Essentra in ‘grave danger’ of losing FTSE 250 spot as shares crater on lowered expectations

Essentra, lowered its 2024 full year operating forecast, as its shares cratered by almost 20 per cent this morning.

The company lowered its expectations, from the previous range of £48.4m-£49.7m to an estimated operating profit of £40m – £42m.

This was put down to the impact of adverse foreign exchange translation of around £2m.

Following its results this morning analysts warned it was even in danger of falling out the FTSE 250, following a prolonged period where its share price had suffered.

The group previously anticipated further modest improvement in volumes in the second half of the financial year 2024 due to an ongoing recovery of demand across end-markets. 

Essentra indicated that market conditions and its end-markets were mixed by region, with modest sequential improvement in volume trends seen in the first half of 2024.

Yet, market conditions in Europe have since softened.

The FTSE 250-listed firm said it remains confident in its business model, saying it was in a good position to benefit from high levels of operational leverage when normalised growth returns.

Investors were not impressed however, with the firm’s shares plummeting this morning. Its share price dropped by 19.38 per cent by just before 11am, to £134.80.

The firm’s share price has suffered for a long time, down more than 20 per cent by year-to-date, and almost 70 per cent in the last five years, since the pandemic.

The firm has previously talked about “supply chain headwinds” caused after the pandemic in particular.

On 24 October 2024, the company will release its Q3 results for the three months ending 28 September 2024.

Russ Mould, investment director at AJ Bell commented on its results, saying: “Approximately £100 million has been wiped off the value of Essentra, amounting to a fifth of its market value, after the manufacturer warned of weak market conditions in Europe.”

This share price slump means Essentra is in grave danger of losing its place in the FTSE 250 at the next index reshuffle unless it can pull a rabbit out of the hat over the next three months and drive a share price recovery.

“Essentra is no stranger to profit warnings and last year flagged a slowdown in trade. Despite expressing confidence earlier this year that volumes would improve, the big recovery hasn’t lived up to expectations.”