Synthomer stock rises on 1Q25 EBITDA gains

Investing.com -- Shares of Synthomer (LON:SYNTS) (LSE:SYNT) climbed 5% today following the company’s first quarter trading update, which revealed an increase in EBITDA supported by improved pricing and cost savings.

The update, presented ahead of the Annual General Meeting (AGM), indicated that Synthomer’s EBITDA and margins for the first quarter outperformed those of the same period last year, despite slightly lower volumes.

The company attributed its positive performance to a combination of better pricing, cost savings, and a decrease in raw material prices. Organic sales growth and margin improvement within the Adhesive Solutions and Health & Protection and Performance Materials (HPPM) divisions contributed significantly to the EBITDA rise.

However, the Coatings & Construction Solutions division faced challenges due to a slowdown in US end markets, which was partly mitigated by an uptick in European construction activity.

Synthomer’s management also commented on the company’s strategic approach to manufacturing, which is designed to withstand a protectionist market environment with minimal direct impact from tariffs. This strategy has been particularly advantageous for the Malaysian glove manufacturers, a key customer segment for the company’s nitrile latex products in the HPPM division, as they potentially benefit from US tariff disparities affecting their main competitors in China.

Looking forward, Synthomer’s management reiterated their fiscal year 2025 guidance, which was initially set forth in the second half of 2024 results. They expect limited improvement in end-market demand, with cost reductions estimated to be between £25-30 million and cost headwinds projected to be lower than in 2024.

The anticipated positive free cash flow (FCF) for 2025 is primarily driven by these cost savings. To achieve the consensus estimate for FY25 EBITDA of £166 million, the company acknowledges that some recovery throughout the year will be necessary, given the annualized second-half 2024 EBITDA implies an estimate of approximately £144 million for 2025.

UBS analysts have weighed in on the trading update and guidance, stating, "We would expect the share price to react positively to the trading statement and the reiteration of the 2025 guidance."

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