4th Jul 2024 12:13
(Alliance News) - Forecasts for Victrex PLC were expected to fall after the company warned on Thursday that soft trading at its Chemicals business means reaching second half profit targets will be "challenging", despite a pick-up in some other end markets.
In a trading update for the financial third quarter to June 30, the Lancashire-based supplier of high performance polymers said full-year volume guidance is unchanged and it continues to expect low to mid single digit volume growth.
But at a profit level, destocking in Medical and ongoing lower asset utilisation continue to be headwinds, with currency rates starting to move adversely in the second half.
"Unless Medical improves above current run-rates, the opportunity to deliver a slightly better [pretax profit] performance in the second half versus H2 2023 - in line with our previous guidance - will be challenging," the company said.
Chief Executive Jakob Sigurdsson noted continued momentum in some end markets but cautioned that Medical performance is tracking lower than expectations for the second half year.
Analysts at UBS estimated that to reach the second half consensus for revenue, sales in the fourth quarter would need to be up 17% sequentially to GBP87 million, "which looks ambitious given the continued destocking in medical".
The broker pointed out Visible Alpha consensus currently forecasts second half pretax profit of GBP39.7 million, up 6% from a year prior. No growth in second half profit would therefore represent a 3% to 4% downgrade to full year consensus.
The broker retained a 'sell' rating.
Pell Hunt expects to lower its full-year pretax profit forecast by around GBP5 million from GBP68.5 million, a reduction of 7.2%. The broker put the full-year consensus at GBP68 million.
Peel Hunt notes Victrex remains cautious about the Medical sector in the fourth quarter and the following year, as signs of improvement have yet to be seen.
"The company’s previous guidance was contingent on an improvement in Medical, which has not materialised," it pointed out.
As a result, the broker anticipates full-year figures to be lower than previously guided.
Peel Hunt kept a 'buy' rating on Victrex but noted financial 2024 has proven to be a "tough year, characterised by lower demand, prolonged de-stocking in Medical, and lower asset utilisation."
"Unfortunately, Victrex has continued to see these trends in [the third quarter], with no visible signs of improvement in Medical and the company maintaining a cautious stance."
Shares in Victrex shrugged off early weakness to trade 1.1% higher at 1,162.50 pence in London on Thursday.
By Jeremy Cutler, Alliance News reporter
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