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Fox Marble expects sales upturn as production increases

Published: 01:43 23 Sep 2014 AEST

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Bad weather and a need to boost output from its portfolio of quarries in the Balkans hindered Fox Marble’s (LON:FOX) first half progress.

Interest in its range of marble had been significant, Fox said, but to secure large scale orders it has to be able guarantee a consistent supply of high quality materials.

Unusually poor weather in Kosovo since April had affected progress in the quarries and work on a new factory site.

Fox Marble expects sales to pick over the remainder of the year and through 2015 following the work it has been able to carry out.

Foundations have now been laid at a factory to cut and process marble slabs produced from its quarries, with the building expected to be finished at the end of 2014. Processing equipment will be installed shortly after.

Losses for the half year rose to €1.2mln (€1.07mln) on nominal revenues. Cash holdings were €6.9mln including the proceeds of a placing in August.

Chris Gilbert, Fox Marble’s chief executive, said: “As production increases we expect to make progress in selling our product to markets that have already responded well to the marble we are producing.

"Now that the quarries are fully operational this will give customers confidence that our products can be reliably supplied in sufficient volume, which should underpin new orders from customers that were reluctant to order from a quarry in the development phase.

“We have been able to expand our capacity in Sivec marble in Macedonia. Also we are now able to establish ourselves as the leading supplier of Illyric white marble from our quarries in Malesheva, Kosovo.

"We expect that these will form a material proportion of our sales in 2015."

Speaking to Proactive Investors, Gilbert acknowledged that blaming the weather is a convenient standby excuse for many companies, but in the case of Kosovo, the weather – including snows and flooding in April - really has been extraordinary or, to use Gilbert’s description, “unprecedented”.

“These things [the weather and disappointing sales] aren’t unrelated. We can’t have sales unless we’ve got production, and we can’t have production if we are delayed, or constrained in the quarries because of the ridiculous weather,” Gilbert said.

“Having said that, we’ve made very good progress in developing the production in our quarries,” Gilbert maintained.

That bodes well for the future, because response to the company’s product has been good. “If we didn’t have good quality blocks, we wouldn’t be in business. We’ve proved the model from beginning to end,” Gilbert said.

The second key development is the imminent completion of the group’s own factory for the cutting and processing of blocks, currently being erected on a 10 hectare site in Lipjan, close to Pristina airport.

That too has been delayed by bad weather but the shell is now going up and once the roof goes on, “it can rain all it likes,” Gilbert sardonically observed.

Handling the cutting and processing of the blocks it produces will put Fox Marble in control of its own destiny and will improve margins.

Shares were down 13.3% to 20.375p on the results, but Gilbert said he is confident shareholders can look forward to hearing about a steady stream of orders over the coming months.

Furthermore, as the company digs deeper into its quarries, the quality of the marble is improving.

“Surface marble is subject to the freeze/thaw conditions that you would expect, and you get cracks, and you get holes and water in it, and therefore the quality of the blocks as we go a little bit deeper becomes much more compact, with fewer defects and people like that kind of thing better,” Gilbert explained.

 

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