a much wider impact on civil protection techniques and urban environmental projects in the future, ranging from protecting infrastructure such as stadia or government buildings against contamination, to cutting the cost of removing graffiti. We also have a very strong flow of new products in the pipeline.
Geo-mix revenue by destination