Plastic components manufacturer Essentra PLC (LON:ESNT) saw its shares drop 10% today as it warned that its 2016 operating profit will be "modestly below" the lower end of its previous guidance.
In a year-end trading update, the FTSE 250-listed firm said its Health & Personal Care Packaging unit saw a significant decline in revenue and profitability in the last two months of 2016.
Essentra added: "As a result, and while the detailed year-end close and audit is ongoing, the board expects adjusted operating profit to be at, or modestly below, the bottom end of the company's previously communicated guidance of £137 to £142m."
The firm said there is no expectation of near-term improvement in the Health & Personal Care Packaging unit, which will receive "remedial attention" from the group's new chief executive Paul Forman - who only took over at the firm on January 1 - and other senior management.
Essentra also said it expects to book an impairment for the unit in its full-year results.
The group added that Forman recently commenced a strategic review of the company, and an update will be provided at the time of Essentra's first-half results, scheduled for July 28.
Third time unlucky ...
Today’s warning was Essentra’s third profits alert in less than a year
Mike van Dulken, Head of Research at Accendo Markets, said: “A brace of warnings in such quick succession is a real concern, and today’s sell-off adds to an existing downtrend and weak start to the year.”
However, he pointed out that bargain hunters have already stepped in to rally the shares well off their worst levels, having been down 12.5%.
In late morning trade, Essentra shares were off 4.4%, or 19.4p at 423.3p, albeit still topping the mid cap fallers list.
Van Dulken said: “Investors have endured several warnings before watching the shares deliver a bounce. Bulls look prepared to give them one more chance.
And he added: “The Component Solutions and Filtration units are said to be on-track while net debt may improve more than expected.”
Essentra said its current forecast is for net debt to be £380mln as at December 31, slightly up from the £374mln seen at the same date in 2015, but better than expectations.
The group also said that the previously-announced sale of its Porous Technologies business is expected to complete in the first quarter of 2017 with net proceeds of between £185mln to £190mln set to lead to a significant gain in Essentra’s 2017 results.
The firm – which was formerly known as Filtrona and was spun from packaging group Bunzl in 2005 - added that the disposal proceeds will be used to repay existing debt facilities.
-- Adds broker comment, updates share price --