Zotefoams confident in meeting full-year expectations

(Sharecast News) - Zotefoams reported a robust trading performance for the first nine months of the year on Monday, with year-to-date sales ahead 23% at £110.7m, compared to the same period last year. The London-listed firm said sales in the third quarter rose significantly, up 54% to £39.7m, driven by strong volume growth in footwear and 'Zotek' technical foams, along with steady performance in polyolefin foams.

Its footwear segment, which represented nearly half of third-quarter sales, saw a 60% year-to-date volume increase due to high demand linked to the Olympic year, the expansion into basketball products, and restocking by tier-one suppliers.

Zotek volumes increased 29%, while 'T-Fit' advanced insulation and polyolefin foams showed modest growth, with a 1% rise each.

Despite the surge in demand, Zotefoams said it expected footwear orders would normalise in 2025 as the group's primary customer completed supply chain adjustments, although longer-term growth opportunities remained.

Margins across the group remained strong, supported by strategic pricing, product mix adjustments, and cost normalisation, although wage inflation and investment in global operations had added some cost pressures.

Zotefoams said it was investing in its 'ReZorce' recyclable barrier technology, with operating costs slightly higher year-on-year.

The company said it was advancing technical testing and was actively seeking a strategic partner to support the commercial-scale production of ReZorce, given the significant capital needed.

Looking ahead, Zotefoams was optimistic about achieving significant revenue growth for 2024, driven by solid order visibility across most business units.

Margins in its foams segments were expected to hold steady, balancing benefits from product mix and volume growth against investments and higher staffing costs.

The MEL business unit, however, was expected to report a full-year loss, largely due to ongoing ReZorce development costs.

Zotefoams' board said it remained confident in the group's outlook, and expects both revenue and adjusted profit before tax to meet market expectations for the year, barring any unforeseen disruptions.

"As world leaders in supercritical foams, our positive third quarter performance further validates the strength of our core technology and market position," said group chief executive officer Ronan Cox.

"The 23% year-to-date sales growth demonstrates our ability to leverage this foundation across multiple markets, particularly evident in our exceptional footwear performance and continued progress in technical foams.

"We are building from this position of leadership and technical excellence to expand our reach and impact."

Cox said the firm's recent technical agreement with Shincell represented an "important strategic step", enhancing the company's capabilities in the footwear market and providing new opportunities to extend its manufacturing footprint internationally.

"We are also strengthening our organisation with key appointments expected by the year end that will accelerate our transition to a market-led approach, allowing us to identify and capture new opportunities that build naturally from our core capabilities.

"While we continue to progress the development of ReZorce and explore potential strategic partnerships for its commercialisation, our primary focus remains on expanding our leadership in our core supercritical foam technologies, where we see significant growth opportunities.

"This focus, combined with increased investment in innovation and operational excellence, will enable us to extend our leadership in supercritical foams into adjacent markets and applications."

Looking ahead, Ronan Cox said the company's order book provided good visibility for the rest of 2024.

"While we expect footwear demand to normalise during 2025, we are actively engaging with our key footwear customers to capture emerging opportunities from their evolving supply chain strategies.

"Despite ongoing inflationary pressures, our operational discipline and market leadership continue to deliver value.

"As a result, the Board remains confident in its ability to meet market expectations for the full year."

At 1132 GMT, shares in Zotefoams were up 1.36% at 360.85p.

Reporting by Josh White for Sharecast.com.