Essentra’s Shares Slump 9% As Sales Fall In Q4

Shares in industrial fasteneers manufacturer Essentra slumped on Friday after it announced worsening trading conditions at the end of 2022.

At 212.5p per share the FTSE 250 firm was trading 9% lower in end-of-week business

Essentra said that it expects like-for-like revenues from its continuing operations to have risen around 6.5% in 2022.

However, the company claimed that sales were down 3% on a like-for-like trading day basis in the fourth quarter. It commented that “the business saw a period of slower global economic growth” with “toughening market headwinds.”

Essentra kept its full-year operating profit forecasts unchanged.

Geographical Split

Trading at the company’s European business “continued to deliver growth at moderated levels” in quarter four, it said. Essentra’s US operations meanwhile faced greater headwinds due to distributor destocking.

In Asia, Essentra said that trading remained hamstrung by continued pandemic-related lockdowns in China. However, it added that this disruption is “showing signs of abating” through the first half of 2023 following Covid-19 policy changes in Beijing.

The business generates 15% of business from Asia and 30% from The Americas. Europe and the rest of the world accounts for more than half (55%).

Looking Ahead

Essentra said that it “continues to monitor the macro-economic outlook and is focused on maintaining profit margins.”

It said that it “remains confident” in its ability to pass higher costs onto its customers, and that “the underlying business operations remain strong.”

The Oxfordshire company said that “the group’s resilience is supported by its breadth of customers, market categories, geographies and acquisition momentum,” adding that “[our] strong balance sheet also provides flexibility to pursue organic and inorganic growth opportunities.”

The company acquired mechanical components supplier Wixroyd Group for an initial consideration of £29.5 million in December. This was Essentra’s first acquisition as a pure-play components supplier following a strategic review in 2021.

Essentra sold its packaging and filters divisions in 2022 for a combined value north of £570 million.