Avon's automotive results improving as Turkish plant nears production

By Liz White, ERJ staff

Despite a tough global market in the automotive market, UK-headquartered group Avon Rubber plc says its automotive business is "performing well," while the group continues to see the protection business as "one of great opportunity," said Avon's chairman, Trevor Bonner.

Energy and raw material costs have continued to rise and Avon is moving to reduce its other overheads, Bonner added, in a 19 Jan statement before the group's annual general meeting.

In its automotive operations, Bonner said, Avon's strategy is to strive for the best manufacturing systems, and also to move more manufacturing to lower-labour-cost areas. Over the last year, the group has closed its Calaf, Spain, plant, and built a new hose factory in Turkey. Bonner pointed out that Avon is about to move equipment into this new facility and expects to start production early in 2006.

Avon is also about to finish a "major strategic review" of its Engineered Products business, Bonner said, and the group expects to begin implementing a revised strategy over the next few months.

In its Protection business, Avon is starting production of the new US military respirator (now called the M50) and "expects to receive final European approvals for our newly developed Rapid Escape Hood this month … moving straight into production with sales starting as early as February," Bonner commented.

Subject to these approvals, Avon will be the preferred supplier to the UK emergency services, he added, commenting that all the new government contracts are seeing some delays, which in turn will delay growth in Avon's Protection business in the first half.

Bonner pointed to "consistently high" sales of dairy rubberware in North America, contrasting with some decline in sales in Europe, causing Avon to reexamine the best routes to market. "We believe, with our product range and our technical expertise, the dairy

business has real potential to grow into a strong international business," Bonner said.

In the automotive sector, Avon said the North America market stayed fairly robust with total vehicles sales in 2005 marginally higher than in 2004. Nevertheless, five of the top six manufacturers saw volume reductions, as the 'new domestic' car manufacturers continue to take market share from the 'big three.' Avon's North American automotive sales in its first quarter year were similar to last year, with demand for its GREENbar product for the small engine market continuing to be strong.

In Europe, Avon said its new global Automotive structure has started to pay off in winning new orders for future years.