REG - Zotefoams PLC - Trading Update and Chair Succession

ZotefoamsAnnouncement

24/05/2023 07:00

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RNS Number : 4142A  Zotefoams PLC  24 May 2023

Zotefoams plc

("Zotefoams" or "Group")

 

Trading Update and Chair Succession

 

24 May 2023 - Zotefoams, a world leader in cellular materials technology,
today provides a trading update for the four months ended 30 April
2023, ahead of its Annual General Meeting to be held today at 10am at 675
Mitcham Road, Croydon, CR9 3AL.

At this meeting Steve Good, Chair of Zotefoams, will make the following
statement:

Trading in the four months ended 30 April 2023 was strong, with the Group
delivering continued year-on-year revenue growth and with margins benefiting
from pricing, operational efficiency initiatives and a stronger US dollar. In
addition, levels of input cost inflation were lower in the period and the
Group has also benefitted from the phasing of planned SG&A spend
increases.

Highlights, against the comparative prior year period, were:

 •    Group sales increased by 15%
 •    Polyolefin Foams sales increased by 14%:
      - Volumes declined by 5%, primarily due to market-specific factors in
      continental Europe, which was more than offset by higher average selling
      prices as a result of previously implemented increases, favourable exchange
      rates and product mix
 •    High-Performance Products (HPP) sales increased by 19%:
      - Footwear sales grew strongly, with a 12% increase in volumes and a higher
      average selling price, primarily due to the stronger US dollar but also with a
      slightly more favourable product mix
      - Sales volumes of ZOTEK(®) F technical foams for aviation and other markets
      declined by 13%. A relatively slow start to the year belies an improved demand
      environment
      - T-FIT(®) insulation products sales were at a similar level
      - In line with the normal seasonality of our business, our HPP business
      represents a smaller share of total revenue at this stage in the year
 •    MuCell Extrusion's focus is on the technical and commercial development of
      ReZorce(®) mono-material packaging solutions. In the period, the business
      unit has:
      - Transitioned its initial raw material formulations to its facility in
      Denmark in preparation for commercial trials in Europe for ReZorce cartons
      - Made good progress on downstream processing of ReZorce sheet for cartons
      using off-the shelf commercial processing equipment
 •    Cash generation and management has been strong in the period, with the
      leverage ratio being around 1.1x on a trailing 12-month basis, improved from
      1.2x at 31 December 2022.

 

While the macroeconomic environment remains uncertain, the cost environment
for the Group has improved in the early part of 2023.

Pricing for LDPE (the main material used in polyolefin foams) is relatively
stable and at levels which are significantly lower than the all-time highs
seen in 2022, albeit higher than long-term historic average pricing. Energy
costs have also fallen from recent highs, but market prices remain volatile
and forward prices are significantly higher than spot price as a result. Other
cost inflation has generally been moderate with the exception of speciality
polymers and wage inflation.

In the previous two years, Zotefoams has reacted to input-price movements by
increasing selling prices and focusing on internal efficiencies and
controllable costs, while proactively implementing actions to mitigate supply
chain risks. In the period, there have been no major pricing actions and the
current focus in Polyolefin Foams is to align the Group's product offering and
pricing with the value its products deliver across markets globally.

Outlook

The Board anticipates further sales growth in the year to come primarily from
the HPP portfolio, with good opportunities across all product groups.
Prospects for volume growth in the Polyolefin Foams business unit are more
reliant on general industrial market conditions, which we expect to remain
challenging everywhere except for North America. At current exchange rates,
the Board expects little impact from currency on full-year profit.

Internally, the Group is well-positioned to deliver further operational
improvements and its spending plans are focused on key deliverables. This
includes a significant spend on the ReZorce mono-material packaging
development within the MuCell Extrusion business unit.

Performance in the early part of the year evidences continued demand for the
Group's products together with its resilient operating platform. While being
mindful of remaining macroeconomic volatility, the Board's full year
expectations remain unchanged and it is confident about the long-term
prospects of the business.

Chair Succession

As previously announced, Steve Good, who has been Chair of Zotefoams plc since
2016 and a non-executive director since 2014, will step down from the Board
following the conclusion of the 2023 AGM. Steve will be replaced as Chair by
Dr Lynn Drummond.

 

Commenting on the update David Stirling, Group CEO of Zotefoams, said:

"I am pleased with the business performance in the first four months of the
year and also the progress made on ReZorce carton development. The business
has opportunities for growth in a number of HPP markets and better margins in
Polyolefin Foams reflect pricing and cost management actions taken over the
past year. With good cash generation and management, the business is well
placed for further growth.

"It has been a pleasure to work with Steve Good as a fellow Director since
2014 and Chair since 2016, over which time the business has experienced strong
growth and transformational change, which has included significant investment
in global manufacturing capacity and in new product development. On behalf of
the Board of Zotefoams plc and our management and staff, I thank Steve for his
contribution to our success over the years and wish him all the best for the
future."

 

Note. The Board understands that current market expectations for the year
ended 31 December 2023 are revenue of £135m and adjusted profit before tax of
£12.6m.

 

 

- Ends -

 

Enquiries:

 

 Zotefoams plc                         +44 (0) 208 664 1600
 David Stirling, Group CEO

 Gary McGrath, Group CFO
 IFC Advisory (Financial PR & IR)      +44 (0) 203 934 6630
 Graham Herring

 Tim Metcalfe

 Zach Cohen

 

About Zotefoams plc

Zotefoams plc (LSE - ZTF) is a world leader in cellular materials technology
delivering optimal material solutions for the benefit of society. Utilising a
variety of unique manufacturing processes, including environmentally friendly
nitrogen expansion for lightweight AZOTE(®)polyolefin and
ZOTEK(®) high-performance foams, Zotefoams sells to diverse markets
worldwide. Zotefoams uses its own cellular materials to manufacture
T-FIT(®) advanced insulation for demanding industrial
markets. Zotefoams also owns and licenses patented microcellular foam
technology to reduce plastic use in extrusion applications and for
ReZorce(®) mono-material recyclable barrier packaging.

Zotefoams is headquartered in Croydon, UK, with additional manufacturing
sites in Kentucky, USA and Brzeg, Poland (foam manufacture), Oklahoma,
USA (foam products manufacture and conversion), Massachusetts, USA and
Stilling, Denmark (microcellular foam technology) and Jiangsu
Province, China (T-FIT).

www.zotefoams.com (http://www.zotefoams.com)

AZOTE(®), ZOTEK(®), ReZorce(®) and T-FIT(®) are registered trademarks
of Zotefoams plc.

 

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