Synthomer trades ahead of expectations in 2016

Synthomer issued a trading update for the year to 31 December on Friday, saying the positive trends it experienced in its Europe and North America business during the first three quarters of the year continued through the fourth quarter, leading to an overall performance ahead of its original expectations.

The FTSE 250 company said it saw better than expected results across all business segments and further benefits from the ongoing focus on efficiency, new product initiatives, a strengthened procurement function and investment in business development activities.

Its Asia and Rest of World segments also performed modestly ahead of expectations in the fourth quarter, with the company saying the competitive dynamics in its Asian nitrile business continuing to evolve following the introduction of additional industry capacity in the second half of the year.

Full year 2016 volumes and margins for that business were now likely to be sequentially ahead of the 2015 financial year, Synthomer explained.

The integration and trading performance of Hexion PAC continued to progress in line with expectations, the board explained.

It said the underlying annual EBITDA and expected synergies remained unchanged from the guidance given to the market in March 2016.

“Due to the combination of a stronger trading performance in Europe and a slower evolution of the Asian Nitrile dynamics during the fourth quarter, we now expect 2016 performance on an underlying constant currency basis to be ahead of the top end of current market expectations,” the board said in a statement.

“In addition, the group will also benefit from the translation effect related to the ongoing weakness of sterling.”

Average year-to-date foreign exchange rates were €1.22 and $1.35, Synthomer reported, and were expected to provide a translational benefit of approximately £12m for the full year.

In reported currency, taking into account both of those factors, the board said it now anticipates that 2016 profit before tax will be approximately £120m.

“Looking forward to 2017, we still expect to see resilient trading in Europe although the raw material and macroeconomic environments remain volatile.

“We also expect our Asian nitrile business to be further impacted by the introduction of the additional industry capacity in 2016.

“This will be partially offset by a full year of Hexion PAC included in the group's results.”

Synthomer said it will provide further detail on the outlook for 2017 with its full year results for 2016, on 6 March.