Inkjet company Xaar cuts revenue forecast again

LONDON Thu Aug 28, 2014 4:12am EDT

LONDON Aug 28 (Reuters) - Industrial inkjet company Xaar cut its annual revenue forecast again on Thursday, blaming the latest downgrade on softening demand from the ceramic tile sector and sending its shares to a 16-month low.

The company said in its half-year report that it expected full-year revenue to come in between 115 million and 125 million pounds ($191-$207 million), down from the 130 million pounds it was forecasting last month.

"During the third quarter, demand from the ceramic tile decoration sector has softened, which we believe relates to a slowdown in construction activity in China," it said.

"In light of this, the Board's expectation for 2014 revenue has reduced to 115-125 million pounds, with adjusted operating margin projected to be broadly in line with the 26 percent achieved in the first half of the year."

Shares in Xaar, which had already cut its forecast in June, fell as much as 31 percent, with volumes in the first hour of trading nine times the average daily amount. They were trading down 22 percent at 433 pence at 0802 GMT.

The warning prompted Investec analyst Thomas Rands to move his recommendation on the stock to "sell" from "hold". He cut his full-year revenue forecast to 112.5 million pounds, with 2015 down to a similar level.

"Given the prospect of further declines in Chinese construction volumes in the fourth quarter along with minimal year-over-year earnings growth, we move to a Sell until visibility of the timing of the next wave is more certain, albeit we acknowledge that a falling share price leaves Xaar potentially vulnerable to a bid," he said.

($1 = 0.6030 British Pounds) (Reporting by Paul Sandle; Editing by Mark Potter)