Shares of Renold plc, the Manchester-based industrial chain and power transmission firm, fell about 10% on Friday amid a trading update on the impact of the coronavirus outbreak on the group’s performance in the year ending March 31, 2020.
Renold said it had been on track to deliver an adjusted operating profit for the year in line with current market expectations — but the the outbreak of the coronavirus is having a direct impact on some of the group’s operations.
“Most notably, this resulted in an extension of the Spring Festival shutdown of our Chinese factory by almost a month,” said Renold.
“Whilst we are pleased to report that the Chinese factory has reopened, staffing levels are not yet fully recovered due to continuing limitations on the movement of employees.
“In addition, the extensive disruption and the limited visibility of third party supply chains into both the Chinese factory and our Australasian chain business, means that there remains uncertainty as to the performance of these business units over the coming months.
“We are working closely with customers and suppliers to mitigate the impact of these factors but now expect there will be a profit drag across February and March that will not be recoverable before the end of the year.
“As a result and whilst mindful of the ongoing uncertainty, the board estimates, based on current information, that the effects described above are likely to reduce adjusted operating profit by approximately £1m in the year to 31 March 2020.”
Renold CEO Robert Purcell said: “While the current year has been a challenging one, with difficult underlying markets, the improvements being delivered within the business are supporting our profitability.
“However, the impact of Coronavirus, with the extended shutdown of one of our major factories and continuing uncertainty over Chinese supply chains, has happened close to the end of our financial year and there is no opportunity to recover the operating profit shortfall before March 31st.
“Whilst market conditions remain challenging in the near term and a level of uncertainty remains over the longer-term implications of Coronavirus on our business, we are encouraged by the positive impact of our ongoing strategic initiatives.”