JPMorgan has cut its free cash flow forecasts for Melrose Industries PLC (LSE:MRO, OTC:MLSPF), the FTSE 100 aerospace supplier, after it announced a claims programme providing up to $100 million for eligible residents and businesses affected by the Garden Grove evacuation.
The incident happened in May when a tank containing 6,000 to 7,000 gallons of methyl methacrylate at Melrose's Orange County, California facility overheated, creating a risk of explosion and prompting the evacuation of more than 50,000 nearby residents.
JPM said the programme, worth about £74 million at current exchange rates, had not been included in its previous forecasts and reduced its 2026 and 2027 free cash flow estimates.
Citi, the American bank, took a more positive view, saying the disclosure largely quantifies the financial impact of the incident and materially reduces the risk facing investors. It estimated the claims fund equates to roughly six pence per Melrose share.
Both banks were responding to an update Melrose published on Monday regarding its Garden Grove facility in California.
The update confirmed that Orange County's district attorney's office has closed its investigation and will not pursue criminal charges against the company.
Melrose is targeting 28 September to resume full manufacturing operations, subject to required safety standards, monitoring protocols, regulatory obligations and a court-approved safety plan.
Melrose Industries shares surged 11% on Tuesday after the company announced the programme.
JPM described the resumption of production and the closure of the criminal case as clear positives, even as it trimmed its cash flow outlook.
Citi said the update largely quantifies the incident’s financial impact and materially reduces investor risk, although civil penalties remain possible.
