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Profits down at Brownhills foundry firm Castings after production problems at machining arm

Castings, the Brownhills-based foundry and engineering group, has seen sales rise but profits fall after suffering production problems at its machining business.

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The Castings headquarters on Lichfield Road in Brownhills

It has also been hit by the rising price of steel scrap and other raw materials, which have had to be passed on to customers.

In the first half of the company's year, to the end of September, sales were £61.7 million, up £3.8m on the same period a year ago. But profits were down to £5.91m from £7.08m a year ago.

Based on Lichfield Road, Castings employs around 400 people in Brownhills, which is also the site of its CNC Speedwell machining business, and at its William Lee foundry in Yorkshire.

The company said customer demand at its foundry businesses remained steady and it benefited from high prices as it shifts towards more machined parts. It also spent £3.3m on automation in the business. The foundry arm also increased its profits by 10.5 per cent to £6.9m as productivity improved across both sites, despite disruption in supply from the machining business.

CNC Speedwell racked up a £1m loss, compared to an £800,000 profit in the same six months a year ago, as external revenue fell 10.9% to £3.3 million.

In a report from company chairman Brian Cooke he said: "The business has experienced significant issues, including production problems, during the period which have impacted both the machining and foundry operations.

"Following a detailed review of the operation, additional short-term costs have been identified and included in the result for the period. The main areas impacted are stock obsolescence and the recoverability of tooling costs which, when taken with the director severance cost, have reduced group profits by £1 million."

CNC Speedwell's MD Mark Lewis resigned in October.

Looking ahead Mr Cooke said: "Demand from our commercial vehicle customer base remains steady and therefore the full year result for the foundry operations is anticipated to be in line with market expectations.

"The changes being made at the machining operation are not expected to have any meaningful impact on profitability during the remainder of the year. However, from the start of 2018/19 we anticipate the machining operation to return to an acceptable level of profitability."

He added: "The ongoing Brexit negotiations continue to cause uncertainty regarding the near-term outlook and prospects for the UK economy. It is still too early to quantify or determine with certainty the impact on the group"