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(Alliance News) - Victrex PLC on Wednesday said volumes have continued to decline in recent months as macroeconomic weakness continued to impact the chemical centre, and said its annual profit likely will be lower than previously forecast.
Peel Hunt analyst Henry Carver called the unscheduled profit warning "a disappointing update". Analysts at Jefferies said: "The comment in the release that the headwinds could persist beyond the current financial year, adds further uncertainty to forecasts looking out to [financial 2024]."
The polymer solutions company previously announced on May 9 that in the first half of its financial year ending September 30, sales volumes decreased 14% to 1,941 tonnes from 2,264 tonnes for the same period the year before. Pretax profit fell to GBP39.1 million from GBP43.6 million and Victrex said "trading would need to improve before the end of the year for profit expectations to be met," as Peel Hunt's Carver put it.
This anticipated "step up in demand" did not materialise, however, resulting in year-to-date volumes for the period ending May 31 were tracking in excess of 20% down compared to the previous year. Victrex said that continuing macroeconomic weakness and industrial customer destocking were harming performance in several end markets throughout the chemical sector.
However, Victrex also said trading for its medical division remained strong and average selling prices remained stable.
Victrex lowered its expected annual pretax profit to between GBP80 million and GBP85 million, having previously said this would be in line with financial 2022's GBP87.7 million. Jefferies said the profit warning was likely to make the consensus adjusted pretax profit fall by around 10% from the currently expected GBP92.3 million. Peel Hunt's Carver said it was expected to settle at approximately GBP82 million.
"The current trading reflects the natural cyclicality in some of VCT's end markets, which can recover very quickly, and the long term picture remains unchanged. However, this short-term unpredictability will likely be reflected in the valuation," Carver said.
Victrex said pretax profit was approximately GBP53 million during the period ended May 31, which Jefferies said "gets you to the bottom end of the range" when annualised. Jefferies said this "[implied] the top end factors in a small improvement in the macro."
For the third quarter overall, Victrex expects volumes to have decreased by about 40% to approximately 800 tonnes from 1,323 tonnes in the same quarter the previous year. It also said revenue for financial 2023 would be between 6% and 10% lower than the prior year if current trends continued.
Shares in Victrex were down 2.4% at 1,500.00 pence each in London on Wednesday. Stocks have declined 5.7% over the last 12 months.
By Emma Curzon, Alliance News reporter
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