Somero lowers expectations after tough first half

30th Jul 2024 13:11

(Sharecast News) - Somero Enterprises said in a trading update on Tuesday that, while the broad US non-residential construction market remained healthy, its recent trading in North America had been impacted by project start delays and pauses due to elevated interest rates, labour shortages and concrete rationing.

The AIM-traded firm added that significant inclement weather in the first half of 2024 also contributed to lower trading levels compared to the first six months of 2023.

In Europe, positive non-residential construction market conditions led to trading in the first half being comparable to the same period in 2023.

However, Australia experienced project delays due to inclement weather, resulting in a decline from a record performance in the first half of last year.

The rest-of-world segment saw decreased trading compared to last year, primarily due to lower sales volumes in the Middle East and Latin America.

Looking ahead, Somero anticipated an improvement in the second half over the first, driven by new product revenue growth, including the launch of a third new machine, and expected better weather conditions.

However, in light of the anticipated reduction in 2024 revenue, the company initiated a 15% workforce reduction and implemented cost controls to offset the impact on profitability.

As a result, Somero said it now expected 2024 revenue of about $110m, down from the previous market consensus estimate of $120.7m.

EBITDA was projected to be around $30m, compared to the previous estimate of $34m, and year-end cash was expected to be about $27m, down from the previous estimate of $31.7m.

"Despite the impact of persistent challenges and poor weather conditions on trading in the first half, the non-residential construction market remains fundamentally sound," said president and chief executive officer Jack Cooney.

"Importantly, the long-term growth drivers remain intact and we are working hard to expand our product offering and build our presence internationally to capitalize.

"As those factors outside our control abate, we would expect performance to improve."

Cooney said that in the meantime, Somero was built to withstand challenging conditions.

"We have a solid track record of adapting to changing conditions and then emerging strongly."

At 1250 BST, shares in Somero Enterprises were down 7.43% at 324p.

Reporting by Josh White for Sharecast.com.