- Fiscal 2022 sales and earnings miss forecasts
- Europe and Australia report record trading
- Muted 2023 growth as investments crimp profit
Concrete levelling equipment specialist Somero Enterprises (SOM:AIM) fell short of its own full-year 2022 sales and profit guidance due to a shortage of cement and labour in the US.
The earnings disappointment and lower profit guidance for 2023 pushed the shares 8% lower to 396p, leaving them down around a fifth over the last year.
Revenues to 31 December 2022 are expected to be around $134 million, 3.5% below prior guidance of $138.8 million but still a new record above 2021’s $133.3 million which in turn was 50% above 2020.
Somero benefited from the boom in demand for retail warehousing as online shopping spiked during the pandemic when consumers were stuck at home.
Lower than expected revenues mean EBITDA (earnings before interest, tax, depreciation, and amortisation) will be 3.5% below prior guidance at $46 million.
For 2023, Somero said it expected to generate similar revenues to 2022 and EBITDA which reflected ‘planned investment to add strategic resources for future growth’, implying a lower outturn.
WHAT CAUSED THE MISS?
The company said ‘inconsistent’ availability of cement supply nationwide across the US as well as drivers to transport the material to sites led to a slower pace of activity on certain projects.
Looking forward, the market dynamics remain positive with customers reporting a ‘significant’ volume of work compared with 2022 and increased project backlogs.
RECORD REVENUES IN EUROPE AND AUSTRALIA
While still the dominant source of revenues, the US ended 2022 with a lower overall proportion (76%) reflecting stronger contributions from Europe and Australia.
Second-half trading in Europe increased by over 20% year-on-year to reach a record level supported by increased inventory availability and greater internal resources dedicated to the region.
Australia increased revenues by over 40% year-on-year, also a record reflecting strong non-residential construction demand. Activity also benefited from the company’s decision in 2020 to go to a direct sales and marketing model.
The company’s decision to shift its international strategy away from China was reflected in revenues from the country falling 50% compared with 2021. Trading in the remaining regions were said to be modestly ahead year over year.
Somero's full year earnings are due to be released on 8 March 2023.
