Overview
Materials Analysis provides a wide range of analytical instrumentation to the metals and mining, pharmaceutical and life sciences, and semiconductor and electronics industries. Our products help customers to improve accuracy and speed of materials analysis in the laboratory and in process manufacturing applications. The operating companies in this segment are Malvern Instruments, PANalytical and Particle Measuring Systems.

Market drivers
In addition to the need to improve process manufacturing productivity, a key factor in the demand for this segment’s products is the requirement for certification to comply with regulation, for example for quality control in the manufacture of drugs in the pharmaceutical industry and detection of materials such as lead and cadmium to meet legislation on the use of hazardous substances. Another driver for materials analysis instrumentation is the growth in new molecular and nano-material sciences, where our equipment is used to analyse and characterise materials and structures in the development of new products.

Segment performance
Sales in Materials Analysis, at £248.1 million, were 2% lower than in the prior year (down 11% at constant currencies). Operating profit declined by £5.6 million to £31.9 million. Operating margins declined from 14.8% to 12.9%. Around half of the decline in operating margins relates to the effects of foreign exchange and the remainder relates to the cost of restructuring.

Key market demand in this segment in 2009 came from the academic sector and from global infrastructure projects. Sales to academic research institutions were strong, partially offsetting weaker demand from industrial customers. Furthermore, government economic stimulus packages in a number of countries, notably China and India, to support infrastructure projects provided demand for equipment from Malvern and PANalytical in construction-related sectors such as cement, steel and asphalt for roads.

Requirements to improve food and drug quality and safety, particularly in China, provided good opportunities for PANalytical, whilst Particle Measuring Systems is also experiencing growing interest in its contamination monitoring solutions from food and pharmaceutical companies.

This segment has a strategic focus on the pharmaceutical sector. In October, Malvern signed a collaboration agreement with Kaiser Optical Systems, based in North America, a leading supplier of Raman analysers and components for spectroscopy. Malvern will integrate Kaiser’s analysers and probes into its Morphologi platform, with the initial focus on pharmaceutical, life sciences and forensic applications. Particle Measuring Systems saw good demand from vaccine manufacturers, who are increasing capacity to address the growing global demand for immunisation, and their investment in a direct sales channel in China is proving successful, with a number of pharmaceutical facility monitoring systems installed during the year. In the second half of the year, the company acquired the business of MicroSafe, whose microbial air sampling products it had previously distributed, from an Italian subsidiary of 3M. The MicroSafe suite of microbial detection and monitoring products complements the existing particulate measurement systems for the pharmaceutical market and the combined product portfolio will enable the full capabilities for use in sterile manufacturing environments to be provided by a single supplier. In November, Particle Measuring Systems opened a new business and technology centre in Tokyo, Japan, consolidating its sales and service capability to provide direct sales and support in the country.

After a weak first half, semiconductor and electronics markets began to see some recovery towards the end of the year, driven by demand from the consumer electronics industry. Growing demand for LED technology benefited PANalytical and the company received a number of orders for its X-ray systems for LED applications from China and South Korea.

Outlook
We expect to see a gradual recovery in some of the industrial markets during 2010.
We believe that the pharmaceutical sector will continue to provide good opportunities, particularly in life sciences, driven by research and development applications and increasingly stringent requirements for product quality in manufacturing processes. The outlook for the semiconductor market remains challenging, with further industry consolidation expected.