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Renold warns of decreased profits from FY17 despite its 'good progress'
Engineered and power transmission products delivery group Renold warned of the impact that increased raw materials prices were having on its operating margins on Thursday, saying that its chain division, in particular, had suffered significant headwinds as a result.
Renold told investors on Friday that it was "making good progress" in passing additional costs on to customers; however, progress on the realisation of the price increases had been slower than the group had hoped for.
Combined with continued increases in raw materials prices in certain territories, together with the weakening US dollar, further sales price hikes would be necessary, the company added in a statement.
As a result, Renold expected to report revenue growth of "approximately 5% for the year ending 31 March 2018", but adjusted operating profit was tapped to fall "below previous expectations and slightly below the reported adjusted operating profit for the years ended 31 March 2016 and 31 March 2017."
Robert Purcell, chief executive of Renold, said, "The increase in raw material prices has been significant, both in scale and speed, and has challenged our ability to pass these costs through to customers at the same pace. The adverse impact on profit of timing differences between increasing costs and the off-setting sales price increases being realised has continued through the second half of the year."
"This is masking the positive effects of our strategic actions which are delivering organic growth across most chain and torque transmission business units. These actions have also improved the resilience of the group when faced with challenging conditions, as demonstrated by a third year of consistent profit delivery. We continue to remain focused on executing the group's strategy in order to deliver sustainable improvements in performance," he added.
As of 1000 GMT, shares had dropped 13.90% to 38.40p.