Essentra cuts profit expectations as sales slow

Essentra has warned its annual earnings will be towards the ‘lower end’ of forecasts following a continued slowdown in trade.

The plastic products manufacturer anticipates making between £43million and £45million in adjusted operating profits this year.

Turnover fell by 7.1 per cent on a like-for-like and trading day-adjusted basis for the 13 weeks ending September, a slight improvement on the 11.9 per cent drop reported in the previous quarter.

Demand moderated across the Europe, Middle East and Africa region amid a weaker economic backdrop, while sales across the Americas were affected by destocking by distributors.

But trading continued to improve in the Asia-Pacific thanks to a solid performance in China, whose economy has somewhat recovered since Covid-related restrictions began being loosened at the end of last year.

FTSE 250 Essentra said that it ‘continues to demonstrate through-cycle resilience, as it has historically, and is well positioned with a robust and differentiated business model, underpinned by its breadth of customers, market categories and geographies, as well as a strong balance sheet’.

Essentra shares plummeted by as much as 12 per cent this morning but recovered to be approximately 4.1 per cent down at 141.6p in the late afternoon.

This still made it one of the ten worst performers on the FTSE 250 for the day, and means the share price has plummeted by around 40 per cent since the year began.

Analysts at broker Numis said: ‘Although the backdrop shows little sign of improvement in the short term, we think Essentra remains well-placed to recover rapidly when the cycle turns, consistent with its track record over the last 15 years.’ 

Originally founded in the 1940s as an arm of Bunzl, the company started producing cigarette filters but has since expanded into supplying tens of thousands of products, such as pin fasteners, hinges, self-adhesive tape and rotary cam switches.

In September, it agreed to spend €33.5million acquiring BMP TAPPI, an Italian plastic fabrication business, with whom Essentra has been a trading partner for more than two decades.

The Milton Keynes-based group said the takeover, which it expects to be finalised sometime before the end of 2023, would help expand its European presence and the range of products it sells.