Victrex confident despite broader economic weakness

(Sharecast News) - Polymer specialist Victrex said in an update on Thursday that despite ongoing macroeconomic weakness and destocking across multiple end markets, it was optimistic about its positioning for a broader economic recovery.

The company said that during its third quarter, it saw further improvement in average selling prices (ASP), bringing the year-to-date ASP to £85 per kilogram.

It said the increase was supported by price hikes, sales mix adjustments, and favourable currency exchange rates.

The firm now expected that its full-year ASP would surpass £84 per kilogram.

Additionally, Victrex said it experienced an improvement in gross margin in the second half of the year compared to the prior year, which it put down to easing energy costs.

However, lower asset utilisation slightly hindered that progress.

The board also highlighted significant progress in its 'mega-programme' growth pipeline, particularly in the e-mobility and trauma segments.

Victrex said it now expected annual revenues from the e-mobility mega-programme to exceed initial expectations, reaching £5m in the 2023 fiscal year.

In the trauma segment, the firm said it had made advancements with its 'PEEK' composite trauma plates, catering to growing demand in the US and Asia.

Victrex said it expected revenues from that segment to reach £1m, with further growth expected in both e-mobility and trauma in the 2024 period.

Looking at the books for the third quarter, Victrex said group revenue was down 23% at £72.2m, while group volume decreased 38% to 818 tonnes.

Year-to-date group revenue had reached £234.4m, representing an 8% decline from the prior year, while year-to-date group volume was off 23% at 2,759 tonnes.

Weakness in the electronics, energy and industrial, and value-added resellers segments primarily drove the third quarter performance decline, with the aerospace segment showing robust growth, and the automotive segment remaining stable.

The medical segment performed strongly, with double-digit year-to-date revenue growth.

"In line with our recent trading update, we continue to be impacted by ongoing macro-economic weakness and destocking in several end markets," said chief executive officer Jakob Sigurdsson.

"Compared to a record prior year period, lower third-quarter volumes were driven by electronics, energy and industrial and value-added resellers.

"Aerospace and medical continue to perform strongly, whilst automotive is stable year-to-date."

Overall, Sigurdsson said the company's outlook was unchanged from what it recently communicated, with full-year adjusted profit before tax expected to be in the range of £80m to £85m.

"As we move into the final quarter, strong average selling prices, mix, energy costs and cost discipline remain supportive, and we continue to be well-placed for when the macro-economic environment improves.

"On a medium- to long-term basis, we have a strong and diverse core business, growing commercialisation in our mega-programmes, capital investment which is set to reduce and support improving cash flows, and strong ESG credentials."

Victrex said it would report its preliminary results for 2023 on 4 December.

At 1008 BST, shares in Victrex were up 0.49% at 1,429p.

Reporting by Josh White for Sharecast.com.