Consumer goods company McBride plc (LON:MCB) announced the sale of its European personal care liquids business on Tuesday as it issued its second profit warning for the year.
Shares plunged 13% to 114p in morning trading.
McBride has agreed to sell the European business, which includes two manufacturing sites in the UK and Belgium, to Royal Sanders Group for £12.5mln in cash after poor trading.
Proceeds of the disposal will be used to pay down net debt and settle transaction costs. The deal is expected to be complete in the final quarter of 2018.
The move is part of a restructuring plan to turn around the struggling personal care and aerosols division. In May the group said it would close the UK aerosols operations at Hull, which is expected to be completed in Spring 2019.
The company sees profits at its aerosols operation reaching break-even by July 2019 in line with the target announced at the first half results in February.
Full year profits to miss market forecasts
However, McBride said the personal care and aerosols business will post “marginally higher than expected” losses in the year to 30 June 2018, reflecting weak revenues.
Group pre-tax profit for the year is now expected to be “marginally below the lower end of analyst forecasts" of £32mln due to weaker-than-expected sales in certain markets in May and June.
"This implied pre-tax profit will decline at least 7.5% year-on-year in 2018 vs. our expectations of a 5% decline and company guidance of +2/-2% last year," said Liberum analyst Anubhav Malhotra.
"The profit warning should lead to further pressure on the stock which has already declined more than 40% year-to-date."
Higher distribution and warehousing costs and some short-term inefficiencies at certain factories have pushed up operating costs in the period since January due to the impact of increasing volumes in the final quarter.
Household division trading in line with expectations
More positively, trading in the household division has been in line with expectations since the first half results as continued declines in revenues in the French market have been offset by better-than-expected revenues in Germany and from Danlind, the laundry and dish-wash products business it bought last year.
Total household revenues in the second half, including Danlind, are expected to be 15.8% higher than the same period of last year, or up 3.8% on a like-for-like basis.
In January the company warned that first half profits would be hit by weak trading in its European personal care and aerosols division coupled with ongoing cost inflation.
READ: McBride wiped out as it warns on full-year sales and profits
At the time, McBride had thought revenues would pick up in the second half, meaning full-year revenues and profits should be broadly the same as last time around.
-- Adds broker comment --