Synthomer reports second consecutive year of record profits

Chemicals company Synthomer reported a second consecutive year of record profits with a rise in pre-tax earnings following strong performances in Europe and North America.

Revenue in 2016 climbed 20% to £1.04bn, or 10.8% on a constant currency basis, when compared to the previous year, which resulted in a second consecutive year of record profits with underlying earnings up 28.2% to £122.2m.

The FTSE 250 company said this was due to a strong organic performance in Europe and North America with improved margins and stable volumes as well as the Asia and the rest of world segments performing ahead of expectations and a good showing from its nitrile latex product.

IFRS pre-tax profit increased 88.6% to £136.7m due to £33.2m profits on the Malaysian land sales and the £4.7m sale of its South African business.

Underlying earnings per share rose 31.6% to 28.3p each and the company declared a final dividend of 7.8p, up from 5.4p, resulting in a total payout for the year of 11.3p, an increase from 8.6p.

Chairman Neil Johnson said: "Looking ahead, we expect to continue to see resilient trading in Europe, although the raw material and macroeconomic environments remain volatile. Whilst we envisage our Asian Nitrile business will be further impacted by the introduction of the additional industry capacity in 2016, this will be partially offset by a full year of PAC and 10 months of Perstorp Belgium included in the 2017 results. Despite these uncertainties and challenges, the board's expectations remain unchanged from the trading update on 20 January and we remain confident in delivering long term growth in profitability and shareholder value."

Separately, Synthomer announced it had bought Perstorp Oxo Belgium from the Perstorp Group, a Sweden-based chemicals supplier, for €78m a part of its growth strategy.

This builds on its acquisition of PAC in June 2016 for $221m, which the company said strengthened its position in the adhesives and coatings market, while the integration of PAC is on track to deliver synergies of $12m in the next two years.

The company believes that Perstorp Belgium is complementary to its existing markets and so Synthomer will aim to develop closer relationships with Perstorp Belgium's customers by leveraging its existing sales and technical services.

Perstorp Belgium, a performance additives business for the decorative and industrial coatings industries, operates from a single site in Ghent, Belgium where Synthomer said there is potentially room to increase capacity for future demand.

The €78m paid was funded from existing financial resources and represents 8.5 times Perstorp Belgium's adjusted earnings before interest, depreciation and amortisation (EBITDA) achieved in 2016.

It is expected to fall to about seven times EBITDA after Perstorp Belgium is integrated with operational efficiencies and increased volumes to existing customers.

In calendar 2016, Perstorp Belgium generated earnings before interest and tax of €8m and had gross assets worth €21m.

Synthomer chief executive Calum MacLean said: "The acquisition of Perstorp Belgium represents another step forward in our strategy to continue to grow and develop Synthomer. The business is an excellent fit and provides increased access to new products and customers."