SYNT Synthomer Plc

Synthomer plc
Winter trading statement

Synthomer plc ('Synthomer' or 'the Group') today issues a scheduled update on trading for the twelve months to 31 December 2023.

We expect to report revenue of £2.0bn and underlying EBITDA in the range of £140-144m for the continuing Group in 2023. Year-end net debt is expected to be £499m, ahead of our expectations as a result of strong cash delivery in the final quarter. Since the start of 2023 we have reduced net debt by half, through the rights issue, divestment programme and our strong focus on cash conversion.

Trading in the fourth quarter was consistent with trends throughout 2023, with subdued volumes and limited visibility reflecting ongoing challenging macro conditions throughout the chemicals industry. Our more differentiated speciality businesses continue to be significantly more resilient in terms of volumes and pricing compared to our base businesses, which reinforces our determination to deliver the strategic refocusing of the Group set out in October 2022. Coatings and Construction Solutions (CCS), our most speciality-weighted division, delivered a resilient final quarter, its fourth of the year. Adhesive Solutions (AS) experienced increased pricing pressure from global competitors in its base products towards the end of the year although its speciality businesses remained more robust, and we continue to work through the reliability and supply chain challenges described previously. In Health & Protection and Performance Materials (HPPM), our nitrile butadiene business experienced a modest improvement in volumes in the fourth quarter.

The Group has the operating capacity to deliver significant progress in volume, revenue, EBITDA and cash generation as end market demand recovers, although visibility as to the timing of this remains limited at present. Therefore, for prudence, we are progressing a dialogue with our lending banks to extend the period of temporary covenant relaxation to ensure that we maintain appropriate headroom while trading conditions remain subdued.

In 2024, the Group will continue to focus on delivering our speciality solutions strategy, including portfolio management, alongside our ongoing activities to generate robust cash flow and successfully navigate through current uncertainties in our markets. In addition to further progress with our previously announced actions to reduce cost, complexity and improve site reliability, we have commenced a procurement optimisation programme which is expected to deliver significant additional savings in 2024 and 2025. These actions will be partially offset by some increases in operating overheads, mainly due to wage inflation and normalisation of bonus accrual. We remain confident that Synthomer's medium-term earnings power is more than double recent levels, through a combination of our near-term actions, end market volume recovery and strategic delivery.

Commenting, Synthomer CEO Michael Willome said:

"We continue to execute our speciality solutions strategy, repositioning the Group to deliver on its substantial potential for value creation as market conditions begin to improve. In the near term, our focus remains on enhancing our strong positions in key speciality end-markets, optimising our business portfolio and cost position, and sustaining our demonstrated ability to generate free cash flow despite the challenging demand environment."

Further information:

Notes

Legal Entity Identifier (LEI): 213800EHT3TI1KPQQJ56. Classification as per DTR 6 Annex 1R: 3.1.

Synthomer plc is a leading supplier of high-performance speciality polymers and ingredients for coatings, construction, adhesives, and healthcare end markets. Headquartered in London, UK and listed there since 1971, we employ around 4,400 employees across nearly 40 locations across Europe, USA and Asia. With more than 6,000 customers and £2.4bn in continuing revenue in 2022, our three divisions are aligned to our end markets which play an important role in global megatrends including urbanisation, climate change, and economic and demographic shifts. In Coatings & Construction Solutions, our tailored solutions enhance the sustainability and performance of a range of products such as architectural and masonry coatings, mortar modification, fibre bonding, waterproofing and flooring, while our energy solutions promote drilling stability in the challenging operating environments of the oil and gas industry. Adhesive Solutions is a leading supplier of products that bond, modify and compatibilise surfaces and components for a range of end markets including tapes and labels, packaging, hygiene, tyres and plastics. In Health & Protection and Performance Materials we are a world-leading supplier of water-based polymers for medical gloves and a major European manufacturer of high-performance binders, foams and other products for a range of niche applications. Our purpose is creating innovative and sustainable solutions for the benefit of customers and society. Around 20% of our sales volumes are from new and patent protected products. At our innovation hubs in the UK, Germany, Malaysia and Ohio, USA we collaborate closely with our customers to develop new products tailored to their needs while also minimising environmental impact. We are working to embed sustainability in everything we do; we have reduced our scope 1 and 2 carbon footprint by one third since 2019, and our 2030 decarbonisation targets have been approved by the Science Based Targets initiative as being in line with what the latest climate science says is necessary to meet the goals of the Paris Agreement. Since 2021 we have held the London Stock Exchange Green Economy Mark, which recognises green technology businesses making a significant contribution to a more sustainable, low-carbon economy. Find us at www.synthomer.com or search for Synthomer on LinkedIn.