Victrex maintains strong start to new financial year

Blackpool-based global polymers business, Victrex, said it has made a good start to the new financial year and its forecasts are unchanged for the full year, in a trading update for the three months to December 31, 2024, today.

Issuing the stock exchange statement ahead of its AGM in London this morning, the group said Q1 saw good progress in both volume and revenue against a weak quarter in the prior year.

And Q2 has also started solidly, with January well ahead of the prior year.

However, it said despite overall top line progress, trading conditions remain mixed, with Medical revenues continuing to be subdued on a year-to-date basis, driven by ongoing industry destocking amongst medical device customers.

The Sustainable Solutions business is seeing year-on-year improvement across Aerospace, Electronics, Energy & Industrial and Value-Added Resellers and the group is benefiting from incremental business in Aerospace, while Electronics is seeing an improvement in Semiconductor and in smart devices.

Automotive performance is currently lower than the prior year, although the group expects year-on-year improvement in E-mobility as platform build for 800 volt motors supports increased Victrex PEEK content per car.

In Medical, inventory correction amongst major medical device customers continues, with limited visibility on improvement at this early stage. However, progress is expected as the year plays out.

First quarter revenue was up by nine per cent at £66.6m, while volume increased by 20% to 898 tonnes.

Group ASP (average selling price) is broadly in line with guidance at £74/kg, reflecting currency headwinds, sales mix and a softer Medical performance.

The current financial year is expected to see a significant step-up in the group’s mega-programme revenues, with Aerospace Composites, E-mobility and Trauma set to show progress.

In PEEK Knee, the knee-replacement technology, Victrex is awaiting the outcome following the regulatory submission in India, supporting the potential of a commercial PEEK Knee in the market in 2025. Following good progress in clinical trials across Europe and India, site recruitment for the US clinical trial is moving forward.

Victrex’s cash generative business model is expected to show further cashflow improvement this year, supporting optionality for growth investment and shareholder returns.

Following the major investment phase in assets and capability, capital expenditure will reduce closer to 8-10% of revenues – approximately £30m – and inventory is expected to unwind towards the target level of approximately £100m.

Despite the final phase of inventory unwind in FY2025, asset utilisation will improve this year. As previously stated, cost of manufacture will also benefit from lower raw material costs.

The group said it remains focused on tight cost control, alongside its Project Vista self-help programme, which will help underpin profitability.

Victex said its full year expectations are unchanged, and CEO, Jakob Sigurdsson, said: “The group has delivered a solid start to the year and our full year expectations are unchanged.

“Based on our momentum at this early stage, our guidance remains for at least mid-single digit volume growth for FY2025, with underlying PBT (profit before tax) growth ahead of volume growth.

“Cost control, self-help measures, higher asset utilisation and lower raw material costs will help to underpin profit improvement in FY2025. However, we are mindful that current trading conditions remain mixed, with continuing softness in Medical.

“As a result, profit growth will be weighted to the second half year. This reflects Medical and sales mix, the impact of currency – which is a £7m-£8m headwind to PBT for the year – being heavily weighted to H12025, and annualised costs from our new China facility.

“All of these factors are expected to limit our progress in the first half year, versus H12024.”

He added: “Victrex continues to have a strong long term investment proposition. We have a robust, diversified and increasingly differentiated core business, growing commercialisation in our mega-programmes, well invested assets, and the prospect of further cashflow improvement. Overall, we are well placed for the medium to longer term.”