Trading Update

RNS Number : 3654T

Renold PLC

12 October 2017

 

Renold plc

("Renold", "the Company" or "the Group")

Period End Trading Update

12 October 2017

Renold, a leading international supplier of industrial chains and related power transmission products, today issues a period end trading update covering the six months ending 30 September 2017 (the 'period') ahead of announcing interim results on 14 November 2017.

Trading in the period has been mixed.  The Torque Transmission division performed in-line with expectations. The Chain division delivered organic growth, but profitability was affected by machine break-downs at our Einbeck facility and by sustained increases in raw material costs.  

Consequently, the Board now expects adjusted operating profit¹ for the Group for the year to 31 March 2018 to be slightly below the lower end of the current range of analyst forecasts.

Group revenue in the period grew by 8.0% and on an underlying² basis by 2.7%, compared to the first half of the prior year.  Order intake in the period grew by 9.9% on an underlying basis or 6.1% excluding the element of the large UK Couplings order which extends beyond the current financial year.

The Torque Transmission division delivered growth in underlying revenue of 6.3%.  Including the major project win for UK Couplings, underlying order intake increased by 27.4%.

The Chain division delivered strong year on year underlying revenue growth of 8.2% in Q1 of the financial year.  However, in Q2, major machine break-downs at our Einbeck, Germany facility reduced availability of key product lines.  This resulted in increased shipping and maintenance costs to mitigate the impact on key customers in Europe and the US and led to a Q2 revenue decline of 4.5% and underlying revenue growth of 1.8% for the period.

As noted in the AGM statement in July, the Group, particularly the Chain division, experienced sustained increases in raw material costs, notably in respect of steel.  Sales price increases have been implemented to pass on these costs and are visible in the order book.  Margins in the period have been impacted by the lag between raw material increases being incurred and sales price rises working through the order book.  As a result of this, and the costs of machine break-downs, adjusted operating margin for the Chain division for the first half is expected to be around 8%.

Underlying order intake for the Chain division improved to 9.0% in Q2 resulting in an overall growth for the period of 5.3%.  Performance in the division is expected to improve in the second half, with the issues at Einbeck now resolved and price increases in the order book feeding into revenues.

The Torque Transmission division remains on track to perform in line with the Board's expectations.

Robert Purcell, Chief Executive of Renold, said:

"It has been a frustrating first half for the Chain Division.  Organic growth opportunities, particularly in Europe, have been converted but have failed to deliver the expected improvements in profitability due to issues at Einbeck and the rise in raw material prices.  Management actions to address these issues are expected to benefit the second half of the year.

"The Torque Transmission division continues to make progress in line with expectations.  The consolidation of our Halifax and Cardiff plants into a single UK Couplings business unit is starting to deliver the planned benefits, with more opportunity for improvement in the future."

(1)   Adjusted operating profit excludes exceptional items, the costs of administering closed defined benefit pension schemes and amortisation of acquired intangibles.

(2)   The use of "underlying" excludes the impact of changes in foreign exchange rates by retranslating the prior year comparative figures to the current year exchange rate.

ENQUIRIES:

Renold plc	0161 498 4500
Robert Purcell, Chief Executive
Ian Scapens, Group Finance Director
Arden Partners	020 7614 5917
Chris Hardie
Instinctif Partners	020 7457 2020
Mark Garraway
Helen Tarbet
Rosie Driscoll

NOTES FOR EDITORS

Renold is a global leader in the manufacture of industrial chains and also manufactures a range of torque transmission products which are sold throughout the world to a broad range of original equipment manufacturers and distributors. The Company has a well-deserved reputation for quality that is recognised worldwide. Its products are used in a wide variety of industries including manufacturing, transportation, energy, steel and mining.

Further information about Renold can be found on the website at: www.renold.com

 

END

 

 

TSTLLFVEIVLLLID