ii view: Victrex dragged lower by cars and planes

This high-tech plastic maker is suffering due to Covid, but it hopes to reinstate the dividend soon. 

Full-year trading update to 30 September

• Revenue down 10% to £266 million
• Net cash position of £67.4 million

Guidance:

• Expects to reinstate a dividend for full-year 2020
• End markets to remain subdued

ii round-up:

Polymer maker Victrex (LSE:VCT) today pointed to subdued trading at the start of its new financial year, although did flag an expected return of its dividend payment.

Victrex shares fell 3% in UK trading and are down by nearly a quarter since the start of the year. Users of its polymer products include the Covid hit automotive, aerospace and energy sectors, along with electronics including mobile phone materials and medical devices. 

Shares for fellow chemicals company Elementis (LSE:ELM) are have more than halved year-to-date while shares for FTSE 100 constituent Croda (LSE:CRDA) are up by around a fifth. 

Fourth-quarter volumes fell by just over a quarter to 695 tonnes, with revenue down a similar amount to £55.7 million – a deterioration from the 12% and 18% falls seen in the third quarter. For the full-year and including some pre-pandemic trading, revenue declined by 10% to £266 million. 

Although some end markets had slightly improved from trough levels, aerospace and energy volumes had remained in line with the lows seen during the third quarter. 

First-half results reported back in May, saw it reporting a 1% fall in adjusted pre-tax profit to £52 million, along with declaring no interim dividend payment. 

Given what management described as a “healthy net cash position,” it now anticipates paying a final dividend for the year just completed. 

Full-year results are scheduled for 9 December. 

ii view:

Victrex was formed following a management buy-out from ICI in 1993. Its high-performance polymer solutions are based around PEEK (polyetheretherketone) and PAEK (polyaryletherketones), an ultra-high performance, durable, high strength and lightweight plastic that has a unique combination of properties, helping to improve reliability, reduce weight. PEEK was invented by ICI in 1978. 

Today, over 20,000 aircraft, more than 500 million vehicles and over 4 billion mobile devices use its materials. The vast majority of its sales are made outside of the UK.

For investors, the diversity of both its product markets and customer locations must be remembered. The lightweight advantage polymers have over metals also leaves them with an arguable environmental advantage given the reduced fuel consumption required to complete a journey. But exposure to pandemic-hit sectors such as aerospace is clearly weighing for now, potentially leaving investors in little rush to buy just now.

Positives: 

• Diverse product markets
• Expects to pay a 2020 final dividend

Negatives:

• Uncertain Covid outlook
• Some polymers/plastics are not easy to recycle, raising environment concerns

The average rating of stock market analysts:

Hold