Avon Rubber down on legal challenge to US order

Avon Rubber, the gas masks and dairy products company, has dropped sharply this morning after reporting a legal challenge over an order from the US Department of Defence.

The losing bidder in a tender for gas masks (more precisely, "filters") is challenging the award of the contract and Avon expects this to delay deliveries. The contract is a big deal for the company, worth $176m, with an initial $2.5m for immediate delivery, so the time lag is a problem.

Avon says that the pipeline of sales opportunities remains strong outside of its Department of Defence markets, but the economic climate is making it difficult to predict exactly when customers will sign on the dotted line.

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The Dairy division, which makes products for use in milking livestock, is seeing "strong market conditions prevail", particularly in North America.

Net debt at the end of the year was down to £7m from £11.8m in September.

The outlook statement warns that filter deliveries (gas masks) will be weighted to the second half of this year, with an obvious impact on earnings.

The stock had droppped 6.4% by 11:45am in London.

BS