21st Nov 2016 09:05
LONDON (Alliance News) - Plastic and fibre products company Essentra PLC on Monday issued its second profit warning of 2016, as weakness in parts of the business continued into the second half of the year.
Essentra shares dropped 20% at 396.54 pence on Monday, the worst performer in the FTSE 250. Essentra shares are down 52% in 2016 to date.
In June, Essentra issued a profit warning driven by deteriorating trading conditions in its Filter Products unit, which makes filters for cigarettes. The business was hit by a challenging market backdrop and projects either not being commercialised or being delayed.
Essentra also said it had faced short-term operational issues in its Health & Personal Care Packaging division in the US and UK amid an extensive site-integration programme. The plants are those being integrated by Essentra following its USD455.0 million acquisition of the specialist packaging business of Clondalkin Group in November 2014.
On Monday, Essentra said those issued had continued. In Filter Products, the ramp-up of new contracts the firm has won has been slower than forecast. In addition, the transfer of an existing line of business from the US to Asia has been delayed into 2017.
Essentra said this has resulted in lower-than-expected volumes in Filter Products, hitting revenue and profit in the division.
Health & Personal Care Packaging has seen an improvement in the three sites having integration issues, Essentra said. But these sites are not delivering the month-on-month uplifts in revenue and operating profit the group had anticipated.
Essentra added business for its Pipe Protection Technologies unit remains subdued, though it said trading in its Component Solutions arm has remained in line with its expectations in the second half of 2016. Still, however, the Component Solutions unit in the US, while demonstrating some improvement on the revenue declines seen in the first half, has yet to "establish a consistently improving trend".
As a result of all these issues, Essentra now expects to make an adjusted operating profit of GBP137.0 million to GBP142.0 million in 2016, down from its previous guidance of GBP155.0 million to GBP165.0 million previously.
In 2015, Essentra made pretax profit of GBP90.4 million.
By Sam Unsted; [email protected]; @SamUAtAlliance
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