Performance Technical Textiles Division

Our Performance Technical Textiles division (comprising Colbond, Bonar Technical Fabrics, Bonar Yarns and Yihua Bonar) supplies products such as geosynthetics, artificial grass yarns, carpet tile backing, agrotextiles and construction fibres to the civil engineering, flooring, leisure, industrial and construction sectors.

2011

2010

Revenue

£269.3m

£239.2m

Operating profit*

£23.1m

£19.1m

Operating margin*

8.6%

8.0%

* Before amortisation and non-recurring items.

Sales were 13% higher than last year and were not materially affected by changes in foreign exchange rates. Operating margins increased 60bps to 8.6%. The year on year margin progression was stronger in the second half following the restructuring of the Yarns business and the success in securing higher selling prices to offset raw material inflation. Raw material costs increased significantly in the first half of the year but in the second half of the year began to stabilise, albeit at a high level.

Our civil engineering business grew strongly again. Sales increased by 20% driven by robust growth and market share gain in heartland markets and continued progress in emerging markets. Heartland sales growth benefited from an undemanding first quarter comparative which had been affected by adverse weather in 2010. Sales growth continued throughout the year with good performances in our core German, French, Benelux and Scandinavian regions. Activities in tunnelling projects and good progress made in structural fibres for concrete reinforcement were highlights. In emerging markets the Middle East grew strongly in advance of commissioning our joint venture manufacturing plant in Saudi Arabia. China also increased significantly albeit from a small base.

Sales in our Flooring business also grew strongly again, advancing 18% this year. In Europe and the USA sales continue to benefit from positive substitution effects which assisted our speciality tile backings as they take a larger share of the total floor coverings market. The launch of new products to sustain product leadership in this segment continues to augment performance and our focus on Asia led to a 31% sales increase in the region. The transport sector also experienced robust sales growth. Sales in Europe were strong with USA activity somewhat slower. We continue to benefit from our leading position in the premium automotive brands and their success in penetrating Asian markets. Sales of our traditional building products posted solid growth in lacklustre markets which have yet to materially recover in either the commercial or residential sectors. The development of our ‘green’ product range to address this growing trend was pleasing. Growth returned to our agrotextiles business, driven by an improved product range and development of sales into new territories; however, activity levels in the important Dutch market have yet to recover. The sales performance of our artificial grass yarn business was disappointing. Markets, as anticipated, were weaker than last year due to public funding constraints reducing demand in the dominant European and US markets. Product availability during our Yarns restructuring project was also a contributory factor.

The division also progressed well towards the Group's two internal growth initiatives. Sales outside of our heartland increased to 20.2% (2010: 19.6%) and sales from recently developed products advanced to 15.5% (2010: 14.2%). In order to accelerate progress in establishing a global business a number of projects are being undertaken to assess entry options in Asia and Latin America. There were important contributions to the improvement in sales from new products across all sectors including innovations in new structural fibres in concrete reinforcement, improved yarns for sports and landscaping applications, the development of “Face to Face”, a unique US tile backing product, and new flame retardant products for industrial greenhouses. The new product pipeline is very healthy and focused on products which deliver improved sustainability, functionality and efficiency features.

The Yarns restructuring project was successfully completed on time, on budget, delivered the anticipated cost savings and returned the Yarns business to profitability. The closure of the Ostend site during the year now enables the business to operate from a much lower manufacturing cost base. In parallel, investments are being made to enhance the product range and to pursue our strategy of being the yarn supplier of choice to the independent grass tufter. In 2012 we expect to make further progress in both our product offering and manufacturing efficiencies.

Investment projects to expand capacities for flooring products in China and Europe were successfully commissioned during the year. These will be augmented in 2012 with the upgrade and expansion of capacity in the USA. Our joint venture in Saudi Arabia is progressing well and we should be manufacturing in this important growth region before the end of the 2012. The building is under construction and key equipment items have been ordered.

There has been an enhanced focus across the Group on improving our health and safety performance with the aim of being ‘best in class’ and having a ‘zero tolerance’ approach to any workplace accidents. The division has made good progress this year significantly reducing its lost time accident rate and successfully progressing site based improvement programs. This progress will continue to be underpinned by committed and visible leadership in this area.

The division is well positioned to grow, with innovative products in its attractive heartland markets and is accelerating its exposure to emerging markets which have significant growth opportunities for its existing products and technologies.

Solutions

Concrete mattresses stabilise the banks of the Danube

Solutions

Bonar Technical Fabrics supplied a 1.5km concrete mattress as a solution to serious riverbank erosion along a remote section of the Danube in Ukraine. The mattress consists of upper and lower layers of woven fabric which are fixed together, laid in place and pumped full of concrete. It is easy to transport, easy to install and reinforces the slopes both above and below the waterline.

Revenue

£269.3m
(2010: £239.2m)

Operating profit*

£23.1m
(2010: £19.1m)

Operating margin*

8.6%
(2010: 8.0%)

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