Avon Protection shares plummet as supply chain disruption and order slowdown drive helmet maker to a $14m loss
- The respiratory protection equipment maker posted a $13.6m pre-tax loss
- Paul McDonald is departing as chief executive after five years in his position
- Profits were partly impacted by lower purchases of its first responder products
Avon Protection shares took another tumble on the London markets this morning after the group fell to a first-half loss.
The respiratory protection equipment maker’s shares plunged 14.3 per cent, as it revealed a heavy blow from supply chain problems and a slowdown in orders.
Avon Protection posted a $13.6million pre-tax loss from continuing operations in the six months to early April, compared to profits of $0.4million in the equivalent period last year.
Lossmaking: The respiratory protection equipment manufacturer posted a $13.6million pre-tax loss from continuing operations in the six months to early April
Earnings were negatively impacted by rising employee, manufacturing, and freight costs, and lower purchases of its first responder products, which tend to be its highest-margin business.
Performance was also dented by a long delay in agreeing on the US Government’s federal budget and the resulting effect on major customers dependent on public spending, especially the US Department of Defense (DOD).
This caused the department to hold back on orders, which lead to Avon’s revenues from this division diving by 32.5 per cent to $43.5million.
However, the expects this to gradually turn around in the second half of the financial year.
Chief executive Paul McDonald said the period was one of ‘both challenge and opportunity…While we have experienced some specific issues impacting profitability, they have been identified. We are working proactively to address them.”
By contrast, its UK and international business sales climbed by about three-quarters to $45.2million ,thanks to the 10-year contract it won from NATO in October 2020 to supply its CBRN personal respirator system.
Due to Russia’s full-scale invasion of Ukraine, the Wiltshire-based company forecasts higher demand in both the medium and long term for personal protective equipment across NATO member countries.
At the start of April, its order book totalled $110.7million, lower than the record amount posted at the end of September, but providing the company with ‘good visibility’.
Paul McDonald added: ‘The requirement for our world-leading, high-tech products has never been stronger. Our global customers are adjusting to the structurally higher threat environment and, against this backdrop, we remain confident in a return to growth.’
Avon also revealed that McDonald will step down as boss at the end of the fiscal year after spending five years in his role and almost two decades with the company.
During his time in charge, he changed the group’s name from Avon Rubber, sold its milking products business, and oversaw two significant and consequential acquisitions.
One of them was Ohio-based helmet protection firm Team Wendy, which helped boost first-half sales in Avon’s Commercial Americas division by around 10 per cent to $30.7million.
However, the purchase of the body armour division of consumer goods conglomerate 3M led to considerable trouble for the manufacturer, including a substantial decline in its share price.
Tests conducted in December 2020 and October last year revealed some defects in the company’s bulletproof vests, leading to delays in product approvals and the publication of its full-year results.
Following a strategy review, Avon eventually announced that it would be winding down its body armour business over two years at a potential cost of $46million.