Synthomer earnings tumble after tough second half

The FTSE 250 company said revenue from continuing operations increased 11.2% to £2.38bn, while EBITDA tumbled 50% to £249.2m, and underlying operating profit decreased 62.5% to £162.5m.

It reported a statutory operating loss of £20.5m, swinging from a statutory operating profit of £296.5m in 2021.

Underlying earnings per share decreased 72.6% to 20.6p, and basic losses per share were reported at 7p, compared to basic earnings per share of 48.3p in 2021.

Free cash flow slid 68.2% to £69.2m, while net debt widened to £1.02bn, from £114.2m at the end of 2021.

Synthomer attributed the weaker performance to the year-long nitrile latex destocking and deteriorating macroeconomic conditions during the second half of the year.

The firm said it saw reduced demand for nitrile butadiene rubber (NBR) due to extreme medical gloves inventories built up during the Covid-19 pandemic.

Its performance elastomers division was impacted the most, while its adhesive technologies division was affected by raw material supply and asset reliability issues.

The company said it was expecting to make progress in the second half of 2023, reflecting the benefits of its operational and cost actions, supplemented by an expected improvement in market conditions.

However, visibility of that was currently limited, and the unprecedented period of destocking was not expected to abate before the end of 2023.

Despite the challenging conditions, Synthomer said it was confident in its ability to execute its refreshed strategy and deliver the medium-term targets it set out in October, including mid-single-digit growth in constant currency over the cycle, EBITDA margins above 15%, and mid-teens return on invested capital.

“Following an exceptional prior year and a robust first half, our overall performance in 2022 was significantly affected by deteriorating macroeconomic conditions during the second half and the prolonged destocking in nitrile latex,” said chief executive officer Michael Willome.

“The group has been swift to respond - we are on track to save £150m to £200m of cash by the end of this year, have rapidly executed the first successful divestment from our non-core business portfolio and completed a refinancing with our banks, strengthening the group's financial platform.”

Willome said the firm was implementing operational changes to strengthen delivery in its adhesives business whilst executing its new strategy, which would increase focus on the more speciality, higher growth end markets in the portfolio.

“This strategy, together with the Group's larger global footprint and the depth and breadth of our innovation and sustainability capabilities, means that we are well-positioned to make progress toward our medium term profitable growth targets.”

At 1020 BST, shares in Synthomer were down 11.99% at 109.05p.

Reporting by Josh White for Sharecast.com.