Industrial materials firm Low & Bonar (LWB) is getting a heavy beating today after the company warned that profits this year (to 30 November 2019) will fall short of previous expectations.
The response from investors has been swift and damning, the share price slumping 22% in morning trade to 13.25p, making it by far the biggest faller on the FTSE All-Share index.
STIFFENING HEADWINDS
There are multiple reasons why Low & Bonar’s trading will miss targets. On a broader level, the company has seen end market demand ease off in recent months. Low & Bonar designs and manufactures a whole range of high performance materials from polymer based yarns and fibres that are used in all sorts of applications, such as to car makers, in eco-friendly roofing solutions and latest artificial sports pitches.
Flooring, roofing and automotive markets have weakened in particular but there is also significant evidence of intensifying competition, believe analysts at broker Canaccord Genuity.
More specific problems to hurt trading include the impact of a fire at the company’s CTT plant at Lomnice in the Czech Republic, that unit’s loss of a significant US customer, plus a number of larger customers running down existing stock levels.
BUSINESS SALES
Management hopes that the sale of non-core units in civil engineering, where it is in the process of selling its construction fibres and needle-punched nonwovens businesses, will leave a better focused business going forward. Both sales are expected to be completed by the end of this financial year.
But this will come as scant consolation to shareholders whom were asked to provide extra funding for the company as recently as January, when Low & Bonar raised £54m. That cash call was priced at 15p per share, a rough 14% discount to the then prevailing 17.5p share price.
Canaccord has slashed its full year pre-tax profit forecast for this year from £20.6m to £16.3m.
Low & Bonar issued a similarly damaging profit warning around 15-months ago, a blow that cost then chief executive Brett Simpson his job.
