Profit warning at manufacturer following contract cancellation

Technical plastics manufacturer, Carclo, warns its profits for the second half of this financial year will be lower than previous expectations following the cancellation of a key supply contract worth up to £15m a year.

The Ossett-based business says “constructive discussions” are ongoing with the customer regarding an appropriate commercial settlement following the cancellation, which was first reported on 7 December.

Carclo adds that its lending bank remains supportive and is actively engaged with the group to discuss what amendments may be required to address the impact on its banking covenants.

The group’s 10-year framework deal had originally been struck with a major global OEM in late 2020 for the supply of a range of components for use in its laboratory-based PCR diagnostic systems.

Carclo, which has annual sales of £130m, said that at full production rates these contracts were expected to deliver incremental sales of between £10m and £15m annually for the life of the agreement.

It had expected production volumes would start building from the last quarter of the current financial year.