Polymers group says trading and financial reserves are strong
Lancashire polymers group Victrex issued a market update today, saying trading has remained solid during the coronavirus pandemic, and it is taking prudent measures to deal with the ongoing situation.
The Thornton Cleveleys business, which is focused on the auto and aerospace industries, said it had seen solid first half trading in line with expectations.
This included solid volume growth and a strong finish in March.
There was good growth in automotive and medical, with a stable performance in aerospace, electronics and value-added resellers, offset by weakness in energy.
First half inventory was around £100m, with high sales stock across US, Europe and Asia. It has appropriate raw material inventory in the UK and its supply chain is functioning well.
The group said it has a strong financial position.
Victrex is part of multiple supply chains, many of which are supporting critical applications, for example in medical.
The group said it retains a strong balance sheet to maintain customer, supplier and investor confidence and to ensure it has sufficient resources to invest and underpin future growth.
This includes facilities of £40m, comprising a committed and undrawn revolving credit facility of £20m and a £20m accordion, to October 2024.
Its net cash position on March 31, was £42.2m, after payment of financial year 2019’s final dividend in February.
While Victrex benefits from a net cash position, it said it is acutely aware of the near-term uncertainty at a macro and end-market level, and has prudently implemented appropriate measures to reduce cost and conserve cash, while maintaining strong service levels for customers.
It revealed that capital expenditure for its UK debottlenecking programme has now been deferred to financial year 2021. Other capital programmes have been limited to essential-only expenditure, while operating cost items are being limited to prioritise and support customer-related activity.
Its China capacity investment is continuing on plan and other cash conservation measures will remain under review, which could include future shareholder dividends, it said.
Victrex said its proactive actions on COVID-19 include a a COVID-19 committee which was established at the start of 2020, with a proactive approach and a range of contingency plans already implemented.
The group continues to follow governmental, or state, guidance relating to its people, wherever it operates, and it continues to serve customers from home offices, with all of its global employees homeworking, wherever roles are not production-related.
Regarding the interpretation of essential industry, it says the UK Government defines chemicals as an essential industry with essential workers, with Victrex also having a long-standing history in supporting many critical and “life-sustaining” applications, particularly in medical.
In the UK, reflecting government guidance and requirements in many “life-sustaining” applications, the group is continuing to produce, aligned to demand, supplemented by high buffer inventory if required.
In the US it continues to operate on an ongoing modified basis, defined as being a ‘life-sustaining’ organisation in several states.
Also, in addition to companies Victrex already serves, it is supplying materials for ventilators or related equipment to a number of global companies.
Looking ahead, today’s statement said that, although trading has remained in line with expectations year-to-date and the third quarter has shown early signs of a solid start, including some normal demand returning across parts of Asia, the macro-economic and end-market outlook over the coming months is very uncertain, particularly for Europe and the US.
It said: “It is, therefore, too early to provide guidance for the remainder of the current financial year. We will continue to produce for essential business, monitoring appropriate guidelines and assessing other cash conservation measures as required.”
Victrex said it will report its interim results on May 11.
