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Cookson Announces Closure of Vesuvius' Buffalo Location; Plans Three Expansions in China (posted 10/3/07)

October 3, 2007
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Cookson Group plc recently announced the closure of Vesuvius’ plant in Buffalo, N.Y., and three new expansion projects in China, which the company expects will combine to enhance the prospects of Vesuvius, Cookson’s Ceramics division. The closure of the Buffalo plant is part of the company’s program of restructuring in maturing markets. Negotiations with the relevant unions on the closure terms were recently concluded, and there will be a phased run-down of activity through 2008 with final closure by year end.

The facility, which manufactures isostatically-pressed foundry crucibles, has relatively high labor costs. Production is to be relocated to Vesuvius’ existing facility in Monterrey, Mexico. The closure, which will result in cash-related rationalization costs of £5 million (~ $10 million) in 2007, is expected to generate cost savings of £1 million (~ $2 million) per year from the beginning of 2009. These rationalization costs are included within the expected £10 million (~ $20 million) total rationalization charge for 2007 for Cookson as a whole.

Since 2003, Vesuvius has operated a 50/50 joint venture with WISCO, China’s fourth largest steel producer, producing slide-gate refractories. This operation had revenue of £6 million (~ $12 million) in 2006. Based on this success, a further 50/50 joint venture between the parties has been formed for the production of VISO™, Vesuvius’ range of isostatically-pressed alumina-carbon products used to control and protect the flow of molten metal in the continuous casting steelmaking process.

The new joint venture, to be managed by Vesuvius, will involve the construction of a new facility in Wuhan, Hubei Province. Around half of the production will be dedicated to supplying VISO products to satisfy the anticipated expansion of WISCO’s own steel-making capacity, with the remainder available to Vesuvius to sell to other Chinese steel producers. Vesuvius’ share of the investment in the new facility will be £2 million (~ $4 million), and the facility is expected to be completed by the second quarter of 2008.

Vesuvius recently signed a letter of intent with Angang for the formation of a 50/50 joint venture to supply various refractory products to Angang. Following the completion of the proposed merger with Benxi Iron & Steel, Angang will be China’s largest steel producer and has plans to significantly increase its steel production over the next five years from the current level of 15 million tons per year to between 40 and 50 million tons. The joint venture, to be managed by Vesuvius, will supply Angang with a significant proportion of its total magnesia-carbon brick, magnesia-based monolithics and VISO requirements from these three new facilities. Vesuvius’ share of the investment in the three new facilities, to be built in Liaoning Province, will be £7 million (~ $14 million), with completion expected by the end of 2008.

Cookson has completed two new Solar Crucible™ facilities so far in 2007, in China (Wei Ting, Jiangsu Province) and Poland (Skawina), both of which are expected to be at full capacity by the first quarter of 2008. In August 2007, it was announced that a further new facility is to be built in Moravia, Czech Republic, for completion by the first quarter of 2008. Each of these facilities manufacture Solar Crucibles used in the manufacture of photovoltaic (solar) cells.

In response to continued strong growth in the solar power industry, an additional facility (“Sunrise”) is to be constructed in Jiangsu Province, close to Vesuvius’ existing Solar Crucible facility in Wei Ting, and capable of producing around 40,000 Solar Crucibles annually. The total investment in the new facility will be just over £11 million (~ $22 million) and it is expected to be completed by the end of 2008. All production from this facility will be supplied, under a five year agreement, to a new £245 million (~ $501 million) solar cell factory to be constructed in Jiangsu Province by Glory Silicon Energy (GSE). GSE’s factory will represent one of the largest facilities of its type in the world, capable of producing solar cells generating 1500 megawatts of electricity per year.

Additional information is available at www.cooksongroup.co.uk.

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