The Investment Column: Molins shares head south...
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Molins shares head south
What horrible things must Molins have done in a former life to warrant its fate this year? The company, which makes machines for producing cigarettes and PG Tips' tetrahedron tea-bags, yesterday announced its fifth profits warning of 1997. Is that a record? Though Peter Harrisson, chief executive, says he is not counting warnings, investors will be. Shares in the company have taken a largely uninterrupted slide downhill since their 1037p high in 1996.
After increasingly grave statements about trading in ... take a breath ... March, April, July and September and escalating costs related to dodgy accounting in the US, yesterday's trading news of worse-than-expected demand from China, nervous US customers ahead of a tobacco litigation settlement and 500 job cuts in the UK, felt like the final straw. Shares in Molins slumped 72.5p to 327.5p.
What is going on? The main problem is China, the world's biggest tobacco machinery market and a heck of a big customer for Molins, which with Germany's Hauni, is one of the few suppliers of cigarette machines around. As part of a crackdown on corruption rife in China's tobacco industry, its 180- odd cigarette factories are being cleaned up and consolidated. That has meant a hold on orders for machines.
Though the Chinese government promises Molins that things will return to normal "soon", that has yet to happen. So Molins has responded by cutting a quarter of its tobacco machinery workforce to meet demand and says a pounds 30m provision this year will go to reducing costs and improving efficiency.
That is welcome, but would have made a better impression if it had been done ahead of the problem not in the middle of it. It is a sobering thought that at the start of 1997, analysts expected Molins to make almost pounds 40m of profits this year. Brokers are now going for a pounds 20m full-year loss or pounds 11m profit pre-exceptionals, down pounds 4m on previous numbers. The shares are on 18 times earnings for 1997. With investors facing prospects of a held dividend and continued uncertainty, avoid.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments