31st Jul 2015 12:47
LONDON (Alliance News) - Plastic and fibre products company Essentra PLC on Friday said its pretax profit fell in the first half of 2015 thanks to exceptional costs it booked in the period, and it said it is taking a heavy hit from its exposure to the slowdown in the oil and gas industry.
Essentra shares were down 6.1% to 901.54 pence on Friday afternoon, the worst performer in the FTSE 250.
Pretax profit fell to GBP45 million from GBP49 million a year earlier, thanks to one-off costs Essentra booked, primarily related to the acquisition of Clondalkin Specialist Packaging. Revenue rose to GBP550.4 million in the half, up from GBP431.1 million, primarily thanks to the Clondalkin acquisition, as like-for-like revenue growth came in at 1.1%.
Essentra said it will pay an interim dividend of 6.3 pence per share, up from 5.7 pence per share a year earlier.
Colin Day, Essentra's chief executive, said the group had made a solid start to the year, notwithstanding the impact that the slowdown in activity in the oil and gas sector is having on the company's Pipe Protection Technologies business.
"While the current environment in the oil and gas sector remains uncertain, Essentra remains well-positioned to deliver balanced, profitable growth in 2015 under its Drive for 2020 strategy," Day added.
Essentra reported a 14% decline in first half revenue in its specialist technologies division, driven by the slowdown in activity in the oil and gas industry, where operators have been cutting spending in order to keep projects economically viable within a low oil price environment. Those spending cuts have hit all companies that provide services to the oil and gas industry, including specialty chemicals players.
Most severely bruised within Essentra was sales in its pipe protection technologies arm, where like-for-like revenue fell by 63% thanks to the heavy drop in the North American rig count and consequent reduction in drilling and demand from pipe mills.
Elsewhere in the division, porous technologies, specialty wipes and healthcare all performed well on the back of the roll-out of new products, but its printer systems business suffered against difficult market conditions.
In Essentra's distribution division, components sales were stronger on the back of improved trading conditions across Europe and the opening of a regional distribution centre to serve the Asian market. Trading in the Americas proved more challenging in the half, though some better trends have been seen recently and an improvement is expected in the second half. The Abric Seals business the company acquired has been fully integrated, and the company said its specialty tapes business is benefiting from a good US market.
Revenue in the health and personal packaging business more than doubled in the half, entirely thanks to the acquisition of Clondalkin, which Essentra acquired in November last year for USD455 million. Like-for-like growth in the business was only 0.2%, with a good performance in healthcare packaging offset by softness for tobacco tear tape.
Filters revenue was up by 5.8% in the half, with particularly strong growth from special filters thanks to new product launches.
By Sam Unsted; [email protected]; @SamUAtAlliance
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