Engineering firms hit by trade trouble

It has been a bad week for Northern Ireland's leading engineering companies, FG Wilson and Mackie International, one of which is laying off 400 people and the other of which is on the point of going into receivership.

Although they trade in different sectors, both have been affected by two common factors - the strength of sterling and the economic difficulties in the Far East. Such factors, especially when combined, are having a devastating effect on the engineering sector.

FG Wilson is Europe's largest manufacturer of diesel generators, most of which are sold to developing Third World countries. One of its key markets is south-east Asia, where there has been a considerable slowdown in local economies. The strength of sterling also means that the company's products are becoming less competitive in the increasingly cut-throat global markets. Corrective action will mean laying off 400 people, or around 20 per cent of its workforce, from its plants in Larne and north and west Belfast.

Mackie, which employs 300 people, faces a similar scenario. The group, one of Northern Ireland's best-known engineering firms, makes machinery for the textile industry and has had a chequered history in recent years. The current chief executive, Mr Sul Sahota, took over following results which showed that the company had lost £437,000 sterling (€619,000) in 1996, compared to a profit of £3.3 million (€4.68 million) in 1995. Sales were down almost £18 million.

The company's shares were suspended in April 1997, prior to a warning that it might have to restate its published results. In June 1997, the results were restated to a £7.2 million loss and there was a £5.2 million rights issue at 20p per share (the shares had been suspended at 113.5p). Full year results for 1997 showed that the picture was still grim, with losses of £11.6 million on sales of £14.5 million. Restructuring continued, redundancies were implemented and the business was consolidated into one premises on Belfast's Springfield Road. The company had also bought Rice, a foundry business in Britain, for £1.1 million, to take advantage of its order book.

Analysts said yesterday that, although the company had the most modern equipment, it was in a notoriously difficult sector - textiles - and did not have enough orders. Mr Sahota's attempt to buy Shield in Britain was an effort to buy orders to fill the Northern Ireland plant's capacity. Reports say that Mackie had the £10 million Shield deal virtually in its grasp before talks broke down.

The odds now are on a management buyout, probably led by Mr Sahota. Analysts say the plant will have little attraction for outside buyers, and only someone with Mr Sahota's experience of Mackie will know what can be achieved.