Norcros PLC (LON:NXR) shares flopped on Thursday after the adhesive and tile maker warned on profits as the coronavirus outbreak disrupted its Chinese supply chain.
In a trading update for the 10 months to 2 February, the company said a return to production among its Chinese suppliers had been “slower than anticipated” and the disruption was “likely to have some impact” on the remainder of its current financial year and the early part of the next.
As a result, Norcros said it now expected underlying profitability for the year ending 31 March 2020 to be “below market expectations”.
For the period as a whole, Norcros said it had continued to win share in its major markets despite “challenging” conditions since its interim results in November.
However, the company added that its business in South Africa had seen “no market improvement” since the first half due to “markedly lower” activity levels in the construction sector, although it still expected the division to report underlying profitability that was “marginally ahead” of the previous year.
The shares slumped 12.4% to 255p in early trading in the wake of the profit warning.
However, analysts at Peel Hunt were unfazed by the update, retaining their ‘buy’ rating and 270p target price.
“Despite short-term supply chain issues, we still like the medium-term growth prospects for the group”, the broker said.