REG - Zotefoams PLC - Trading Update

ZotefoamsAnnouncement

04/11/2024 07:00

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RNS Number : 7151K  Zotefoams PLC  04 November 2024

Zotefoams plc

("Zotefoams" or "Group")

Trading Update

"Strong performance in a volatile market - profit in line with market
expectations"

4 November 2024 - Zotefoams, a world leader in supercritical foams, today
provides a trading update for the nine months ended 30 September 2024 ("year
to date") and in respect of its financial year ending 31 December 2024.

The Group's strong performance announced at the interims has continued into
Q3, with year-to-date sales up 23% to £110.7m against the comparative prior
year period (YTD 2023: £90.3m).

Q3 sales were up 54% to £39.7m (Q3 2023: £25.7m) against a relatively weak
prior year comparator. Q3 volumes increased significantly year-on-year in both
Footwear and ZOTEK(®) technical foams, alongside solid growth in polyolefin
foams, while T-FIT(®) advanced insulation saw reduced volume from a small
base. On a year-to-date basis, Footwear volumes were up 60% against the prior
year comparative, benefiting from an Olympic year, the addition of basketball
sales, and increased orders from Tier 1 suppliers resulting from a rebuilding
of inventory. Volumes in ZOTEK were up 29% and T-FIT up 1%. Polyolefin foams
volumes were up 1% overall, as a 6% decline in EMEA, mostly in Germany, has
offset 18% growth in the USA.

Q3 Footwear revenue, which represented 48% of sales in the period (Q3 2023:
32%), was higher than anticipated as ongoing supply chain re-configuration at
the Group's largest customer led to a continuation of elevated short-term
demand for our foams. As described in the interim results, we expect the
exceptional level of demand in Footwear to return to normalised patterns
during 2025. Over the longer term, our customer's evolving supply chain
structure may present further growth opportunities for the Group, and we are
engaging with them to assess how Zotefoams is best positioned to support and
build on its strong Footwear offering.

Strong margins have been maintained year to date, with the Group's ongoing
focus on effective pricing and mix improvement and a normalisation of
operating costs offset by higher people costs from inflation-linked pay
increases and further investment in our wider geographic footprint.

Zotefoams has continued its investment in the development of ReZorce(®)
recyclable barrier technology, with year-to-date operating costs slightly
higher than the prior-year comparative period. We continue to work towards the
key technical milestones, including endurance and sterility testing, which we
are targeting to complete before the year end. The commercial scale production
of ReZorce requires significant capital investment and, therefore, the
priority of the Board and executive management has been to find a strategic
partner that will enable the commercial development of this transformative
technology. The process to identify a such a partner has been underway since
May this year and we will provide a further update to the market when
appropriate.

Outlook

With the exception of T-FIT, which is generally heavily weighted to Q4, the
Group has good visibility of confirmed orders across most business units for
the remainder of the year. As a consequence, and while we remain mindful of
the risk of some continued demand volatility in certain sectors, we expect to
deliver significant revenue growth in 2024 over 2023.

Across our two foams business units, margins are expected to be in line with
the prior year, with mix and growth benefits offset by our investment in
Shincell and increased people costs.

In our MEL business unit, the full year loss will be slightly above that of
the previous year, as expected, reflecting further ReZorce development costs.

The Board is confident in the Group's ability to carry positive momentum
through the remainder of the year. Based on its current sales forecasts and
foreign exchange rates, and subject to there being no material disruption to
the business, it expects revenue and adjusted profit before tax to be in line
with current market expectations.*

Commenting on the update Ronan Cox, Group CEO of Zotefoams, said:

"As world leaders in supercritical foams, our positive Q3 performance further
validates the strength of our core technology and market position. The 23%
year-to-date sales growth demonstrates our ability to leverage this foundation
across multiple markets, particularly evident in our exceptional Footwear
performance and continued progress in technical foams.

We are building from this position of leadership and technical excellence to
expand our reach and impact. The recent technical agreement with Shincell
represents an important strategic step, enhancing our capabilities in the
footwear market and providing new opportunities to extend our manufacturing
footprint internationally. We are also strengthening our organisation with key
appointments expected by the year end that will accelerate our transition to a
market-led approach, allowing us to identify and capture new opportunities
that build naturally from our core capabilities.

While we continue to progress the development of ReZorce and explore potential
strategic partnerships for its commercialisation, our primary focus remains on
expanding our leadership in our core supercritical foam technologies, where we
see significant growth opportunities. This focus, combined with increased
investment in innovation and operational excellence, will enable us to extend
our leadership in supercritical foams into adjacent markets and applications.

Looking ahead, our order book provides good visibility for the remainder of
2024. While we expect Footwear demand to normalise during 2025, we are
actively engaging with our key footwear customer to capture emerging
opportunities from their evolving supply chain strategies. Despite ongoing
inflationary pressures, our operational discipline and market leadership
continue to deliver value. As a result, the Board remains confident in its
ability to meet market expectations for the full year."

* Current Zotefoams-compiled consensus expectations for revenue is £145.5m
and adjusted profit before income tax and separately disclosed items, for the
year ending 31 December 2024, is £14.9m.

 

 - Ends -

 

 

Enquiries:

 

 Zotefoams plc            +44 (0) 208 664 1600
 Ronan Cox, Group CEO
 Gary McGrath, Group CFO

 IFC Advisory             +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 (MuCell
Extrusion) and Jiangsu Province, China (T-FIT).

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

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

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