Shares in Synthomer PLC (LON:SYNT), the chemicals maker once known as Yule Catto, hit new highs on the back of an upbeat trading update.
In Europe and North America, the group said the positive trends seen in the first nine months of 2016 continued into the last quarter, which meant full-year performance topped management's expectations.
“We saw better than expected results across all business segments and further benefits from the ongoing focus on efficiency, new product initiatives, a strengthened procurement function and investment in business development activities,” the group said, prompting its shares to surge to 438.8p at one point, up from 377.5p overnight, before ebbing to 417.10p.
Asia and the rest of the world also performed ahead of management expectations in the fourth quarter, albeit only modestly, with the competitive dynamics in its Asian Nitrile business continuing to evolve following the introduction of additional industry capacity in the second half of the year.
Full year 2016 volumes and margins for this business are now likely to be ahead of 2015.
Charles Webb at Morgan Stanley retained his 'underweight' stance on the stock, and 310p price target.
“Nitrile latex spreads have more than halved since the peak last February/March, as rising butadiene and acrylonitrile prices have not been offset by modest nitrile latex price increases. Spread compression could pose a major head wind for Synthomer's Asia business in 2017,” he predicted.
Peel Hunt, however, moved to 'add' from 'hold' and pumped up the target price from 390p to 440p, after a stronger than expected fourth quarter performance, partly driven by cost savings.
Synthomer's board indicated profit before tax for the year just ended will be around £120mln, helped by forex tailwinds, ahead of Peel Hunt's forecast of £105mln and the market consensus forecast of £109mln.
The company said it expects to continue to see resilient trading in Europe, although the raw material and macroeconomic environments remain volatile.
“We also expect our Asian Nitrile business to be further impacted by the introduction of the additional industry capacity in 2016. This will be partially offset by a full year of Hexion PAC included in the group's results,” it added.