Zotefoams on a firmer footing with Polish factory

Zotefoams is reporting its 2020 figures on 23 March and these should indicate how well the foams manufacturer bounced back in the second half. The new factory in Poland is up and running and the outlook is good.

Switzerland based Sekisui Alveo sold its 7.8% stake earlier this month, with the Business Growth Fund, Schroders and Highclere International Investors buying shares. They paid 350p a share, which is well below the current price of 429p.

2020

Full year revenues are expected to increase from £80.9m to around £85m, while pre-tax profit will dip below last year’s figure of £9m. Net debt will increase from the end-2019 figure of £31.9m, but the investment in Poland has been made. Underlying cash generation is strong.

There were variances in the revenue performances in different parts of the business. The high performance products (HPP) business grew revenues by more than 10% due to higher demand from footwear customers. The Azote polyolefin foams division had a mixed year with weak demand from normal customers offset by protective equipment-related sales.

MuCell, which has developed technology for greener, lower cost plastic products with micro-bubbles, had been making progress towards breakeven, but sales were two-fifths lower last year. Travel restrictions hit this part of the business because it is at an early stage and is a more complicated sell. This is a highly operationally geared business and will hold back group profit.

2021

The Poland factory adds 15% to total foam capacity, so Zotefoams is well-placed for increasing demand. There will inevitably be further disruption in some markets and management should provide some guidance on how trading has fared in the early months of 2021. HPP is likely to remain the bright spot and the rate of recovery of other parts of the business will also be crucial when it comes to this year’s outcome.

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