The performance materials group Low & Bonar hailed an improving market for its flooring and artificial grass businesses, but prepared investors for a 30% fall in interim profits next month.
The company which started life more than 100 years ago as a Dundee jute merchant, and produces carpet-backing and artificial turf fibre products from bases at the city’s Caldrum Works and in Abu Dhabi said the sectors were “comfortably ahead” of the previous year.
But it also issued a profits warning for the six months to the end of May, thanks to continuing restructuring costs.
Low & Bonar’s yarns business had suffered a “difficult” 12 months, thanks in part to a collapse in the installation of publicly-funded sports pitches, and despite a major restructuring including the closure of a factory in Belgium during 2011.
It was also forced into an £11.2 million impairment charge over the loss-making operation, which accounts for around 7% of the group’s overall sales of approximately £380m.
But the first six months of the present period appear to have led to increased business for the division, amid a slow start for the group as a whole.
“Sales within the flooring, industrial, transport and artificial grass yarns sectors were comfortably ahead of last year,” the firm said in an update to the markets.
“Demand in our civil engineering and building products markets has been adversely affected by the particularly harsh weather conditions across Europe, which continued through to the middle of April.
“As anticipated, sales in these sectors improved as the weather conditions reverted to seasonal norms. This contributed to a strong end to the half year, with group sales per working day being 7% higher than last year during the final six weeks of the period.”
The firm employing around 120 people at the Dundee plant, which has made yarns for major international events like the Superbowl said its efforts to “build organisational capability” would result in the fall in first-half profits when they are announced next month.
The anticipated £2m hit marks a 30% fall on last year’s £6.3m figure, which was itself down around 50% on the equivalent £11.2m sum in 2011.
“However, with the group entering its traditionally stronger second half of the year with good momentum and exchange rates being more favourable, we still anticipate full-year profits to be in-line with our expectations,” Low & Bonar added in the pre-close update.
Analysts were positive over the group’s outlook for the second half.
Michael O’Brien at Canaccord Genuity said any material improvement in the yarns business “would ultimately offer the potential for the capital employed in that business to be unlocked and reapplied to greater long-term growth areas.”