Essentra shares up as it reveals pure play components plan
10:06, 26 October 2021
Shares in Essentra jumped 5.30% on Tuesday morning as the company revealed its intention to become a pure play components business.
The British packaging products maker said the change will enable strategic focus and an acceleration of organic and inorganic growth.
“As a first step to realising this goal, the board has decided to review the full range of strategic options for the filters business. It is anticipated that the strategic review is likely to conclude in Q2 2022 at the earliest,” it said about its division that serves the tobacco industry.
“In the meantime, the filters division will continue to receive full support from the group and focus on sustaining its strong performance. The filters division has made significant progress over the last four years on the delivery of all strategic ‘game changers’ and now has attractive long-term growth prospects,” Essentra said.
Trading performance
The strategic update was included in the company’s third-quarter trading update, in which it revealed like-for-like (LFL) revenue growth of 5.1% compared with the same period last year, driven by a strong performance in its components and filters divisions, despite ongoing global supply chain disruptions.
Essentra noted that the components division had LFL revenue growth of 28.5% compared to the third-quarter last year.
“This growth comes amid supply chain challenges and inflationary input cost pressures. Price increases implemented during the quarter have partially mitigated these cost pressures, with further benefit expected in the fourth quarter,” the company stated.
Elective surgery volumes affected by pandemic
In a further breakdown, revenue declined in its packaging division by 6.1% as prescriptions and elective surgery volumes continued to be impacted by the pandemic.
“The division implemented pricing actions in the third quarter. The slower than expected recovery in volumes coupled with global supply chain challenges – the availability and cost of raw materials and labour especially in the US, means the fourth margin is now expected to be slightly below 8%. However, we expect global healthcare systems will continue to recover given pent-up demand, a trend we are already seeing reflected in our current order levels, especially in North America,” Essentra said.
Meanwhile, it said its filters division posted revenue growth of 2.8%, mainly driven by higher volumes from outsourcing contracts, in line with expectations.
Essentra outlook
Essentra said it expected adjusted operating profit for the full year to be within the range of analysts’ forecasts whilst it takes actions to mitigate the global supply chain disruptions and ongoing impacts from the global pandemic.
Paul Forman, Essentra CEO, said the improvements in operational efficiencies and the strategic investments made has put the business in a better position for growth.
“I am pleased with the third quarter performance overall. Components has delivered strong revenue growth, filters has good momentum and packaging continues to manage the difficult conditions within its market. We continue to focus on organic growth and efficiency initiatives to drive profitability, as well as acquisition opportunities,” he said.
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