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Low & Bonar marked down on input cost woes

The performance materials group has been hit by rising input costs
October 17, 2017

Shares in Low & Bonar (LWB) were marked down heavily after the performance materials supplier warned that ongoing problems at its civil engineering business are being compounded by rising raw material costs, partly linked to hurricanes that caused severe damage in parts of the US and the Caribbean.

IC TIP: Buy at 66.2p

Management is reviewing what steps could be taken to mitigate problems in civil engineering, but the business segment isn’t expected to make a profit for the year as a whole. Low & Bonar isn’t the only manufacturer to make mention of increased raw material prices of late, but the problem is "they remain at elevated levels" rather than falling as anticipated at the half year. The company has been passing on the increases through to customers, but the ability to achieve this over a prolonged period is rather dependent on existing inventory levels in end markets, together with demand elasticity – time will tell on this score.