- Industrial end-demand solid
- Medical demand disappoints
- New chief executive arriving
Considering how weak the stock has been over the past few years, investors in specialty chemicals firm Victrex (VCT) were probably expecting the market to take today’s third-quarter trading update in its stride.
Unfortunately, there isn’t a lot of love out there for the business, and the shares dropped as much as 118p or 15% to a 15-year low of 668p before recovering slightly to trade down 8% or 64p at 722p.
PRICES AND PRODUCT MIX WORSEN
The company, which produces high-performance polymers as well as specialist components, reported an 8% increase in sales volumes for the quarter to the end of June, driven by growth in energy and industrial demand as well as Sustainable Solutions.
However, sales in the medical division were weaker than expected due a combination of factors such as destocking by wholesalers, the introduction of volume-based pricing in China and the availability of rival products in the US.
As a result, average selling prices declined 11% from £76/kg to £68/kg meaning total revenue for the quarter was 3% lower at £71.5 million against £74 million last year.
The firm said although it expected ‘at least’ high-single-digit volume growth for the full year to September, average selling prices were likely to remain weak, and the adverse sales mix across the business meant while it had hoped its second-half pre-tax profit would be slightly higher than the first half, it could just be at ‘a broadly similar level’.
It added: ‘As we navigate macroeconomic uncertainty, the group has strong cost discipline and improvement actions in place. Overall, we have confidence in our medium to long-term growth prospects, well invested assets and an improving cash position.’
COULD NEW CEO SHAKE THINGS UP?
Alongside its trading update, the company announced current chief executive Jakob Sigurdsson, who has been in the role for the past eight years, would be stepping down.
The new chief executive, Dr James Routh, is head of AB Dynamics (ABDP), the automotive parts manufacturing, testing and simulation business, and brings decades of experience of dealing in the same industrial end-markets Victrex serves, notably transportation, aerospace and defence.
Routh doesn’t have a start date yet, but Shares is interested to see what changes he makes when he does arrive, particularly if it involves streamlining the group by spinning or selling off the medical business to make Victrex a pure-play industrial polymers producer.
LEARN MORE ABOUT VICTREX
