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Synthomer shares drop as chemicals firm warns on profit, reviews portfolio

Full-year underlying profit before tax is likely to be 10% lower than 2018 mostly due to its styrene-butadiene rubber European business

Synthomer - Synthomer issues profit warning, reviews portfolio
The nitrile butadiene latex segment is forecast to outperform 2018 numbers

Synthomer PLC (LON:SYNT) shares plunged Friday as the company warned that its full-year profit will be below expectations due to “depressed European industrial activity combined with increased political and economic uncertainties” and said it is reviewing its portfolio.

In a trading update, the FTSE 250-listed chemicals firm said full-year underlying profit before tax is likely to be 10% lower than 2018, when it came in at £135mln, and a similar amount below the current company compiled 2019 consensus forecast of £135.3mln.

READ: Synthomer refutes allegations that its chairman is "over-boarded"

The group said the loss will be mostly due to “increased weakness” in the styrene-butadiene rubber (SBR) European business, where volumes and unit margins are expected to be 10% behind last year.

The company said it will provide news on “asset re-purposing and cost base” alongside its full-year report in March, following a review of the SBR portfolio.

In contrast, the group added, its nitrile butadiene latex segment is forecast to outperform 2018 numbers, thanks to the additional capacity introduced at the end of last year, with volumes increased in Q3.

The functional solutions and industrial specialities segments are forecast to keep a flat performance year-on-year, with extra capacity added in German and US operations expected to benefit the functional solutions business, Synthomer said.

“Whilst Synthomer continues to benefit from its strong product portfolio, end-market diversification and geographic presence, the slower trading environment is expected to continue through the remainder of the year and into 2020, particularly in Europe,” the company concluded.

Synthomer shares were down 11% to 277.26p early on Friday morning.

Quick facts: Synthomer

Price: 342.6 GBX

LSE:SYNT
Market: LSE
Market Cap: £1.25 billion
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