UK-based Chemring Group said that it will be divesting units to enhance its financial position after weak sales and revisions made to its profit estimates. Based in Fareham, England, Chemring's operations are in the pyrotechnics, munitions, explosive ordinance disposal and countermeasures markets, giving solutions in the defense, safety and security industries.
In a statement, Chemring said that there were businesses in the group that no longer coincide with the company's long-term strategy. However, the company did not state what assets it will be offering up for sale. Last month, the firm reduced this fiscal year's operating profit forecast by GBP 8 million. Chemring cited issues with quality and production and the development of an unfavorable exchange rate, Bloomberg reported. The amendment was the first done by Chief Executive Officer Mark Papworth. He took the helm from his predecessor David Price.
Papworth said, "We continue to take the necessary steps to give Chemring a stable platform and rebuild shareholder value. The defense environment remains undeniably challenging."
The announcement caused Chemring shares to increase the most in 15 months. In London trading, the shares jumped 14% to 222 pence a share. The company's stock had decreased 15% this year, Bloomberg reported.
Chemring posted sales of about GBP 185 million or USD 300 million in the fourth quarter. This represented a decline of 24% compared with the sales the year before. Chemring also said that its orders book declined 8% to GBP 702 million as of October 31. However, the fallout spawned by delivery delays to a customer in the Middle East was mitigated by the GBP 14 million payment the company received last month when its financial year came to an end.
Chemring added that business in its countermeasures unit is near its minimum sustaining level. The company added that they are undertaking efforts to enhance the terms of the contracts in their pyrotechnics and munitions segments.
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