Turbo-charged recovery at Chamberlin Chamberlin is a group of foundry and engineering businesses operating from five sites. Recent results showed an improvement in performance as the company returned to profitability. Two recent contract wins highlight the opportunity that exists for Chamberlin’s automotive business. The company runs foundries in Scunthorpe, Leicester and Walsall, while the two engineering businesses, Exidor and Petrel, are based in Cannock and Birmingham respectively. The Walsall foundry manufactures light castings and components, principally for automotive and hydraulic applications. This business currently delivers around half of group sales. It is prospects for these operations that are key to the investment case.
cost reductions in the first half saw the company move to an underlying profit The Leicester business produces medium castings for end use in construction and mining equipment, power generation and defence. The Scunthorpe site produces heavy castings for applications such as railways and construction. Past customers include Crossrail, where heavy castings were used to support some of the more complex areas of tunnelling. Exidor manufactures escape door equipment (such as the bar you would push to open a door) and door closing mechanisms. Petrel is a lighting and control business, with products designed for hazardous environments. The current Chief Executive, Kevin Nolan, has been in place for just over one year. Finance Director David 6
Roberts assumed his role in July 2013. Half-year results from the company, issued in November, showed that this new team is making significant progress. Huge cost reductions in the first half saw the company move to an underlying profit of £0.4m from a loss of £0.6m in the previous year. While problems remain at the Scunthorpe site, a return to profitability is expected by Q4. Significant challenges remain at Leicester however, with aged infrastructure holding back attempts at margin improvement. New contract wins for the Walsall foundry point to a more prosperous future for the company. In October, Chamberlin announced a €6.7m, fouryear contract to supply turbo-charger parts for diesel passenger cars. This contract helped underpin full-year forecasts. Chamberlin topped this in November with the announcement of an eight-year automotive parts contract worth €26.0m, again won by the Walsall operations. Management believe that it is the broadening of the engineering skill base in the Walsall business that helped Chamberlin win this large contract.
In the longer term, the prospect of increased proliferation of turbo-charged petrol engines constitutes a companychanging possibility.
new team is making significant progress While there is some debt in the business, Chamberlin has significant headroom to its facilities. The current market rating suggests that there is not much more to come from the company’s recovery. To me at least, the contract wins and recent results suggest that the turnout may be more positive than the share price suggests. Chamberlin (LON:CMH) FOR Modestly priced v. forecasts Petrol opportunity could be bonanza AGAINST Leicester division holding company back Current structure sub-optimal Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£8m 98p:106p 10.6 0 65p:112p
Published on Dec 8, 2014