Synnovia PLC (LON:SYN) saw its share drop on Tuesday after the manufacturer of plastic products for industrial use and food packaging said its Films division is having a challenging year coping with capacity constraints due to some delays and teething problems with restructuring at the unit. In a trading update, the AIM-listed firm said: “Revenue has continued to grow strongly, but this has not yet translated into the profitability growth that we expected. In part this is due to our ongoing hedging policy, which has negated an improvement that would have arisen from the US$ strength versus sterling over the period. It has also arisen because of cost pressures and unforeseen minor delays to the addition of new capacity in our Films Division." However, the group - formerly known as Plastics Capital - said that its Industrials Division has continued to perform well, with bearings sales having grown significantly over recent months, exceeding management's expectation.
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Synnovia's chairman Faisal Rahmatallah commented: "Significant organic growth continues to be achieved across both our Divisions. We continue to implement a programme which adds capacity to fulfil this demand and to enable future growth thereafter. "Relatively small delays to this programme have been experienced in the Films Division and will restrict profit growth in the current financial year. Except for this disappointment we are satisfied with the progress the Company is making this year.” He added: “Overall, we anticipate that our financial performance over the second half of the financial year will enable us to announce results that are broadly in line with market expectations." In afternoon trading, Synnovia shares were down 8% at 102.00p.