26th Feb 2015 14:03
LONDON (Alliance News) - Shares in chemicals company Synthomer PLC were trading higher early afternoon on Thursday, having been down in the morning, after the group reported a fall in 2014 pretax profit on lower sales but raised its dividend by 30% and said it had seen an improvement in its Asian business towards the end of the year.
Shares in the company were up 3.1% to 279.0441 pence early afternoon, one of the best performers in the FTSE 250. Just after the open, the shares had been trading down around 2%, one of the worst performers in the index.
Synthomer said its 2014 pretax profit was down to GBP53.8 million from GBP59.1 million in 2013.
Sales fell to GBP990.5 million, from GBP1.05 billion the previous year. The group said a positive first half in Europe was offset by weaker demand in the second half, although it saw a year-on-year improvement in unit margins. Asian trading was also weaker over the year, although Synthomer said it saw encouraging nitrile trends towards the end of the second year and improving margins.
Despite the fall in profit, the group pushed its total dividend up by 30% to 7.8 pence per share from 6.0 pence per share in 2013.
"After a positive start to the year, the economy in Europe faltered, causing demand to weaken during the second half. In Asia, we saw the opposite, with a more intense competitive environment putting pressure on nitrile margins during the first half of the year, but an improving position during the second half," said Synthomer Chairman Neil Johnson.
"In the context of this challenging environment Synthomer has maintained its focus on cost control, product innovation, investment in R&D and capacity expansions in developing markets," Johnson added.
Sales fell over the year in both its Europe and North America and Asia and Rest of the World divisions. Sales in the Europe and North America business fell to GBP687.2 million from GBP744.8 million, hit by a fall in demand in the second half caused by a weakening in the general European economic climate and some destocking towards the end of the year.
Margins in the division were eroded heavily in 2013, but recovered over the course of 2014 with average margins for the year slightly improved year-on-year on a constant currency basis. Margins in 2014 were helped towards the end of the year by lower raw material prices, though Synthomer said it thinks any benefits from this will be modest going forwards. Margins were weaker in its paper business, but improved across its other product segments.
Synthomer said it is continuing its plans to improve the performance of the European business and said the costs of any restructuring remain in line with its expectations.
Sales in the smaller Asia and Rest of World business also fell to GBP303.3 million from GBP310.1 million in 2013. Nitrile volumes were up around 3% year-on-year for the year, boosted by noticeably stronger demand in the second half. Nitrile had been hit hard in the first half of the year by intense competition in the market and by customer pressure owing to excess glove manufacturing capacity. But margins recovered in the second half and ended the year improved year-on-year.
By Sam Unsted; [email protected]; @SamUAtAlliance
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