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Investors in speciality chemicals company Synthomer (SYNT) are rather pleased with themselves this morning, and rightfully so after shares jumped over 15% to make fresh all-time highs above 400p.
Having reiterated FY guidance as recently as 9 November’s Q3 trading update (solid trading in Europe offsetting sluggishness in Asia linked to new capacity; Sterling providing translation boost to profits) management says positive Q3 trends continued into Q4 and that all geographies outperformed. Another leg down by GBP versus both USD and EUR, compounding longer-term downtrends, has also helped reduce average FX rates for the year to further flatter the bottom line.
All this obliges management to warn investors that full-year 2016 profits will in fact be better than even the top end of analyst expectations. A reverse profits warning if you like (rare, like a no-tweet day from Trump, but it does happen), although in the outlook “raw material and macroeconomic environments remain volatile”.
The question now is whether geographical trends continue to evolve positively. Oh, and where GBP goes in 2017. Expect politics on both sides of the pond and divergent central bank policy to keep this part of the equation exciting. Shares off their best levels, but still holding above their 410p opening lows.
Mike van Dulken, Head of Research, 20 Jan 2017
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