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Renold shares plunge on new profits warning

The industrial chain supplier said that increased raw materials prices combined with a weaker US dollar exchange rate led to price increases and lower estimates
Remold's chain division is bearing the brunt of higher raw material prices

Renold plc (LON:RNO) was under the cosh again as it issued a further profit warning for the year to March.

Higher raw materials prices had squeezed margins and operating profits are now set to fall below levels seen over the past two years, said the FTSE SmallCap-listed industrial chain supplier.

READ: Renold takes a belting after profit warning

The chain division, in particular, is suffering, Renold said, while Torque Transmission was performing in-line with expectations.

Robert Purcell, Renold’s chief executive, added: "The increase in raw material prices has been significant, both in scale and speed, and has challenged our ability to pass these costs through to customers at the same pace. 

“The adverse impact on profit of timing differences between increasing costs and the off-setting sales price increases being realised has continued through the second half of the year.”

A weaker US dollar exchange rate would also affect the results on translation, Renold said.

Renold shares were down 23% to 34p in late morning trading.

In a note to clients, broker finnCap cut its target price for Renold to 40p from 50p, and reduced its earnings per share estimate for the current year were reduced by 12% to 4.4p per share while retaining a  'dull hold' rating on the stock given the big share price fall.

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