Shares of Blackburn-based toilet roll and tissue maker Accrol Group fell about 15% on Wednesday after the firm published a trading update for its current financial year warning on the impact of problems with its raw material supply chains, higher energy prices and the shortage of truck drivers.
“In line with the wider market, pressures on the group’s raw material supply chains have been considerable with further tightening in recent weeks,” said Accrol.
“Pulp and parent reel production costs have been impacted across the world by energy cost increases, input shortages, and general inflationary pressures.
“Whilst the group’s supply chain has shown significant resilience and supply shortages have been managed, considerable cost increases had to be absorbed in the short term.
“In addition, distribution pressures, notably the availability of HGV drivers, which served to increase costs further, have restricted revenue growth in FY22.
“These cost increases are successfully being passed on, albeit there will be a time lag in passing on the full impact, resulting in earnings in FY22 being lower than previously expected.
“Overall, operational efficiencies and integration synergies, together with the successful passing on of cost increases, will enable the group to deliver FY22 percentage EBITDA margins in line with those achieved in FY21.
“The market share recovery of the UK discount retail sector within the hygiene category continues to see slow but steady improvement.
“The group is maintaining its discipline of targeting only higher value business and avoiding long-term fixed price agreements, especially in this period of volatility.
“This continues to ensure that revenue growth is of good quality.
“As previously indicated, revenues and earnings for FY22 remain weighted to the second half of the financial year.
“The board now expects year-on-year revenue growth to be c.25% on FY21 (FY21: £136.6m) and adjusted EBITDA in FY22 to improve by c.20% (FY21: £15.6m).
“The short-term external challenges facing the business have no effect on the ongoing execution of the group’s strategy.
“The business remains in excellent operational shape with scalable foundations for growth and a strong market position across UK retail.
“Accrol remains well placed to benefit from the ongoing recovery in volumes in the discount sector and a more stable cost environment, as the full effects of the pandemic and broader supply chain and distribution constraints unwind.
“The group continues to operate within its banking covenants and the group’s liquidity and cash flow position remain robust with adjusted net debt expected to remain in line with current market expectations.
“A further update will be provided at the group’s H1 22 results, which will be announced in mid-January 2022.”