McBride Plc (“McBride”, the “Company” or the “Group”)
Trading Update
5 May 2021
McBride, the leading European manufacturer and supplier of Private Label and Contract Manufactured products for the domestic household and professional cleaning/hygiene markets, provides the following trading update.
In our half year results on 23 February 2021, our outlook noted increasing input costs. During most of the first quarter of 2021 we have seen increases in line with our expectations. However, in recent weeks there has been further rapid, significant and sustained price escalation for many of our raw materials, particularly core chemicals and plastics. Our current view is that we will see further double-digit increases on average across these materials and packaging items by June 2021 – more than double the rates of increase expected in mid-March 2021. Additionally, we do not see these prices returning to more normalised levels in the near future. Whilst these increases are evident across a number of the divisions, it is most impactful in our Liquids division.
Revenue volatility continues to be a challenge in most of our markets. Since our half year results, demand for auto-dishwash products has remained strong but volumes in household cleaners have been normalising from the peaks seen in 2020. Additionally, sales of laundry and personal care products have remained very subdued across the Group's main markets. With lockdowns lasting longer and still in place across many of our markets, we do not now expect certain category volumes to pick up in the balance of the financial year and therefore the Liquids and Aerosols businesses have reduced their demand outlook for the final quarter. As a result, the Group now expects second half constant currency revenues to be approximately 6% lower year on year.
Consequently the final quarter of trading for the current financial year ending 30 June 2021 is expected to be significantly weaker than the first nine months of the financial year and our full year profits (measured by EBITA) are now expected to be approximately 15% lower than the previous year.
The Group has moved swiftly to enact margin recovery measures, with targeted price increases and product engineering options in development. A number of cost initiatives are being accelerated, with these actions expected to deliver value in the first half of next year. Whilst the Group has made progress in the past few years to increase forward pricing cover for materials, we will look to extend this further
This significant inflation impact is not expected to reset the direction for the Group under its new Compass strategy, nor change its mid-term ambitions. Indeed, this current challenge will be better managed by the new divisional structure as the response from each division can, and will, be different, with the new local management teams leading the mitigation actions. The divisions remain fully engaged with activities in support of their medium-term strategies.
At this stage, in light of the extreme volatility in material pricing, the Group is not providing any update to guidance for next financial year. We would expect to update our outlook in September 2021 in our preliminary results announcement.