Profits have fallen by two thirds at Sheffield Forgemasters, despite an increase in sales.
The company is blaming pressure on margins, prompted by the global economic downturn, for the fall from £7.7 million to £2.3 million, on turnover up from £104.8 million to £107.5 million for the year to the end of June.
Forgemasters was also hit by the unprecedented spell of prolonged cold weather in the winter of 2010, which prevented it from operating normally, because of health and safety considerations.
The Brightside Lane business says there are signs of improvement in the current financial year, with orders up by 14 per cent at £116 million and better margins, assisted by the buoyancy of the offshore market.
Chairman Tony Pedder said: “This year has seen a continuance of the global economic recession.
“For our industry, this has led to trading conditions becoming more competitive and margins being squeezed across a number of the markets.
“As a consequence, operating profit for the year reduced on increased turnover.”
Mr Pedder says general market conditions were challenging, but the bright spot has been the offshore sector where orders and sales achieved by Forgemasters’ project management subsidiary, Vulcan SFM Limited have been extremely encouraging.
Difficult market conditions have prompted Forgemasters to redouble efforts to containing costs and improve efficiencies while maintaining its capital investment programme. The company says it has introduced a lean manufacturing initiative and developed a supply chain programme with a key strategic partner which should eventually lead to more streamlined practices and increased productivity.”
Despite tough economic times, Forgemasters continued to invest, pumping £4.6 million into capital projects in the last financial year, compared with £6.9 million in the preceding year.
The group will also use money from the Government’s Regional Growth Fund to bolster further plans to enhance its manufacturing capabilities.
Forgemasters has increased spending on research and development from £0.9 million to £1.4 million.
It has also invested £400,000 in enhancing apprenticeships and training programmes and spent a further £300,000 on environmental improvements.