Zotefoams plc (LON:ZTF), a world leader in cellular materials technology, has provided a trading update for the Group’s financial year ended 31 December 2020 (unaudited) ahead of the publication of its preliminary results on Tuesday 23 March 2021.
Zotefoams is pleased to report that the strong second half trading momentum highlighted at the time of the Group’s third quarter update was maintained for the remainder of the year, resulting in record six-months sales and more than reversing the decline in the first half. As a result, full year Group revenue was slightly above that of the previous year, in line with current market expectations. Full year trends for the specific business units were as follows:
· HPP sales increased by over 10%
o Footwear sales grew in excess of 65%, with strong momentum from new products and projects in the second half, and now represent approximately 25% of Group revenue;
o ZOTEK® fluoropolymer foam revenue, where the main market is aviation, declined by approximately 50%;
o T-FIT® technical insulation sales grew modestly, despite encouraging levels of demand, with COVID-related delays in India negatively impacting growth versus our expectations in the period;
· AZOTE® polyolefin sales were in line with the previous year. The business experienced a decline of approximately 20% in sales to its traditional markets, which are mainly in industrial applications, although there was notable recovery in demand from these sectors in the fourth quarter. This decline was offset by project-related PPE sales to UK Government programmes which ended late in the year, as expected;
· MuCell Extrusion sales declined by over 40%, mainly in equipment, impacted by the travel restrictions imposed by COVID-19 and a refocus of management time towards its ReZorce® mono-material barrier packaging technology. During 2020, the Group has further progressed the development of the ReZorce product.
Whilst the improving backdrop in the second half has enabled the Group to begin reinstating investment into its long-term growth drivers, operational performance has been strong and, consequently, adjusted profit before tax and exceptional items for the year ending 31 December 2020 is anticipated to be at the top end of market expectations. Alongside this, solid cash generation has returned the leverage ratio (net debt to EBITDA) closer to 2x.
Commissioning of Zotefoams’ third foam manufacturing factory, in Poland, is expected early in February. Delivered on budget, but purposely delayed due to lower demand caused by COVID-19, this facility completes the planned spending on major capital projects, increases Group capacity and is well-positioned to generate and support demand growth.
Commenting on the update David Stirling, Group CEO of Zotefoams, said:
“We are pleased to report robust figures in what have been very challenging conditions. The Group has demonstrated not only the breadth and resilience in demand for the Group’s differentiated technology, but also the organisation’s flexibility to realign commercial and operational activity quickly and effectively. As a result, we have successfully managed to grow sales, provide operational continuity for our customers and retain a strong financial position.
“The adverse impact of COVID-19 encountered during 2020 across most markets, as well as the risk of operational disruption, will continue into the current year, although I believe Zotefoams is well positioned to address these challenges. Our focus on the health and safety of employees globally and all visitors to our sites is our priority and continues to be delivered through well-established procedures.
“We have been encouraged by the recovery momentum in the general industrial markets for AZOTE® foams through the end of 2020 and, whilst sales to PPE applications are expected to be minimal in the current year, this positive momentum, alongside the continuing structural growth in HPP segments such as footwear and T-FIT® technical insulation, provides a strong platform for progress in 2021.
“With tariff-free trading, the outcome from Brexit negotiations has been as good as we might have expected, although delays at ports are currently reducing transport availability and causing what we believe will be short-term disruptions to our business.
“Whilst the macroeconomic climate remains uncertain and challenging, we believe Zotefoams has a strong portfolio of opportunities, a clear strategy and is well-invested in capacity to deliver growth.”