Avon Rubber has confirmed that despite difficult market conditions, trading in the year to September is expected to be in line with market expectations. Encouragingly, prospects for Protection & Defence remain strong and in Dairy milk prices appear to have started to recover during the final quarter. The statement should allay any concerns that major orders only originate in the Middle East, with the announcement of a $9m order for a US police department. Encouragingly negotiations are continuing with respect to the significant Middle East export potentials. The outlook for accelerating growth in 2017 appears to be increasingly underpinned.
In Protection & Defence the company continues to work through the major multiyear contract for JSPGM M50 mask systems. While neither of the anticipated Middle East export contracts has yet been awarded, these are still expected to materialise in FY17. In addition, the company has won a $9m order for the now approved CBRN/CO Escape Hood for delivery to a police department in the US before the year end.
In Dairy, there are encouraging signs that milk price weakness may have bottomed out. InterPuls new product penetration of the US is also starting to bear fruit, with initial sales booked in Q4. Improving milk prices should lead to increased demand as the company enters FY17.
Our forecasts and valuation remain unchanged. The company will release FY results on 16 November 2016.