Nitrile, currency volatility to hit Yule Catto

Specialist chemicals maker Yule Catto said the challenging trading conditions outlined in its May update have continued through the rest of the first half.

Demand at its Europe and North America business segment, remains subdued, as it battles against deteriorating business confidence as economic uncertainty continues.

Orders are currently weaker than the first few months of the year, with business in the construction related sector continuing to be the weakest area of activity, it warned.

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Yule Catto said margin management has fully compensated for the volume declines however, and its European business is benefitting from the synergies of the PolymerLatex acquisition at the expected levels.

Elsewhere in Asia and ROW, the group's non-nitrile businesses are performing well however in nitrile, the weakness in end market demand continues.

This, combined with the effect of recent capacity additions has led to increasingly aggressive competitor pricing and a further weakening of profitability in nitrile, the company cautioned.

In light of the overall supply demand position, competition and volatility caused by rapidly changing input prices, the group now expects the current weakness in nitrile will probably continue throughout the remainder of this year and into next year.

"This will substantially lower operating profit in our Asia and ROW business segment while this persists," it warned.

Meanwhile it said the impact of the euro's volatility remains uncertain and based on current exchange rates, the board anticipates a reduction to operating profit of around £5m from translation consistent with the guidance on currency issued with the Group's IMS in May.

Even so, Yule Catto still anticipates that full year underlying profit before tax will be ahead of prior year.

CJ