A rise in raw material costs caused by US hurricanes and a fall in higher value projects are said to be the causes.
Companies: Low & Bonar
Low & Bonar (LON: LWB) has today released a trading update outlining the Group's performance since the beginning of May, which has seen some mixed results.
Raw material prices have remained higher than anticipated in H2, caused by a number of factors including the impact of the recent US hurricanes.
The Group's Civil Engineering division has also had a challenging H2, with an adverse sales mix caused by a drop in "demand for higher value specification projects". The announcement then went on to say:
"Consequently, the expected improvement in financial performance and anticipated material reduction in inventory levels in the second half will not be achieved. Therefore, Civil Engineering is now not expected to make a profit for the year as a whole."
This news caused the stock to dive 18% to 64p on Monday morning.
Management did say, however, that their Building and Industrial, as well as the Interior and Transportation divisions both continue to perform well.
Low and Bonar's share price has risen and fallen many times in the past several years, and had been growing steadily in the past 12 months until today's profit warning sent the stock falling.
The Group trades at a PE ratio exactly that of the industry median of 10x, and has a current market cap of £263m. Average yearly revenue growth has been just 0.6% for the five years to 2016 while Net Profits have fluctuated between £1 and £21m.
