Speciality chemicals group Synthomer (SYNT) made a record profit last year, despite falling volumes in its core European market and a price war in the Far East. Underlying pre-tax profit rose 2 per cent to £98.1m and a currency headwind should become a tailwind in 2013 - but weak demand will limit growth.
Operating profit before tax and one-offs, and adjusted for the PolymerLatex acquisition the year before, was flat at £109m - not bad given that pro forma revenue fell 12 per cent. Volumes tumbled 8 per cent at the Europe & North America unit and the weak euro cost £5.5m, yet profit still rose 15 per cent there to £98m. That was largely down to savings from the PolymerLatex integration, and there's another £6m to come. Still, Europe's construction industry needs less water-proof membranes and adhesives, which is bad news for Synthomer.
In Asia, profit slumped 42 per cent to just £19.1m after rivals chased share in the market for nitrile, used in synthetic rubber gloves and condoms. That hammered margins and easily offset strong growth in non-nitrile products. Things have since "stabilised" and, in time, will benefit from Chinese health reforms, but management admits it will not grow much before end-2013.
Deutsche Bank expects modest growth in pre-tax profit this year to £103m, giving underlying EPS of 22.5p (from 22p in 2012).
SYNTHOMER (SYNT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 225p | MARKET VALUE: | £764.8m | |
| TOUCH: | 225-226p | 12-MONTH HIGH: | 257p | LOW: 126p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 81p* | NET DEBT: | 54% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 0.60 | 38.9 | 14.3 | 2.58 |
| 2008 | 0.54 | 7.14 | 2.60 | nil |
| 2009 | 0.57 | 54.2 | 20.7 | 2.60 |
| 2010 | 1.06 | 39.5 | 9.80 | 3.50 |
| 2011 | 1.05 | 62.3 | 16.7 | 5.50 |
| % change | -1 | +58 | +70 | +14 |
Ex-div: 5 Jun Payment: 5 Jul *Includes intangible assets of £377m, or 111p a share | ||||
