16th May 2016 11:30
LONDON (Alliance News) - Specialty chemicals company Victrex PLC saw its shares rise on Monday despite a decline in profit and revenue in the first half and as it reiterated a heavy reliance on a big uplift in volumes in the second half.
Victrex shares were up 4.5% to 1,494.00 pence, one of the best performers in the FTSE 250.
The polymer products company, which makes pipes, films and coatings, said pretax profit for the half to the end of March was GBP47.5 million, down 12% from the GBP53.9 million made a year earlier. Victrex said it will pay a flat interim dividend of 11.73 pence.
Revenue for the half fell 10% to GBP117.0 million from GBP130.3 million, and the group's gross margin declined 200 basis points to 62.9% from 64.9% year-on-year, mostly due to new plant costs.
In a trading update in early April, Victrex said the first half had been hit by the re-phasing of volumes in its consumer electronics business to the second half, tough year-before comparatives, and difficult conditions in oil and gas end markets. In the half, Electronics volumes declined 42% year-on-year to 365 tonnes, while Oil & Gas volumes were down 28%.
In the second half, however, Victrex expects Consumer Electronics volumes to more than double against the first half, driven by new product launches in the smartphone market. Victrex provides its PEEK resin to the Apple iPhone and the launch of the new iPhone later this year will be key to the company's order book.
In April, Berenberg, the German bank, warned Victrex could face pressures in the Consumer Electronics business from capacity hikes by competitors and uncertain adoption of PEEK technology beyond Apple.
But Victrex remains upbeat on the outlook, saying the long-term trend for mobile devices to get thinner, smaller and smarter remains strong, benefiting its PEEK technology. The group added securing specifications from customers for next-generation mobile products will be key, but added it remains aware of the volatility in order patterns seen in the consumer electronics industry.
Chief Executive David Hummel said Victrex's outlook for the whole business tracks that for the Consumer Electronics division, leaving the group "comfortable" with current expectations for the full year, though he said orders in the second half will be "more back-end loaded" than in previous years.
On Oil & Gas, Victrex remains confident on the long-term outlook and noted its exposure to the market was mixed, with its key customers in the chemical processing industries and production-led businesses, in addition to the exploration-linked segments which have been hardest-hit by the downturn in the oil price.
Beyond the tough conditions for the Consumer Electronics and Oil & Gas divisions, Victrex said its Aerospace and Automotive units both performed well, leaving total Transport division volumes up 7.0% for the half.
The group said its PEEK technology remains attractive to airframe manufacturers given its capability to speed up manufacturing time, while it also remains optimistic on the outlook for its ABS braking systems, transmission applications and clutch systems in the Automotive segment.
The Medical division also performed well in the half, with revenue broadly flat while the group continues to seek regulatory approval for a range of new products.
By Sam Unsted; [email protected]; @SamUAtAlliance
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