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Slowdown in filters unit forces Essentra to cut forecast
June 9, 2016 / 7:36 AM / a year ago

Slowdown in filters unit forces Essentra to cut forecast

(Reuters) - Essentra Plc, a supplier of speciality plastic and packaging components, warned of lower full-year profit, citing challenging market conditions in filter products and delays in some large projects, sending its shares down as much as 28 percent.

Delays or chances that a large project from a major European multinational would fall through would hurt results, Chief Executive Colin Day said on a call for investors and analysts.

Day added that a slowdown in China and an increase in tax on tobacco products in India had impacted the filters business, which accounted for about 27 percent of Essentra’s 2015 revenue.

The company, whose filter products are used in tobacco, health and personal care and consumer goods, said it expected adjusted operating profit to be between 155 million pounds and 165 million pounds for the year ended Dec. 31, compared with 171.5 million pounds ($248.8 million) last year.

Revenue is expected to be broadly unchanged from the 1.09 billion pounds it reported last year, Essentra said.

“I can’t in my mind be sure we’ll make up the business in the full year. So I’ve taken a pessimistic view and said that business may not occur at all,” Day said.

Over the past two years, Essentra has enjoyed growing demand for its filter products in Asia, the Middle East and Russia, even as cigarette makers including British American Tobacco Plc and Philip Morris International Inc had been grappling with declining sales as more people quit smoking.

Essentra had been making a push into the e-cigarette market. It gets roughly half its sales from Europe, about a third from the Americas and the rest from Asia.

The company, whose products range from cigarette filters to adhesives, said on Thursday site integration in health and personal care packaging had resulted in some factories operating for longer than previously expected, hurting revenue and operating profit.

“We’re closing nine sites into basically two and that’s just taken a bit more time. I think it has had an impact on the first half,” CEO Day said.

Essentra said it was unlikely to achieve the trading levels set out in February, when it said it was confident of continuing its track record of “balanced profitable growth” in 2016, driven by international markets and its wide product mix.

For 2016, Day had forecast at least mid-single-digit like-for-like revenue growth and double-digit adjusted EPS growth at constant exchange.

Essentra’s shares were down 27 percent at 605.93 pence at 0843 GMT, making it the worst performer on the FTSE midcap index.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Sunil Nair

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