The ceramics division, which includes Wedgwood and Rosenthal, has turned the corner, and that is good news for the Waterford Wedgwood group. The division had been a drain. After only marginal sales growth in 1999, ceramics recorded growth in sales of 18 per cent to €202.7 million in the first half of 2000; that's the same growth achieved by the crystal side.
In 1997, ceramics' return on sales amounted to 9.2 per cent. It fell to 6.1 per cent in 1998 and to a mere 3.8 per cent last year. The group does not publish divisional profits at the interim stage, so it is not possible to deduce the return in the first half. However, considering the buoyancy of the sales - Wedgwood's growth was 22 per cent - the return must be moving upwards. Also, the acquisition of German porcelain group, Hutschenreuther, is bound to be a big help in getting a better return. The payment of €10.2 million for Hutschenreuther, looks like a very good deal. It represents just 20 per cent of 1999 sales of €50 million, it is expected to be earnings enhancing from the outset , and importantly, the group expects the outlay - including working capital and investments in integration - to be paid back in three years.
Waterford Wedgwood still has a target of a 15 per cent return on sales. Hutschenreuther has recorded over this target so when it is integrated into ceramics, it should help the overall return. The manufacturing volumes of the new acquisition are expected to be integrated into Rosenthal within 2 years; this will be helped by German government aid.
Rosenthal only managed to grow sales by 5 per cent in the first half due to a continuing tough German market but its expansion into the US is proving productive where sales rose by 29 per cent. Wedgwood itself is benefiting from the recovery in the Asian and Japanese markets. Mr Brian Patterson, chief executive of Wedgwood, expressed optimism about the future. This growth will come from existing and new products. One new product, designed by Nick Munro, is a dog's food bowl which retails for £90 sterling (€117.24). He noted that Elton John had bought 12 for his 12 dogs.
Waterford Wedgwood having sorted out the high cost problems in Waterford Crystal, has proved itself as a vibrant marketing-focused group. That is amply demonstrated with its product renewal programme, the use of well-known designers and expansion into the broadly-based giftware business.
It already has a limited Internet site for Wedgwood, which has sold produce in the US, but is now looking at setting up a full Internet site with a possible introduction at the end of the second half of 2001. Mr Redmond O'Donoghue, chief executive of Waterford Crystal, said that there were a lot of potential problems to overcome but such a site would not be established until all technical difficulties have been overcome.
