May 20, 2019 / 8:37 AM / 6 months ago

Low & Bonar's CEO to leave after second profit warning in two months

(Reuters) - UK-based polymer products maker Low & Bonar’s said on Monday its CEO Philip de Klerk is leaving the company as it issued its second profit warning in two months, sending its shares sliding 30 percent.

De Klerk’s departure is the latest upheaval for the company which has been in the red for the past two years after being hit by a range of problems, including more recently the U.S.-China trade dispute.

“In light of current trading and ongoing weakness in certain markets, the Board has lowered its expectations of full-year performance,” Low & Bonar said in a statement.

De Klerk will leave the company on July 1, it said in a separate statement.

“The Board has decided that a change of leadership is required to accelerate delivery of (the) transformation programme initiated in late 2018,” it said.

Low & Bonar’s shares slumped 73.5% in 2018 as pretax losses more than doubled to 42 million pounds in the year ended in November 2018 and it saw its finance chief leave within nine months of coming on board.

Analysts had expected the company to return to profit this year. However, analysts at Canaccord Genuity said that after Monday’s profit warning they were lowering their full-year pretax profit forecast for Low & Bonar to 8.5 million pounds, just over half of their previous forecast, and were reducing their forecasts for later years significantly as they now assume a weaker recovery.

Polymer maker Victrex also warned this month that annual growth could stall following a much weaker first half due to fewer automotive and consumer electronics contracts.

Low & Bonar said trade wars had hurt Chinese customers of its unit that makes synthetic non-woven fabrics, with year to date Asia Pacific sales behind a year earlier.

It also flagged ongoing softness in the European automotive market and said that first-half performance would be materially behind that of the prior half year and lowered its expectations of full-year performance.

The company said it expects to remain in the red in the first half of this fiscal year and then pick up.

“The Board continues to expect the improving sales trend to underpin a stronger second half, helped by the usual seasonality in the business, and also supported by further cost reductions already in process,” it said.

Its shares fell more than 30 percent to 10 pence on Monday, valuing the firm at 68.9 million pounds.

Low & Bonar, founded as a small textile company in 1903, also said margins in the United States were held hurt slower revenue progression and some manufacturing issues.

The company, which sources polymers and manufactures them into yarns, fibres and coated fabrics used in roofing, building and also automobiles, has been working to simplify its portfolio and structure while working to improve operational performance.

Low & Bonar said its transformation plan was taking longer than anticipated to resolve some of the legacy issues during a challenging period.

It said its balance sheet was a focus with net debt at mid-year expected to be below 110 million pounds, adding it expected to meet banking covenants at both the mid and full year.

Before Monday’s announcement, Low & Bonar’s combined credit score - which measures how likely a company is to default in the next year on a scale of 100 (very unlikely) to 1 (highly likely) - was “1”, Refinitiv Eikon data showed.

Low & Bonar said a search for a new top boss would not be initiated immediately and the situation will be reviewed later in the year, adding that Non-Executive Chairman Daniel Dayan, will become executive Chairman on July 2.

Reporting by Noor Zainab Hussain in Bengaluru; editing by Gopakumar Warrier and Susan Fenton

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