Castings Share Price Tumbles as Demand Drops Further in Q3

Castings PLC (LON: CGS) shares fell sharply Tuesday after the company issued a trading update warning of weaker-than-expected profitability due to declining demand in the heavy truck market, which accounts for approximately 75% of its revenue.

The stock is currently down over 10% at 258p after initially opening the session at 230p a share. 

Castings had previously reported a 20% decline in demand for heavy trucks compared to the previous year. 

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However, the company revealed that demand dropped further in the third quarter, though early signs indicate some recovery in the final quarter. 

As a result, profitability for its foundry and machining businesses is expected to fall below market expectations.

Adding to its financial pressures, Castings faced higher-than-expected electricity costs due to penalties on forward-purchased power that was not needed amid the production slowdown. 

Additionally, start-up costs and trading losses from its new Scunthorpe business further weighed on results.

Despite the setbacks, Castings expects no further impact from electricity costs in the next financial year and anticipates that its Scunthorpe operations will turn profitable in the coming months.

Looking ahead, the company pointed to positive signs from major customers, who have recently reported rising sales orders, which could boost Castings’ sales volumes early next year.

While the company’s balance sheet remains strong, the warning that full-year results will be “substantially below market expectations” has spooked investors.