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Synthomer PLC (SYNT)

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Wednesday 14 October, 2020

Synthomer PLC

Q3 Trading Update

RNS Number : 9815B
Synthomer PLC
14 October 2020
 

October 14th 2020

 

Synthomer plc

 

Q3 Trading Update

 

FY2020 EBITDA guidance raised 10%, interim dividend reinstated and pro forma leverage expected to reduce to circa 2.0x EBITDA by end of 2020

 

Synthomer plc ("Synthomer" or "the Group") today brings forward its update on trading for the third quarter ("Q3") ended September 30th 2020.

 

Strong trading momentum across all three business divisions

 

Performance Elastomers volumes and margins are ahead of prior year reflecting strong demand in Nitrile Latex following the COVID-19 pandemic and improved conditions in SBR latex through Q3.

 

Functional Solutions continued to benefit from the integration of OMNOVA and likewise is trading ahead of prior year albeit some market sectors are demonstrating stronger resilience than others. End market and geographic diversification remains a key strength of our Functional Solutions business.

 

Industrial Specialities continued to improve in Q3 following a weaker Q2 impacted by COVID-19. Current run rate volumes and margins are on or above prior year.

 

FY EBITDA guidance raised 10%

 

At the time of its Interim Results in August, the Group said that it expected FY 2020 EBITDA to be broadly-in-line with market consensus of £211 million (source Teneo). Synthomer now expects FY 2020 EBITDA to be circa £232 million, 10% higher than where it was envisaged to be in August.

 

Proforma leverage expected to reduce to circa 2.0x EBITDA

 

The Group remains highly cash generative and now expects proforma leverage to reduce to circa 2.0x net debt to EBITDA by December 2020.

 

Interim dividend reinstated

 

As a result of the Group's strong trading performance and cash generation, the Board has decided to reinstate the interim dividend which was suspended in April. The Board has declared an interim dividend of 3.0 pence per share payable on November 10th 2020 to shareholders on the register at close of business on October 23rd 2020. The Board has also fully reinstated its existing dividend policy and intends to pay a final dividend in line with its capital policy.

 

Further strategic progress

 

The integration of OMNOVA is proceeding ahead of schedule. As previously stated, the Group now expects synergies to achieve a $20 million run rate by the end of year (increased from $15 million) and a $40 million run rate by the end of 2022 (increased from $30 million).

 

In August, the Group confirmed that it was in a consultation process with employees at its SBR site in Oulu (Finland) concerning future options for the site. The consultation process at Oulu is complete and the decision has been made to close this site by the end of Q1 2021. Consultations are continuing at Marl (Germany) with an outcome expected in Q4 this year. Synthomer remains committed to the SBR markets in Europe and is confident of being able to service customers from its Central European asset base. 

 

Our additional Nitrile Latex capacity in Malaysia is on schedule for beneficial operation in Q4 2021 to further support the strong demand we have seen following the COVID-19 pandemic.

 

 

Calum MacLean, Chief Executive of Synthomer said:

 

"This is a very encouraging performance with all business divisions performing ahead of prior year. Alongside this strong momentum, we have made significant strategic progress, with a decision to close our site in Oulu and the integration of OMNOVA continuing ahead of our initial expectations. This underpins our confidence for the remainder of this year and beyond leading to an upgrade to our guidance for the full year and reinstating our interim dividend."

 

 

Further information:

 

The Company will hold a conference call for investors and analysts at 0900 BST today:

Dial in number: 08003589473  PIN: 69896742#

 

 

Calum MacLean, Chief Executive Officer

 

Steve Bennett, Chief Financial Officer  

Tel: + 44 1279 436211 

Tim Hughes, President, Corporate Development

 

 

 

Charles Armitstead/ Matt Denham, Teneo

Tel: + 44 7703 330 269/ + 44 7825 735596

 

 

Investor Seminar

Synthomer will be hosting an Investor Seminar on Wednesday 18th November to focus on the Group's strategy post its acquisition of OMNOVA, with a particular focus on its Functional Solutions business.

 

 

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