Renold PLC (LON:RNO) shares jumped higher on Tuesday morning, as the engineering firm reported growth in underlying revenue “for the first time in a number of years”, although its operating profit fell slightly.
The FTSE SmallCap firm said its underlying revenue grew to £191.6mln, up from £184.6mln a year earlier, “benefiting from structural changes made over the last few years”.
READ: Renold shares plunge on new profits warning
The supplier of industrial chains and power transmission products said its adjusted operating profit fell slightly to £14.2mln, down from £14.5mln, impacted by slow recovery of raw material price increases and machine breakdowns, but is “broadly stable despite these factors.”
Robert Purcell, Renold's chief executive, said: “During the year ended 31 March 2018, raw material costs increased significantly and we were too slow to respond, resulting in an ongoing lag in passing these increased costs on to customers. This, combined with factory disruption, impacted profitability in the first half.”
He added: “For the year ahead, we expect growth to continue as improving macroeconomic conditions strengthen order intake. Those same macroeconomic conditions are resulting in inflationary pressures on raw material costs and labour rates, which have also been impacted by legislative changes in some territories.”
“Despite this, we expect growth, recovery of material price increases and continued efficiencies to overcome cost pressures and deliver improved adjusted operating profit margins,” he said.
In early morning trading, Renold's shares jumped 10.5% to 25.20p.