Plastics firm warns of second consecutive annual loss, but says markets will improve

Coral Products, the Wythenshaw-based plastics manufacturer, has warned that it expects to make a loss in its 2025 fiscal year.

The AIM-listed firm issued a trading update today (October 14), revealing that the challenging trading conditions referenced in its 2024 financial results, on September 17, have continued into the autumn.

Last month it revealed that, during the period to April 30, 2024, revenues had fallen from £35.2m to £31m and it had recorded a pre-tax loss of £947,000, which was compared with a pre-tax profit of £1.3m in 2023.

Today, the company admitted that it has been experiencing reduced order levels from its core customers in both the Telecoms sector, affected by the sustained reduction in housebuilding and infrastructure projects in the UK, and the FMCG (fast moving consumer goods) and automotive markets, which appear to have been impacted by a general reduction in consumer spending.

The impact on revenues from the reduction in orders from these long term customers is expected to be partially offset by contract wins on the back of Coral’s £3m investment in new machinery albeit delivering a reduced gross margin mix.

Consequently, revenues for FY25 are expected to be in line with the prior year.

However, with the change in revenue mix from higher to lower margin channels and no recovery in core markets or visible improvement in consumer confidence, the company said it now anticipates a YoY margin shortfall of up to 500 basis points and, as a result, group trading for FY25 is now expected to record a loss.

It said, while disappointing the company has not lost customers, rather the markets in which many of its long term customers operate have experienced significant falls in demand over the summer months with little prospect of a full recovery in the short term.

In the medium term, Coral said it believes there is a reasonable expectation that key underlying markets, such as housebuilding, will recover, given the importance the new government has attached to it.

Elsewhere within the business, notable successes include EcoDeck in-house manufacturing investments that fully launched in June 2024, and is now operating 24-hour production, improving gross margin in this business line by a further 10%.

Operational efficiencies and recently increased unit selling prices have further strengthened operating margins. This has been achieved through Coral’s new in-house BRC-accredited food container manufacturing investments where new contract manufacturing programmes deliver cash margin without onward risk of sales, marketing and distribution costs.

Lance Burn, who took over as Coral chief executive on January 2, this year, said: “We began the year well, trading in line with our targets in Q1, but since then, confidence has reduced in many of our customers’ markets.

“The knock on effect has meant a reduction in orders from key long term customers. The new manufacturing revenues which were intended to be incremental to our overall performance, are now substituting for our core revenues, albeit at a lower margin.”

He added: “However, the business fundamentally is in good shape. In the last nine months we have implemented significant change, re-organisnig the operational structure to run the business under two clear divisions, Rigid and Flexible plastics.

“We have released capital back into the business with a sale of freehold sites which, following the re-organisation, are surplus to requirements, and we have continued to invest in developing our manufacturing capabilities.

“Our financial and cash position is resilient, and we will accelerate our focus on improving the overall efficiency of the business. Demand will return to normal levels and Coral will be ready.”