LONDON (Alliance News) - Accrol Group Holdings PLC shares plunged Tuesday after the company warned that weakness in sterling against the dollar and higher tissue prices will hurt profit "considerably" in the first half.
Shares in toilet paper manufacturer sank 35% in morning trading to 13.66 pence each.
Accrol said the negative impact of foreign exchange rates and rising costs are expected to reduce profit by about GBP5 million.
Should the current conditions continue into the second half, Accrol is guiding for a further GBP3.5 million hit to profit.
For the previous financial year ended April, Accrol swung to a pretax loss of GBP24.1 million on revenue of GBP139.7 million.
"Whilst the ongoing macro headwinds encountered by the UK tissue converter industry as a whole in financial year 2019 to date are beyond our control, we are building a more robust business which is increasingly resilient and agile under adverse macro conditions," said Chief Executive Officer Gareth Jenkins.
Accrol, which also manufactures kitchen towels and face tissues, said the current macreconomic headwinds could add a total of GBP8.5 million in additional costs in the current financial year, ending April.
The company expects to post a one-off additional charge for exceptional costs of GBP8.0 million for the year, to account for its restructuring.
Jenkins said: "We are confident that we can create a solid business which delivers acceptable levels of return even under difficult macro conditions and additional upside for shareholders given fair winds. The strategic plan for the group remains on track, operationally, and the directors firmly believe Accrol Group will exit financial year 2019 in a significantly stronger operational position."
Following the restructuring of the company, to improve operational inefficiencies, Accrol said its like-for-like sales are at "record levels". As a result, the company expects its full-year revenue to increase by about 8% to about GBP126 million, "broadly" in line with market forecasts.
Accrol believes the full annualised benefit of the restructuring will benefit the firm in financial year 2020.
The company's net debt at October 31 was down to GBP22.6 million, and it expects its net debt at the end of the financial year to be no more than GBP30.0 million - down from GBP33.8 million at the end of April.
Accrol Gp (ACRL)