Darchem profits take off amid aerospace contract success

The burgeoning aerospace market has bolstered profits by 11% at Teesside's Darchem Engineering

Billy Meijer, managing director of Darchem Engineering
Billy Meijer, managing director of Darchem Engineering

A growing order book from the aerospace market helped to bolster sales at a Teesside engineering firm by 10.8% last year, new accounts have shown.

Stockton-based Darchem Engineering grew sales to £83.5m for the year ended October 25, 2013, from the previous period’s £75.3m, while operating profit also grew by 11.1% year-on-year, driven by increased volumes.

Established in Stillington almost 60 years ago, the firm provides products to a range of specialist and growth markets including nuclear, oil and gas as well as petrochemicals, the navy, marine and aerospace markets. Last December Billy Meijer was appointed managing director, after he spent eight years rising through the management ranks, and it is in the final phase of the construction of its £8m 75,000sqft factory on a brownfield site next to its facility.

Aerospace is a distinct growth market for the company, bolstered by a successful £20m order clinched in 2011 to supply thermal blankets for Boeing’s 737 aircraft, on-going work for Rolls Royce jet engines and work on the 550 seat Airbus A380.

And its latest annual accounts show revenues rose in 2013 as the commercial aerospace industry continued to increase production rates, went through refit programmes and introduced new products. The directors said it is also continuing to recognise revenues from the first of the new aircraft carriers being built for the Ministry of Defence.

The oil and gas market continued to operate at reasonable levels and it also won a large fabrication in the nuclear market.

The directors’ report accompanying the accounts said: “We continue to incur costs positioning ourselves to win fabrication work from the potential new build of power stations in the UK. Unfortunately, the timescales for this work continue to slip, however some progress has been made with an agreement reached on tariff and the announcement of Chinese investment.”

Shareholders’ funds increased by 62.9%, from £25.1m to £40.8m, primarily as a result of investing operating profits into the new £8m manufacturing facility rather than paying a dividend. The average number of employees rose from 814 to 865 as the result of increasing workloads from higher sales.

The directors said 2014 had begun with a busy forward order book, but warned that cuts within the Ministry of Defence could affect the business.

Opportunities for contracts, however, should be found as legislation changes on emission systems.

The report added: “We are entering 2014 with a strong order book and we would expect that turnover will exceed 2013 levels and that this will sustain profitability and employment levels.

“Defence cuts will have an impact as we have no large project to replace the current aircraft carrier contract.”

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