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Victrex shares drop despite record first half as it warns of currency headwinds

Victrex said the foreign exchange rate in the second half will be “much less of a tailwind compared to the first half and we are also mindful of the currency headwind for 2019”
Victrex reached a supply agreement with Straumann Dental in the first half

Victrex PLC (LON:VCT) shares plunged despite a record first half as the company warned of currency headwinds. 

The supplier of polymers, or plastics, for use in smartphones, aeroplanes, cars, oil and gas platforms and medical devices, reported a 26% increase in pre-tax profit to £63.3mln in the six months ended March 31.

Revenue jumped 27% to £166.6mln and sales volumes rose 21% to 2,256 tonnes.

READ: Victrex's first quarter revenues jump, boosted by Brexit-driven slump in pound

Excluding the benefit of favourable foreign exchange rates, pre-tax profit edged up 2% and revenue rose 15% as growth in industrial markets offset weakness in the medical business.

Currency tailwinds led to a 90 basis points increase in the gross margin to 63.8%, which resulted in a 29% increase in gross profit to £106.3mln.

Foreign exchange tailwinds to turn into headwinds 

However, chief executive Jakob Sigurdsson said the foreign exchange rate in the second half will be “much less of a tailwind compared to the first half and we are also mindful of the currency headwind for 2019”.

The gross margin for the year will be “at a level similar to, or slightly ahead” of 2017.

The pound has started to recover after the Brexit vote sent value of the currency lower. 

Shares dropped 3.9% to 2,620p in morning trading.

“Nevertheless, whilst growth comparatives become tougher in the second half, our strong momentum keeps us well on track for full year expectations,” Sigurdsson said.

Milestones in the first half

He added that the group reached “several milestones” in its new product pipeline, including a supply agreement with Straumann Dental for its Invibio Dental device, the first parts supplied to a major European car manufacturer under its Gears mega-programme and the deployment for its Magma oil & gas programme.

The company also saw a new opportunity in Brazil, with TechnipFMC announcing the potential use of Victrex’s m-pipe within the Libra oil field development.

The group raised its interim dividend by 10% to 12.42p. 

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