The Courier & Advertiser (Perth and Perthshire Edition)
Low & Bonar confident of meeting expectations
PERFORMANCE materials group Low & Bonar yesterday said it was on target to hit its financial projections for the year despite the weakening in the eurozone and a continuing lull in demand for its artificial grass products.
The company produces the playing surface at its Caldrum Works in Dundee through subsidiary Bonar Yarns but chief executive Steve Good yesterday said management were not planning any knee-jerk reaction to the current market conditions.
He said his firm’s strategy was to grow where possible while also maintaining a stable platform from which to capitalise when general trading conditions were better.
“The Dundee facility is engaged in the grass market and the flooring market and the flooring market has done OK,” Mr Good said yesterday.
“The grass market has good longterm growth drivers but at the moment it is contracting because of the lack of discretionary public funding necessary to support the breadth of investment in sports pitches.
“That is hurting the whole market at the moment and not just ourselves but what we have been able to do through some of the actions we have taken is consolidate manufacturing.
“We have been able to hold our own and keep the business on a level keel despite the market being much weaker.”
Mr Good said it was difficult to predict when the upturn in the artificial grass market would come, but the firm had positioned itself to take advantage when conditions improved.
He said: “What we are interested in doing is continuing to improve our business so we are ready to capitalise when the market is better. That is what we are concentrating on. The business is stable at the moment and we are continuing to invest.”
Total revenues in the six months to May 31 were £183.9m, as opposed to £182.6m for the comparable period last year. Pre-tax profits came in at £6.3m against £11m last year but the 2011 figure was skewed by an exceptional £6.4m credit as a result of changes to the company pension scheme.
The interim dividend increased by 14% to 0.8p per share.
The firm said it had invested £13.4m during the period to accelerate growth and had taken steps to increase its resilience against difficulties being faced in the eurozone, where it does 65% of its business.
As a result of the weakening of the euro, the company has already had to swallow £1.5m of negative impact when translating its trading performance on the continent for reporting in the UK.
Chairman Martin Flower said the situation was unlikely to change soon but the company was on track to hit its financial targets for the year.
The market consensus is for L&B to return a pre-tax profit in the region of £25.4m for the full-year.
Mr Flower said: “These results demonstrate the quality of our business. We expect macroeconomic conditions to remain challenging, particularly in Europe.
“However, with the benefit of ongoing internal growth initiatives and lower raw material polymer prices, we remain confident that full-year results will be in line with expectations.”
Analyst Howard Seymour of Numis Securities said pre-tax profits for the period had come in ahead of their forecast.
He said: “Low & Bonar has once again demonstrated that management actions are enabling operational outperformance in the face of exchange translation, raw materials and macro uncertain headwinds.”
Michael O’Brien of Canaccord Genuity said performance in the first six months of the year was better than expected but added that “currency headwinds and selective cost investment will temper earnings per share growth in the second half ”.
Shares in L&B were down 5.0 yesterday at 58.00 following the update to the markets.