The price of shares in FTSE 250 polymer producer Victrex (LON:VCT) slipped 2.03% to 1,933p (as of 11:15 BST) after it reported a 1% decline in profits before tax for the six months ended 31st March. Sales volumes for the half year were up by 5% and revenues grew by 4%, but margins declined by 270 basis points and the company also booked losses on its foreign currency hedges.
CEO Jakob Sigurdsson commented: “Overall, we delivered a solid first half which was in line with our expectations. We saw good growth in Automotive and Medical, a stable performance in Aerospace, Electronics and Value Added Resellers, offset by the weaker performance in Energy, as oil prices, rig count and activity levels reduced compared to the prior year.
“Whilst the global demand picture remains highly uncertain, we will continue to position ourselves for the uptick, with further investments tailored to specific long-term growth opportunities. These include our subsidiary in China which will underpin and support continued growth in that region. As part of our cash conservation and cost reduction measures in light of COVID-19, our £15m debottlenecking investment in the UK has now been deferred to FY 2021. However, with lower production already planned for this financial year and some special grade campaigns and new parts programmes ahead of revenue in the first half, we will continue to see some impact on margin from under-recovered overhead. We have continued to make progress in several of our downstream growth programmes, with our US facility now supplying commercial product into the Aerospace market and progress in the Magma Oil & Gas composite pipe opportunity.
“Q3 to date has been broadly in line with our expectations, although we are now seeing emerging headwinds from COVID-19 in our forward order book, particularly in Aerospace and Automotive, with Energy already seeing very tough conditions. Geographically, some more normalised demand returning in Asia could prove supportive, although the demand outlook in Europe and the US is becoming more challenging. Our supply chains remain effective and our inventory levels are high as we continue to serve customers appropriately. We have implemented a range of cash conservation measures, including deferring our debottlenecking programme and a decision on our interim dividend, and alongside our net cash position and available facilities, our balance sheet remains strong. As previously communicated, with significant macro and end market uncertainty, we are unable to provide detailed guidance on full year expectations. We believe the proactive actions we are taking are appropriate to minimise disruption and on a long-term basis, our Polymer & Parts strategy keeps us well placed to deliver our range of medium to long term growth opportunities“.