Synthomer profits fall as trading recovers from weak Q1

Synthomer on Tuesday reported a fall in interim profits as economic downturn hampered its first quarter, though the company left its full-year expectations unchanged, saying that trading had normalised towards the end of the first half.

The UK-based chemicals business reported profit before tax of £70.2m for the six month period ended 30 June, which was down by 8.0% when compared to the same period of the year before, as sales fell by 9.0% to £762.7m.

The FTSE 250-listed company attributed the lower revenues to a decline in volumes in its performance elastomers division, weakness in the European SBR business resulting from a slower start to the year in Europe, the sale of 51% of the group's Dubai operations in June 2018 and the Malaysian natural rubber and polyester resins production line's closures in Q4 2018.

However, Synthomer's second quarter results did come in marginally ahead of their 2018 comparative, with this strength expected to continue through the second half of the year as the company benefits from new low-cost capacity in both its performance elastomers and functional solutions asset bases.

Meanwhile, the board declared an interim dividend of 4.0p per share, 8% higher than last year.

"The group is confident of continued progress in H2 2019 when we expect to benefit from improved market conditions and the additional capacity coming to market. SBR Latex is expected to remain challenging in Europe but offset by a robust performance in our nitriles business. As a result, the board's expectations for group full year 2019 remain unchanged," said Synthomer.

Analysts at Canaccord said the results were robust given that numerous other companies in the sector have reported sharp falls in earnings as the speciality chemicals industry deals with headwinds such as tariff disputes, the automotive slowdown, and general economic weakness in Europe.

The analysts added that they remain confident the company will achieve full year profit before tax of approximately £140m as a stronger second half of the year is expected.

Synthomer's shares were up 1.93% at 285.20p at 0850 BST.