REG - Cropper(James) PLC - Trading Update

James CropperAnnouncement

17/01/2024 07:00

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RNS Number : 9155Z  Cropper(James) PLC  17 January 2024

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James Cropper plc

("James Cropper", the "Company" or the "Group")

 

Trading Update

 

 

Based on third quarter trading to 31 December 2023, and early indications in
January 2024 for the fourth quarter, James Cropper, the leading advanced
materials and paper & packaging group, today issues an update on trading
for FY2024.

Introduction

As announced on 9 November 2023 in its interim results for the six months
ended 30 September 2023 ("Interim Results"), the Group saw half-year revenue
broadly in line with the Board's expectations, with strong gross margins and
an improvement in the cost landscape leading to operating profit in line with
expectations. The final two months of 2023 have, however, presented trading
challenges in the Paper and Packaging business and a slowdown in the pace at
which customers expect their revenues to increase in the Future Energy
hydrogen sector of the Advanced Material business.

Advanced Materials

At the time of the Interim Results, the Group noted that it was scaling
additional capacity for its Future Energy hydrogen offer and investing in the
next phase of expansion in UK electrolyser manufacturing operations to
position the Advanced Materials business to benefit from growing demand in
these markets. However, since the announcement of the Group's Interim Results,
the Advanced Materials business has seen expected projects in hydrogen being
delayed, partly as a result of inflation and higher interest rates feeding
through to higher project costs. In addition, funding decisions by governments
have impacted end customer project plans and scheduling. As a result, customer
expansion plans saw a noticeable change with major market growth now expected
to be pushed back to calendar years 2026 to 2028.

The Advanced Materials divisions' revenue trajectory will be impacted in
FY2024 as a result and the Board now anticipates a slower ramp-up in demand
than previously expected across calendar years 2024 and 2025.  Nevertheless,
the longer-term outlook for the hydrogen business remains strong, with the
company continuing to acquire new customers and working on trials and
specifications with proton exchange membrane ("PEM") electrolyser OEMs.
Pricing across the business has been resilient, underpinned by strong customer
relationships which has protected margins.

Growth in the aerospace and automotive sectors continues to underpin the core
Advanced Materials business where we are executing against accelerated market
growth opportunities.

 

Paper Products

As a direct result of ongoing high inflation impacting consumer confidence,
compounded by supply chain destocking, demand in the Paper Products business
continued to soften to an even greater extent during Q3.

Despite volume pressures, customer retention has remained high, supported by
strong relationships, and pricing has been resilient. Lower input costs
(energy, carbon, pulp), mix improvements and productivity initiatives have
protected margins and our restructuring activity is now complete, with
continuous running in production and a reduction in assets since January 2024
allowing headcount to be reduced by 15%.

Whilst near-term revenues have been affected, the future project pipeline
remains strong and in the meantime the Group will aim to keep efficiency high
through tactical use of free capacity.

The final quarter of the year is expected to show some recovery in volumes in
Paper & Packaging and demand is expected to further recover throughout
FY2025.

Group

As a result of the above trends, the Group now expects full year FY2024
revenues to be not lower than £103m.  FY2024 adjusted PBT is expected to be
materially below prior management expectations, with the Board now expecting
to report a small adjusted profit before tax for the year.

Working capital has been well controlled and the Group's capital expenditure
plans reflect the slower revenue trajectory in Advanced Materials.  As a
result, net debt at the year-end is anticipated to be slightly better than
previously expected notwithstanding the reduced PBT outlook.

Investment in new capacity for hydrogen electrolysers is continuing at our
Launceston site as we gain more specification work and accelerate trials with
a growing number of PEM electrolyser OEMs.

 

 

Steve Adams, CEO of James Cropper, said: "The pressure on volume from
inflation and global uncertainty has, regrettably, resulted in us revising our
profit expectations, despite us continuing to have a strong future growth plan
in place.

 

The Advanced Materials business saw higher revenues for the first half but now
faces a clear hiatus in the hydrogen sector as investment decisions are
deferred or delayed beyond FY2025.

 

The Paper & Packaging business division has been hit the hardest by the
drop in demand but continues to focus on mitigating activities whilst driving
productivity and efficiency savings in line with our restructuring plan.

 

Overall, despite the setback in profitability, we remain steadfast in focusing
on our strategy for accelerated growth and the Board is confident that the
growth prospects of the Group as a whole remain significant in the coming
years."

 

 

Enquiries:

 James Cropper plc

 Steve Adams, CEO

 Andrew Goody, CFOO

 Via Buchanan:  tel: +44 (0) 207 466 5000

 Shore Capital - (NOMAD and Broker)

 Robert Finlay, Henry Willcocks, Lucy Bowden

 Tel: +44 (0) 7601 6100

 Buchanan Communications - Financial PR

 Chris Lane, Charles Ryland, Jamie Hooper, Verity Parker

 jamescropper@buchanancomms.co.uk

 Tel: +44 (0) 207 466 5000

Notes for editors:

 

James Cropper is a market leader in Advanced Materials and Paper Products,
centred around four market audiences: Future Energy, Technical Fibres, Luxury
Packaging and Creative Papers.

 

A purpose-led business, built upon six generations of the Cropper family,
James Cropper has a 600+ international workforce and an operational reach in
over 50 countries.

 

Established in 1845, the Group manufactures creative papers, luxury packaging
and advanced materials incorporating pioneering non-wovens and electrochemical
coatings.

 

James Cropper is a specialist provider of niche solutions tailored to a unique
customer specification, ranging from substrates and components in hydrogen
electrolysis and fuel cells to bespoke colours and textures in paper and
moulded fibre packaging designed to replace single use plastics.

 

The Group operates across multiple markets from luxury retail to renewable
energy. It is renowned globally for service, capability, pioneering and multi
award-winning commitment to the highest standards of sustainability.

 

James Cropper's goal is to be operationally net zero by 2030 and to reduce
carbon through its entire supply chain to net zero by 2050.

 

 

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