11th Aug 2015 11:46
LONDON (Alliance News) - Specialty chemicals company Synthomer PLC on Tuesday said its pretax profit rose in the first half thanks to margin improvements in its North American business and a good operating performance in Asia which offset continued sluggishness in Europe and a hit the group is taking from the weak euro.
The FTSE 250-listed company said its pretax profit for the half was GBP36.8 million, up from GBP29.9 million a year earlier, despite its total sales falling to GBP468.7 million from GBP510.1 million, held back by euro weakness as volumes rose by 6.8%.
The profit rise for the company was driven by a strong performance in its Asia and Rest of World arm, where volumes increased by 11%, boosted by a 13% rise in Asian nitrile latex volumes. Margins in the business improved sharply on the back of a higher utilisation of its nitrile-producing assets in Asia.
In Europe and North America, Sythomer saw sales fall by 15%, however, despite a rise in volumes thanks to the weaker euro. Stripping out volumes from the Synthomer Finland Oy business, however, volumes for the division fell by 1.6%, nearly entirely due to a weak performance in its paper business, which offset steady gains in other markets. Margins in the second quarter deteriorated slightly, however, due to the boost given to the first quarter by low raw material prices in the fourth quarter of 2014.
The results were in line with the guidance given in Synthomer's trading statement in July, when it said it has seen similar trends in its Europe and North America business in the second quarter against the first, with volumes falling on the back of weak demand in its paper and carpets business.
It added it is benefiting from increased capital expenditure, targeted innovation and the fixed cost reductions it has made in recent years, along with an improvement in the supply and demand dynamics in key markets, particularly in Asia. The group also said its management team has been reviewing its assets over the course of the first half and it is working on expanding its nitrile capacity and adding further dispersion capacity to increase the efficiency of its plants.
The group said it will increase its interim dividend to 3.2 pence per share, up from 3.0 pence.
"Looking forward, we expect Europe and North America overall to continue at similar volumes and margins excepting the normally slower periods of August and December. In Asia and Rest of the World, we expect to continue to trade well ahead of the prior year, and broadly in line with the strong first half. Notwithstanding increased currency headwinds, overall the board's expectations for the full year remain unchanged," said Chairman Neil Johnson.
Shares in Synthomer were up 6.3% to 350.606 pence early afternoon on Tuesday, one of the best performers in the FTSE 250.
By Sam Unsted; [email protected]; @SamUAtAlliance
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