Synthomer trading as expected despite some slowing demand

Synthomer updated the market on its trading from 7 September to 31 October on Wednesday, reporting that its overall trading aligned with expectations.

The London-listed firm said that the trends seen in the first half remained consistent despite challenging macroeconomic conditions in the chemicals industry.

Its speciality businesses showed resilience in terms of pricing and volumes compared to their base chemical products, which were facing increased global competition and negative operating leverage.

In October, Synthomer completed a £276m rights issue, enabling it to intensify its focus on implementing its speciality solutions strategy.

At the same time, it said it was managing cash and addressing short-term macroeconomic uncertainties.

The group said its efforts to reduce cost and complexity involved exiting loss-making paper and carpet activities in the United States.

It added that the reorganisation of its SBR manufacturing in Europe had been completed, allowing it to initiate the divestment process for its European paper and carpet operations ahead of schedule.

Additionally, it made a modest increase in investment to foster growth in its speciality end markets, with a particular emphasis on Asia and the US.

Looking to the rest of 2023, Synthomer said it anticipated no improvement in customer demand, with the possibility of a slight slowdown in activity in specific base chemical areas if third-quarter market trends persisted.

Nevertheless, the group said it was optimistic about making sequential progress in the second half compared to the first, primarily due to the implementation of its previously announced self-help measures.

“Although the demand environment continues to be subdued across most of our end markets, the relative strength and resilience of our speciality businesses underscores the logic of our strategy,” said chief executive officer Michael Willome.

“By focusing on these parts of the portfolio, we will continue to reposition the group to deliver on its substantial potential for value creation.

“We are confident that Synthomer’s earnings power in the medium term is more than double recent run-rate levels, driven by improved market conditions, operational and commercial excellence and our ongoing strategic evolution to become a true speciality chemicals business.”

At 1025 GMT, shares in Synthomer were down 1.24% at 207.6p.

Reporting by Josh White for Sharecast.com.