Weather to put dampener on Sinclair's profits

published 2 August 2012

The wet weather has prompted gardening products supplier William Sinclair to issue a profits warning.

The group said that the exceptionally unfavourable weather of late has continued to suppress consumer activity, preventing any peat harvesting operations in July.

Although Sinclair developed artificial peat drying technologies, which performed well this year, the extent of the recent wet weather has meant the demands placed on it has exceeded its capacity. The firm will now substantially increase its drying capacity by commissioning further drying machines and this extra capacity will come on stream in November this year.

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The company also confirmed that the purchase of a second SuperFyba processing line will comprise a full cleaning line together with two new extruding machines rather than only one, to be commissioned at Ellesmere Port site, which has the advantage of having access to industrial scale mains electricity supplies which will generate significant cost savings for the production of SuperFyba, a peat free product which has been used in the Olympic Park in East London.

The effect of this investment will be to double annual SuperFyba production capacity, which will come on stream in December 2012.

In a statement the group said: "The combination of increased SuperFyba production and peat drying will ensure the company can fulfil its obligations to its customer base over the long term. However, because of the time required to establish this production, the company will be forced in the very short term to scale back bagging operations and to buy in some peat from third party suppliers at a substantial price premium.

"The inefficiency associated with volume changes and the higher material costs will mean that even with an assumption of normal weather patterns for August and September the company will not now meet the market's profit expectations for this financial year. While selling prices across the industry are likely to go up, the company will still feel some effect from the shortage of raw materials during the next financial year."

Sinclair stressed that it continues to have a strong balance sheet and expects to maintain its dividend policy.

The share price fell 8.6% to 143.50p by 11:44.