UPDATE 1-Chemical maker Synthomer's profit hurt by weak Europe demand

Fri Feb 28, 2014 4:50am EST

* Full-year revenue down 5 pct to 1.05 bln stg

* Underlying pretax profit down 5 pct to 90.1 mln stg

* Shares fall as much 2 pct

By Karen Rebelo

Feb 28 (Reuters) - British chemical maker Synthomer Plc's full-year underlying profit fell nearly 5 percent, weighed down by anaemic demand across European construction markets.

The company, which supplies specialty emulsion polymers used in construction, textiles, paper and latex gloves, said it started 2014 with a slight drop in unit cash margins from the 2013 average at its Europe and North America (ENA) business.

Synthomer shares fell as much as 2.2 percent in early trading on Friday.

Sales at ENA, which accounts for more than 70 percent of Synthomer's revenue, fell about 6 percent to 744.8 million pounds ($1.24 billion) in the year ended Dec. 31.

Demand was weak in southern Europe, Chief Executive Adrian Whitfield told Reuters.

Synthomer, however, has more exposure in northern Europe.

Underlying pretax profit fell to 90.1 million pounds ($150.21 million) from 94.6 million pounds. Revenue decreased by more than 5 percent to 1.05 billion pounds.

Analysts on average expected the company to report a pretax profit of 90.7 million pounds on revenue of 1.07 billion pounds, according to Thomson Reuters I/B/E/S.

Synthomer said underlying operating profit at its Asia business jumped 21 percent, driven by a continued recovery at the company's nitrile business there.

"The underlying trend that is driving that is the increasing awareness in terms of hygiene and personal protection," Whitfield said.

"We expect that business area to continue to grow strongly."

Nitrile is a speciality chemical used in making latex - a very fine quality of rubber.

Synthomer, formerly known as Yule Catto & Co, said it planned to cut costs at its European business by about 10 million euros ($13.68 million).

The company raised its final dividend to 3.6 pence per share from 3.3 pence a year earlier.

"The apparent delay in decisive recovery in Europe is likely to be a drag on the shares in the immediate near-term," Canaccord Genuity analyst Paul Satchell wrote in a note, while cutting his target price on the stock to 288 pence from 302 pence.

Shares in Harlow, UK-headquartered Synthomer were marginally down at 260.2 pence at 0932 GMT on the London Stock Exchange on Friday. They fell to a low of 253.9 pence earlier.

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