Over the past 3 months the key US ISM Manufacturing index has contracted sharply due to the destabilising effect of Trump’s tariffs and the wider geopolitical turmoil. In essence, why would corporates choose to build a new production line or factory, when they have little to no idea where ultimately the trade winds might blow.
Not surprisingly this demand ‘air-pocket’ has affected Mpac Group. A ‘One Stop Shop’ for all things high-speed packaging and factory automation – who said today that order intake had materially slowed in Q2 (particularly in the US), despite H1’25 results being in line with expectations.
As such, FY25 revenue and underlying PBT are now anticipated to fall below the Board’s previous expectations – with net debt (pre IFRS leases) slightly higher and the June orderbook closing at approx. £90m vs £118.5m in Dec’24.
That said, the group has responded quickly - deciding to close its Cleveland facility, and transfer the associated volume to its other US site in Boston. Elsewhere capacity at Mississauga Canada is also being reduced, with the aim of protecting overall profit margins, alongside stream-lining operations. A £11.5m non cash impairment charge will be incurred in H1.
Further potential cost cutting measures will also be considered if macro conditions worsen.
Importantly for investors though, is this should simply be a temporary effect. Orders haven’t been cancelled, simply deferred. Plus the services business has remained broadly unaffected, and both of the 2024 acquisitions (BCA and CSi) continue to trade well and in line with expectations". The Group also expects to remain comfortably within its banking covenants.
CEO Adam Holland commenting "During the later part of H1'25 we have seen the impact of US trade tariffs, falling consumer confidence, and growing economic uncertainty. Customers have increasingly chosen to defer capital investment decisions, with the Americas being at the epicentre and other regions less impacted to date. Despite resilient H1 revenues, the slow down in order intake means that we must take prompt action now, in anticipation of lower full year revenues and profit than previously expected.”