Shares in chemicals manufacturer Zotefoams (ZTF) have plunged with an unstable political and economic climate in Europe and North America leading the firm to issue a profit warning.
Zotefoam’s share price has fallen a whopping 36% in early morning trade to 340p as the specialist chemicals firm warned that sales of polyolefin foam, its biggest-selling product, are likely to be £6m below market forecasts.
That means that the company’s overall sales in the second half of its financial year are likely to be £2m below the first half, which in turn means that the firm’s anticipated profit in the second half will be impacted.
While the market has reacted with huge disappointment, chief executive David Stirling did flag at the company’s interim results in August that he was ‘mindful of a difficult current trading environment in European polyolefin foams markets and the less stable political and macroeconomic environment.’
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The fact that the shares were trading on 27 times this year's expected earnings before today's news partly explains the size of the share-price fall.
When a company is highly-rated, its shares tend to fall harder when it issues bad news than a company whose shares aren’t so highly-rated.
Zotefoams said its high-performance products division, an area where it sees significant growth opportunities, is still performing as expected.
It added that despite the headwinds facing the polyolefin business it ‘remains confident in the growth strategy and capacity enhancement investments the company is making and in the long-term prospects of the business.’
