Manufacturer profits take £1m hit as a result of Coronavirus outbreak
Chain and gear manufacturer Renold said its profits have been hit by the Coronavirus crisis in China.
The company is expecting to take £1m hit as a result of the disruption caused by the outbreak.
The Manchester firm said in a trading statement it has struggled with challenging trading conditions in the first half of the year.
And it added that the situation has been made worse by the extended closure of its factory in China.
Renold said it experienced challenging market conditions in the first half of the year.
These challenging conditions continued into the second half of the year, with the greatest weakness evident in the US and European markets.
Renold said it has continued to be effective in mitigating the impact of this through improved operational efficiency and flexibility within cost structures.
As a result, the group had been on track to deliver an adjusted operating profit for the year in line with current market expectations.
But the impact of Coronavirus has affected profits.
The outbreak of the Coronavirus has had a direct impact on certain of the group’s operations.
The extension of the Spring Festival shutdown of the firm’s Chinese factory by almost a month affected production.
Whilst the Chinese factory has reopened, staffing levels are not yet fully recovered due to continuing limitations on the movement of employees.
And the extensive disruption and the limited visibility of third party supply chains into both the Chinese factory and the Australasian chain business, means that there remains uncertainty as to the performance of these business units over the coming months.
Renold is working closely with customers and suppliers to mitigate the impact of these factors but now expect there will be a profit drag across February and March that will not be recoverable before the end of the year.
As a result the board estimates, based on current information, that the effects are likely reduce adjusted operating profit by approximately £1m in the year to 31 March 2020.
Robert Purcell, Chief Executive, said: “While the current year has been a challenging one, with difficult underlying markets, the improvements being delivered within the business are supporting our profitability.
“However, the impact of Coronavirus, with the extended shutdown of one of our major factories and continuing uncertainty over Chinese supply chains, has happened close to the end of our financial year and there is no opportunity to recover the operating profit shortfall before March 31st.
“Whilst market conditions remain challenging in the near term and a level of uncertainty remains over the longer-term implications of Coronavirus on our business, we are encouraged by the positive impact of our ongoing strategic initiatives.”