Morgan Advanced Materials Seeks High-Tech Purchases, CEO Says

Morgan Advanced Materials Plc (MGAM), whose insulation protects airplane black-boxes, will consider making acquisitions to gain technology, according to Chief Executive Officer Mark Robertshaw.

The company is looking to expand in aerospace and healthcare markets, Robertshaw said today. Shares of Morgan, whose ceramics are used in everything from body armor to medical instruments, gained as much as 2.4 percent in London trading after reporting better-than-estimated pretax profit.

“We have more of these types of businesses in North America, and it’s no coincidence that margins for the region are 16 percent compared with just under 13 percent for the group,” the CEO said in an interview.

Robertshaw is leading the company’s transformation as it focuses on higher-growth and more profitable areas to counter weaker demand for ceramics used in semiconductors. Windsor, England-based Morgan sold businesses with 20 million pounds in sales last year, and that tally could reach 50 million pounds in 2014 through additional divestments, split between electrical carbon and thermal-ceramic products, the CEO said.

The stock rose 1.1 percent to 315.8 pence as of 12:26 p.m. in London, giving the company a market value of 901.8 million pounds.

Medical Market

Healthcare and aerospace industries in emerging markets such as China and India have “good” growth potential in the future as these economies become more sophisticated, the CEO said. Morgan makes ceramics used in medical instrumentation and implantable devices. China contributes about 9 percent to group revenue.

Boeing Co., the world’s largest planemaker, and Airbus Group NV, the No. 2, have pushed output to record levels helping lift sales at their suppliers.

The U.K. company, previously known as Morgan Crucible, is also poised to benefit from expansion in the U.S. petrochemical industry as manufacturers take advantage of shale gas and cheaper raw materials, the CEO said. Morgan has about 40 percent of the North American market for high-temperature fibers, used for heat insulation in ethylene plants and fire-protection products.

After a “pretty subdued” 2013, the last couple of weeks has seen an uptick in enquiries converting into contract wins, Robertshaw said. Morgan won a $5 million contract to supply a petrochemical project in India at the end of last year, and another one of a similar amount in North America.

“We’re feeling a bit more optimistic in 2014,” he said.

Middle East

A new insulating-fiber plant being built in the Middle East will bring Morgan closer to the “attractive” petrochemical and aluminum markets, while also giving it access to low-cost energy supplies, Robertshaw said.

Bolt-on acquisitions will supplement what will be “predominantly” organic growth, Robertshaw said. Morgan will spend as much as 6 million pounds on restructuring this year, down from 10.5 million pounds last year, he said.

The company was seen in 2012 as potentially a takeover target because of its cheap valuation and after 3M Co. agreed to buy rival Ceradyne Inc.

“The operational performance of the business stands up incredibly well versus all of our direct competition,” Robertshaw said, when asked whether the company had been approached by potential buyers. “That’s the best possible defense.”

To contact the reporter on this story: Morgane Lapeyre in London at mlapeyre@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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