Zotefoams plc (LON:ZTF), a world leader in cellular materials technology, has provided a trading update for the Group’s financial year ended 31 December 2023 (unaudited).
Consistent with the Group’s update of 7 November 2023, the Group expects to report full year revenue in line with current market expectations and similar to the previous year at £127.0m (2022: £127.4m).
Adjusted profit before tax1 for the year is expected to be £13.1m (2022: £12.5m), which is a Group record and approximately 5% ahead of current market expectations2.
This record profit figure, on an adjusted basis, comprises two distinct elements:
| · | A 21% increase in the combined segment profitability of polyolefin and HPP business units (the “foams business units”) to £17.1m (2022: £14.1m), with product range management and cost efficiencies delivering improved margins in polyolefin foams as well as continued growth in the higher margin HPP business unit |
| · | A segment loss of £4.1m in the MuCell Extrusion (MEL) business unit (2022: £1.6m loss), as the Group invests in preparation for in-market trials in Q1 2024 following positive progress in the development of our award-winning ReZorce® packaging technology. |
Year-on-year performance for the specific Group’s business units, with negligible impact from foreign currency movements, were as follows:
| · | 7% growth in High Performance Product (HPP) sales to £58.2m (2022: £54.5m) |
| · | 4% decline in AZOTE® polyolefin sales to £67.5m (2022: £70.1m) |
| · | 57% decline in MEL sales to £1.2m (2022: £2.8m), with most of the business unit resources focusing on the development of ReZorce mono-material packaging. |
In response to increasing opportunities in the region, the Group has committed to further development of its USA foam manufacturing site in Kentucky, with investment in a second low-pressure autoclave and increased warehouse space. This reflects a significant capital investment of approximately £10m, will be funded from existing cash resources and is expected to be completed around mid-2025.
The Group balance sheet remains strong, with significant financial headroom and a year-end leverage multiple3 expected to remain unchanged at approximately 1.2x (2022: 1.2x) affording flexibility to execute on the Group’s strategic plans.
Commenting on the update David Stirling, Group CEO of Zotefoams, said:
“We are delighted to close the year with sales in line with market expectations and record profits ahead of market expectations. The Group has recovered and stabilised margins in its polyolefin foams business and continued to grow sales from its higher margin high-performance products.
“The development of ReZorce mono-material packaging is nearing commercial market trials, with the associated requirement of investment in food-safe scale up. Successful trials would offer brands, retailers and regulators proof of a circular-economy solution for aseptic beverage packaging and the route to a global opportunity for our highly differentiated and sustainable technology.
“Overall, Zotefoams has a clear strategy with a growing range of products, an increasingly global footprint and strong ESG credentials, meaning it is well positioned to deliver further profitable growth.”
1 The adjustment to reported numbers, related to amortisation on acquired intangibles, is £0.3m (2022: £0.3m) and relates exclusively to MuCell Extrusion LLC.
2 Current Zotefoams-compiled consensus expectations for adjusted profit before income tax, for the year ending 31 December 2023 prior to this announcement, was £12.5m.
3 Leverage multiple is calculated as Group net debt divided by EBITDA, where Group net debt is adjusted from IFRS by the impacts of IFRS2 and IFRS16 under the bank facility definition.
Notice of results
Zotefoams expects to publish its preliminary results for the year ended 31 December 2023 on Tuesday 19 March 2024.
