Synthomer gives cautious outlook despite firmer demand in Europe

1st May 2014 10:32

First-quarter operating profit was ahead of the same period a year earlier at FTSE 250-listed Synthomer after the specialist chemicals group continued to experience slightly firmer demand in Europe. The increased levels of demand were seen across its Construction & Coatings, Functional Polymers and Performance Polymers segments, driving revenues despite an adverse currency translation impact of £0.6m. However, the positive news was slightly offset by excess glove capacity and aggressive competition between glove manufacturers, which was the result of recent substantial expansions by its nitrile customers. Furthermore, this combined with falling Butadiene prices, which resulted in destocking and short-term pressure on nitrile margins. Despite this, Synthomer expects on-going demand growth for nitrile latex and unit margins to firm as the year progresses and is currently developing plans for a further expansion of nitrile latex capacity. "Whilst the start to the year in Europe has been encouraging, we remain cautious until these trends become more sustained," the group said. "So far in 2014, Asia has performed below our expectations due to the competitive environment in the glove market. Although the overall Asia and Rest of World results may now be slightly weaker than our expectations at the start of the year, we believe the fundamental drivers for our business in the region remain strong." The company also said it was reviewing its current dividend policy and was considering increasing the planned level of return to shareholders. The share price was just 0.08% higher at 264.20p by 10:32.NR