Components maker Essentra has swung to a hefty annual loss after taking a significant impairment charge from selling its packaging business.
The FTSE 250 company, which manufactures moulded plastics and custom hinges, among other products, reported a £183.8million loss for 2022, having recorded a £28.3million profit the previous year.
In the fourth quarter of last year, the Milton Keynes-based group finalised the sale of its filters and packaging divisions, incurring a £182.7million goodwill charge from the former business and leaving it as a solely components-led operation.
Strategic move: Essentra completed the transition to being a pure-play components business after selling its packaging and filters divisions in the second half of last year
Its packaging segment was acquired for £262million by Austrian manufacturer Mayr-Melnhof Group, while the filters arm was bought for £312million by Frank Acquisition Four, a subsidiary of Centaury Management.
From its continued operations, Essentra revealed losses climbed more than six-fold to £31.1million as it recognised central costs that were formerly allocated to the discontinued operations and incurred higher net interest debt costs.
Yet the disposals meant the firm was able to hand investors £150million through a special dividend and share buybacks, and post net cash of £113.8million at the end of December, compared to net debt of £234.7million at the end of 2021.
Chief executive Scott Fawcett said: ‘While 2022 brought a number of changes for the organisation as a whole, it has laid the foundations to capture future growth opportunities.
‘We have continued to invest organically and inorganically, supporting the business to make progress commercially, whilst maintaining strong operating margins.’
Essentra’s sales increased by 9.5 per cent at constant currency levels to £338million last year amid a recovery in demand from the Americas and Europe.
The group also protected margins by implementing price hikes to offset rising costs from freight, labour, energy and materials.
Trading was impacted by draconian Covid-19 restrictions in China and distributor destocking in the US.
But the company said China’s loosening of lockdown restrictions would benefit the business, while demand in Europe remained healthy and new orders so far this year were 8 per cent ahead of 2022 volumes on a like-for-like basis.
Essentra shares were up 0.9 per cent to 179p on Wednesday morning, although their value has contracted by around 44 per cent in the past 12 months.
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