HeiQ PLC (LSE:HEIQ) shares have crashed over 50% after the materials and hygiene technology firm warned of a "significant deterioration" in consumer demand in the fourth quarter that has led to brands slowing investment in new technologies.
As a result, sales and profits for last year will be lower than expected, with trading in 2023 also expected to disappoint.
Brands have increased their levels of inventory to "all-time highs" due to persisting supply chain concerns, the company said, which combined with lower consumer purchases led to demand from its customer base being up to 70% lower in the final three months of the year.
Sales in China were around half the expected level, amid regional Covid lockdowns.
"Brands have become more hesitant to invest in innovations at this particular time," HeiQ said, which it blamed for milestones with new partner brands being pushed into the new year.
Group revenues for the 2022 financial year will be roughly 20% below market expectations at US$54-55mln, it said, which combined with lower gross margin is expected to deliver a loss before tax of US$2.5-3.5mln.
Pointing to gloomy industry demand predictions for at least another six to nine months that will keep sales and margins for 2023 around the same levels as last year, HeiQ said it had started to implement cost savings to try and return to a pre-tax profit this year.
On the plus side, it said progress had been made with "blockbuster technologies", including building a first pilot commercialisation line for HeiQ AeoniQ, the world's first cellulosic climate positive fibre, with Hugo Boss secured as an investor and first launch partner in January 2023.
The Robert Koch Institute has also recommended the HeiQ Synbio probiotic cleaners versus disinfectants for hospitals following the publication by the Charitè Hospital Berlin, first samples of HeiQ GrapheneX membrane were also sold to producers of battery and handheld mobile devices, and first transparent foils were developed with HeiQ ECOS silver nanowires, conferring infrared reflection for transparent insulation of building windows and stealth technology for defence.
The shares fell 52% to 25.9p in early trading on Wednesday.