Strong sterling taking toll on Avon Rubber

Melksham, UK – Avon Rubber plc has warned that the continued strength of sterling against the dollar will impact its results for the current financial year.

If exchange rates remained unchanged for the rest of the year, Avon expects the currency factor to reduce revenue and adjusted operating profit by 8%.

This compares to previously forecast reductions in sales and earnings of around 3%, the UK maker of rubber-based products noted in a 1 Feb trading update.

The group’s share price dipped by around 1% on the London Stock Exchange, to close at 1250p the day after the statement was issued.

Investors were, likely, somewhat reassured by positive comments from Avon regarding its order books and the benefits of recent US tax reforms.

For the current financial year, the effective US tax rate is anticipated to be down to around 14% – reflecting one-off factors – and 19% in future years, the UK group stated.

Overall, Avon said its current-year expectations remain on-track, with a positive start to the financial year and the continued strong order intake.

Avon reported a positive start to its financial year with trading in the four months to 31 January 2018 in line with forecasts.

Order intake at the group’s Avon Protection unit had remained strong and military business has building on a positive start to the year, said Avon.

Orders from the US department of defense have secured anticipated sales of M50 mask systems for the current year, the company added.

Avon’s ‘rest of the world’ military business has, meanwhile, noted promising demand for an ‘underwater rebreather’ and recently launched ‘powered air’ products.

There was also significant growth in orders for ‘law enforcement products, including ‘powered air’ products in Europe and rest of the world.

At Avon’s Dairy division, market conditions have remained positive in the year to date, with milk price softness being offset by lower feed prices.

“Revenue growth within precision control & intelligence and farm services [were] particularly strong,” said Avon.