Good morning,

Today we have news from:

Somero Enterprises Inc (LON:SOM)

  • Share price: 232p (-17%)
  • No. of shares: 56 million
  • Market cap: £131 million

Interim Results

These are difficult times for investors, and it's unfortunate to see another private investor favourite which has started to struggle.

Somero makes concrete-levelling equipement and sells it worldwide. We already knew that it had a disappointing H1, after a major profit warning in June.

Unfortunately, the negative trends in trading appears to have spread internationally.

In June, Somero reduced its full-year revenue forecast to $87 million.

Today, it reduces this forecast further, to $83 million - $87 million. The broker Finncap is using $84 million as its central estimate. Revenues last year were $94 million.

What's gone wrong?

The profit warning in June was based on poor weather in the US, Somero's home market.

We now find that contracts have slipped in Europe and the Middle, and "wider macro pressures" internationally are mentioned:

Whilst towards the end of the period, trading in Europe and the Middle East fell below the prior year in part due to the timing of certain contracts, we remain confident to deliver improved H2 2019 results, broadly in line with guidance for the full year, notwithstanding the wider macro pressures in Europe, particularly Germany, the Middle East and Australia.  Pleasingly, a number of our other markets delivered growth, alongside growth from new products.

In H1, European revenues are down by 26% to $5.5 million.

In China, "newly imposed tariffs and competition in the low-end productivity segment of the market are resulting in margin pressure."

I have repeatedly expressed scepticism that Chinese builders would be willing to pay a US company for technology of this sort. Somero's reference to competition - i.e. Chinese companies making very similar machines - helps to support this view.

In the Middle East, sales collapsed by $1 million to $0.2 million. The timing of projects is blamed -…

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