Shares in FTSE 250 chemicals company Synthomer (SYNT) gained over 4% this morning to 290p as it revealed strong demand for a chemical commonly used in a type of disposable glove.
In a trading update for the first quarter of 2020, the FTSE 250 firm said it saw higher volumes in its nitrile division due to the coronavirus pandemic.
Nitrile gloves are heavily used in hospitals and other parts of the medical and health sectors due to their strength and high puncture resistance. Some experts claim that nitrile gloves are superior to latex ones.
Synthomer said its Nitrile business continued to benefit from the additional 90kt of capacity introduced in the last quarter of 2018 at its site in Malaysia, though it added that margins were down compared to a strong comparative quarter in 2019.
The strong performance in the division helped Synthomer report a 5% increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) compared to the first quarter of last year.
EARNINGS HIT ‘MASKS DIVERGING PROGRESS’
However, Numis analyst Kevin Fogarty said this masks ‘diverging’ progress within various areas of the company.
While Nitrile demand was strong, Fogarty added that ‘lower or inline volumes in Functional Solutions & Industrial Specialities indicate slower growth elsewhere in the January to March three months.’
The analyst also draws attention to evidence of weakening demand in Automotive and Oil & Gas so far in the second quarter, news that is unlikely to surprise anyone whose been watching what's been happening to car production and oil prices recently.
As the coronavirus pandemic starts to impact some of its markets, Synthomer said it expects to reduce its capital expenditure for 2020 to £50m, down from the £73.5m originally anticipated.
Executives and directors had frozen their salaries at 2019 levels and delayed any further review until October. Synthomer did not mention its dividend plans.
‘Given the unprecedented uncertainty around the impact of Covid-19, it is unclear what impact this will have on the group's financial performance for the year,’ the company said.
‘As such, the group is withdrawing its previous guidance for the year ending 31st December 2020 and will update the market when there is better visibility.’
