LWB.L Regulatory News (LWB)

1 April 2019

Low & Bonar PLC

Q1 Trading Update

Low & Bonar PLC ("the Group"), the international performance materials group, today issues a trading update for the period since 30 November 2018.

As set out in January in the Group's 2018 financial results announcement, 2019 is expected to be a year of transition as the Group simplifies its portfolio and structure and works on resolving legacy issues to improve operational performance, following the successful equity fundraising that was completed in February.

The planned divestment of the Civil Engineering ("CE") division is proceeding well, with sale processes for the two businesses in this division, Construction Fibres and Needle-Punched Non-Wovens, progressing positively. Both of these processes are expected to conclude during the current financial year, and the division has continued to trade in line with expectations. During the quarter, the Group completed the exit from the Bonar Natpet joint venture in Saudi Arabia.

As indicated in January, sales volumes in the Group's remaining divisions, Colbond and Coated Technical Textiles ("CTT"), were held back in the early part of the year due to several factors. These included lower volumes at one important US Enka customer, and reduced capacity at the Lomnice site following the fire in late 2018. In addition, both Colbond and CTT saw subdued demand in some markets.

As the first quarter progressed, Colbond continued to experience lower market demand levels than expected, particularly in automotive and flooring segments, and increased competitive pressure in the lower margin European roofing market. Good progress is being made attracting new customers, notably for Colbond in the US and APAC, which gives confidence for the rest of the year. In CTT, while operational capability is being rebuilt, volumes have continued to be held back by legacy supply issues and intense competition. As a result of reduced volumes, Group revenues in the first quarter were below prior year levels and management's expectations. 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. 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.

As a result of actions being undertaken as part of the transformation programme, and the increased customer focus following the simplification of the Group structure implemented in December 2018, an improving trend in sales and profitability is expected during the remainder of the year, although market and macro-economic factors remain uncertain. The Board is confident that it is taking the right actions to improve performance and create a strong long term growth platform for the Group.

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Notes:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.