Victrex Earnings: Shares Drop on Weak Volumes

Narrow-moat Victrex VCT reported first-half profit before taxes of GBP 43 million, down 15% in constant currency terms versus the prior-year period. Average selling prices were up a strong 18% due to pricing actions, mix, and foreign exchange. However, the 14% decline in volumes was below previous company expectations, which is likely the reason shares were down 8%-10% intraday as the full-year company compiled consensus estimates now look out of reach. We expect to trim our near-term estimates but don’t expect to make a material change to our GBX 2,100 fair value estimate. At current levels, the shares look undervalued.

Industrial volumes declined due to macro weakness, which particularly impacted electronics, industrial and energy, and value added resellers. In contrast, good growth was seen in aerospace and automotive. Overall, we expect volumes to remain weak for the balance of the fiscal year given limited indications of near-term economic improvement. The new China production facility commissioning remains on track for start-up in 2023.

Medical continues to deliver solid performance with revenue up 6% and gross profit up 1% in the first half. This was primarily driven by a further recovery in elective surgeries and new application growth. The Asia-Pacific region continues to deliver high growth, with revenue up 32% over the prior-year period.