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LONDON (Alliance News) - Renold PLC on Wednesday said underlying sales and adjusted operating profit for its full financial year to the end of March will be lower than the prior year following a weak start to the second half.
Shares in Renold were trading down 27% at 31.00 pence on Wednesday morning following the announcement.
The supplier of industrial chains and related power transmission products said most of the territories it operates in saw significant volatility in the period from October 1 to January 31 in both the Chain and Torque Transmission divisions.
This volatility extended to the North American markets which experienced a flat first half, it added, and while January did improve on a particularly weak December, the overall trend for sales and orders in the second half is still negative.
As a result, the Chain division's underlying sales are expected to finish the year down approximately 8% and Torque Transmission around 14%, leading to an overall fall in underlying sales of 10%, the company said.
In addition, the reduction in sales will lead to a 13% decline in adjusted operating profit, Renold said. The Chain division's efficiency gains will deliver adjusted operating profit similar to the prior year, despite the forecast fall in sales, but the scale of the smaller Torque Transmission division means it is less able to absorb the impact of falling sales.
Meanwhile, Renold said its acquisition of the Aventics Tooth Chain business went smoothly, with the integration and business performance proceeding according to plan.
"The fact that international industrial end markets are volatile has been widely reported. We are continuing to do the right things to protect capital and revenue investment in projects to support the medium term delivery of the STEP 2020 Strategic Plan rather than simply cost cutting to deliver short term gains at the expense of the group's future development. Our focus remains on getting the business into the right shape to withstand the current volatility and to deliver growth in the longer term," Chief Executive Robert Purcell said in a statement.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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