Morgan Crucible shares fell by a quarter on Monday after the advanced materials group warned about the impact of the weak dollar and said growth slowed in the second half of the year.

Operating profits at the company, a maker of carbon and ceramic components for products ranging from military body armour and trains to medical instruments, are still forecast to be ahead of last year.

Mark Robertshaw, chief executive, blamed the share price fall on broader market concerns about the global economy.

He said the board had predicted sales growth would average between 4 and 5 per cent a year. This year it will come in at more than 5 per cent, though this represents a sharp slowdown in the second half after first-half growth of 10 per cent.

Mr Robertshaw was also cautious about the outlook for 2008 because his company’s markets provided only two to three months’ visibility. But for each note of caution in the trading statement there were two positives, he argued. He added that Morgan Crucible would probably make one or more acquisitions in the next six to 12 months.

Scott Cagehin, an analyst at Numis, said Morgan Crucible was an early cycle indicator and this could exaggerate investor reaction.

Sales growth for the year will be held back by £30m and underlying operating profits by £6m by dollar weakness. Some 45 per cent of sales are in the US.

The carbon business suffered in the third quarter from production losses at a US customer, which reduced turnover by £5m, while a strike in India will have an impact on profits. Thermal ceramics’ second-half rate
of growth will slow after a high level of shipments in June.

Operating profits are now expected to be about £85m, below the consensus forecast of £88m. Operating profit margins for the year are forecast to rise to about 12 per cent.

The shares dropped 61¼p to 200¼p.

FT Comment

●Morgan Crucible shares could have done with some body armour on Monday, but the sell-off appears overdone. A fall of 10 per cent might have been justified but the shares do not warrant a 34 per cent discount to UK engineering peers. Iinvestors want assurances but the low forward visibility of Morgan Crucible’s markets prevents it making full 2008 forecasts. Earnings expectations for 2008 have been trimmed. But the company has a spread of geographical markets and products, and appetite and resources for acquisitions.

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