Low & Bonar warns on profits as polymer prices mount

Low & Bonar warned that profits for the full year would be "significantly lower" than previously predicted as the performance materials group found it hard to pass on increased raw materials prices to customers.

Following the departure of chairman Martin Flower earlier this month, chief financial officer Simon Webb is now also stepping down, just over six months after chief executive Philip de Klerk joined. Webb will continue in his role until a successor is appointed.

A high level of competition in most markets in the third quarter has compressed profit margins after prices of key polymers unexpectedly increased in the second half of the year. Low & Bonar uses polymer-based yarns and fibres to make high-performance materials for various industries, including automotive interiors, drainage systems for sports pitches, life rafts and door seals.

A further squeeze has come from production issues at the Coated Technical Textiles business. While "good progress" has been made in recent weeks to resolve the Coated Technical Textiles problems, recovery "will take some time".

Group sales volumes grew in-line with expectations in the quarter.

The Interiors & Transportation and Building & Industrial divisions continuing to grow but negatively impacted by persistently high levels of raw material costs and US freight cost inflation.

A sale process for the Civil Engineering business is underway, with performance improving in the quarter.

While overhead costs have been "significantly reduced" in recent months, with the full benefits of this ongoing programme expected next year, reduced profitability in the quarter is constraining the group’s ability to reduce net debt by the level previously anticipated.

Broker Peel Hunt cut its full year PBT forecast 24% to £19mm with EPS down 25% to 4.0p, which still requires a strong Q4 performance. Analysts also increased their year-end net debt forecast by £10m to £133.5m.