Smiths

John Crane Mechanical Seals, the largest operating business, benefited as high energy prices stimulated increases in capital expenditure in the oil and gas industry. John Crane is the world leader in the design, manufacture and servicing of complex mechanical seals for use in many industries, including automotive, chemical, oil and gas, power and energy, pulp and paper, and water. The business won a significant share of the year's new contracts to supply major oil, gas and petrochemical projects. The biggest contracts include orders to supply seals for a Lyondell project in The Netherlands and to Iran's Buali Sina Aromatics plant. Demand was also strong in the pulp and paper industry, although total demand for seals was damaged by weaker activity in the industrial and automotive sectors.

John Crane introduced Performance Plus, a major initiative designed to strengthen and transform its relationship with key customers. Through Performance Plus, facilities including oil platforms and petrochemical plants sign long-term, fee-based service contracts with a consortium of companies led by John Crane. Such contracts, which have already been signed with companies including Shell and BP Amoco, enhance the operating performance of a facility by improving the performance of individual components.

Polymer Sealing Solutions expanded sales, although growth was restricted by falling demand in the North American automotive market, and the industrial markets of Europe. The Polymer business designs and manufactures sealing solutions in rubber and plastic materials for the aerospace, automotive and industrial markets. There were major contract wins in all three of these markets, with clients including Baxter Medical, Caterpillar, Honeywell, Jaguar, TRW Aeronautical Systems in France (which awarded a three-year sole source supply agreement), and TRW Automotive (which supplies Fiat, Nissan and Peugeot).

Both John Crane Mechanical Seals and Polymer Sealing Solutions continued to invest strongly in new product development. John Crane's new 4610 mechanical seal and Polymer's high temperature Isolast seals took the division into attractive new market segments. The businesses also stepped up their e-commerce activities. A global e-procurement initiative was launched, while on-line trading with customers increased.

John Crane-Lips, which supplies marine propulsion systems to the worldwide merchant and naval marine markets, enjoyed good sales growth. It won contracts with major Asia-Pacific shipyards including Hyundai Mipo and was awarded new contracts by several navies: the business now supplies 73 navies throughout the world.

The outlook for this business is encouraging following the October 2000 formation of an alliance with Wärtsilä, the Finnish marine diesel company. The two companies supply entire marine power-propulsion systems, from engine to propeller. This meets the requirements of owners and shipyards, which are increasingly delegating responsibility for power-propulsion systems to single suppliers. Since the alliance was signed, the combined Wärtsilä/John Crane-Lips power-propulsion systems have been ordered for some 50 new ships.

Margin enhancement

The division has launched a series of major initiatives to improve profitability through a combination of reorganisation and more targeted sales and marketing. Restructuring programmes will lead to total annual savings of around £30m, while sales initiatives are being focused on the most profitable and fastest-growing market segments.

In John Crane, restructuring has included moving the manufacture of labour-intensive components from Western Europe to the Czech Republic, and automotive and other high-volume components from the US to Mexico. Costs were also reduced by relocating a good proportion of drawing office capability from Europe to India.

In Polymer Europe, restructuring initiatives were focused on consolidating product lines, introducing more lean manufacturing, and outsourcing non-core products. In Polymer North America, the unprofitable pipe seal manufacturing plant was closed and overheads were reduced.

Resilient sales

With firm order books, sales should continue to hold up despite an unsettled economic environment. Active steps taken to restructure and refocus Sealing Solutions will increase the profitability of the business over the coming year.



		The US Polymer business Forsheda Palmer Chenard provides complete assemblies for regulating aircraft cabin pressure. Its customers are the first-tier suppliers to the aerospace industry.



		John Crane's Performance Plus business is building strategic alliances with key customers by taking long-term responsibility for product supply, performance and maintenance in oil, gas and other processing plants world-wide.



		The 4610 cartridge seal is the result of John Crane's continuous product development programme. This advanced seal reduces maintenance and running costs for customers, replacing more costly and less efficient products used on pumps and rotating shaft equipment.



		Isolast elastomer seals that withstand temperatures up to 325ºC have wide application in chemical processing, oil and gas, and semiconductor industries. Investment in precision production caters for exceptionally short lead times and high raw material costs.