LONDON (Alliance News) - Low & Bonar PLC warned Monday that continued weak trading in the first quarter will lead to revenue and profit being below expectations, despite forecasting an "improving" trend throughout the rest of the year as it progresses its transformation programme.
Shares in Low & Bonar were 23% lower at 13.10 pence on Monday.
During the first quarter for the year ending November 30, the engineering firm explained core businesses of Colbond and Coated Technical Textiles had continued to experience tough conditions leading to revenue and profit performance being weaker than expected.
Low & Bonar explained that lower market demand has continued to hold back Colbond and Coated Technical Textiles sales and legacy supply issues and competition has hindered CTT.
In January, Low & Bonar had reported that Colbond and CTT had seen their performances "held back" early in the new financial year. This was due to lower volumes from an important customer, reduced capacity at a manufacturing site due to a fire and lower demand from some markets.
"As a result of reduced volumes, group revenues in the first quarter were below prior year levels and management's expectations," Low & Bonar explained in a statement.
"A temporary increase in inventory as a result of the lower sales will be addressed during the year as part of a continued focus on working capital," Low & Bonar added. "Overall, despite some benefit from lower raw material costs, the weaker revenues and some manufacturing inefficiencies contributed to lower than expected profitability in the quarter, which the board expects will have an impact on full year performance."
For the year ended November 2018, Low & Bonar reported a pretax loss of GBP45.7 million on revenue of GBP431.9 million.
The simplification of the business launched late in 2018 has resulted in results showing improvement which is expected to continue through the rest of the year. The firm stressed, however, that "market and macro-economic factors remain uncertain."
In December, the engineering firm announced its transformation programme focused on simplifying the business.
So far, its planned divestment of its civil engineering division was described as "proceeding well". The sale of the two businesses which compose the division is expected to complete within its financial year ending November 30.