Renold says profits will be hit by weaker sales

RENOLD, the industrial chains and power transmission products group
has reported a “softening” of demand in its first quarter trading which will dent profits.

The Manchester-based group said macro-economic uncertainty in a number of territories had triggered a “marginal overall reduction in sales”
and this will mean profit growth will be “at a level which is below current market expectations.”

The group said sales in Switzerland in particular had continued to be impacted by the relative strength of the Swiss Franc and meant Chain sales as a whole being below the level achieved in the same quarter of the prior year.

Despite reporting a healthy pipeline in the Torque Transmission division, Renold said the unit had seen a “slight overall decline in sales” after a reduction in demand in South Africa.

It added: “Ongoing cost control has partially mitigated the impact of the lost contribution from lower sales.  This includes the European back-office restructuring programme which continues to progress well.

Our continuous improvement programme, covering all aspects of working capital, combined with careful management of the other components of cash flow, delivered cash generation and debt levels better than expectations and significantly better than the same period in the prior year.”

Commenting on the update David Gorman, a director at Manchester stockbrokers Milkstone said; “Given the tough economic conditions in most markets, we always felt that consensus forecasts for Renold were a little optimistic and today’s announcement is a minor profits warning.

“The company has a good management team which is doing the right things so today might be a good day to pick up some shares.”