Zotefoams (ZTF) shares plunged by more than a third after it issued a profit warning, as a flagging European polyolefin foams market and slowing growth in North America looks set to bring second half sales around £2m below the materials specialist’s first half turnover of £42.3m.
Croydon-based Zotefoams uses nitrogen gas to expand polymers in the manufacturing and sale of block foams. Its high performance-products (HPP) business, which counts shoewear giant Nike as an exclusive partner, remains robust in the face of a deteriorating political and macroeconomic environment. The company is investing heavily in its high performance and polyolefin foam manufacturing capacity across the UK, the US and Poland.
Zotefoams generates the majority of its turnover from polyolefins foams, which accounted for 68 per cent of its 2019 half-year revenues. Unlike HPP, this segment has not escaped the effects of a slowing global economy. The company cautioned that its full-year 2019 polyolefin foam sales are likely to sit around £6 million below current market estimates.
Zotefoams added that its full-year profit will be impacted “by our limited ability to change the operational gearing in the business in this timeframe”. The business will struggle to rein in costs as the business heads into its final quarter.
Peel Hunt trimmed its full-year 2019 pre-tax profit and earnings per share forecasts. Adjusted pre-tax profits are now expected to come in at £9.5m instead of £12.5m, while EPS expectations have been cut from 20.7p to 15.7p.
