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Avon Rubber Shares Plummet After US Defense and Army Contract Delays

Updated: 17 Dec 2020

Shares of engineering and manufacturing firm Avon Rubber (LON: AVON) plunged on Thursday after the company said that its contracts for the US Defense Logistics Agency Enhanced Small Arms Protective Inserts (DLA ESAPI) and U.S. Army Vital Torso Protection (VTP) body armour plates have been delayed.

The company said that it has been engaged with the two customers to complete the product approval processes, but they had been delayed due to “a failure encountered in First Article Testing.”

The UK-based business stated that they are now working with US DLA ESAPI and VTP to speed up the approval process. However, the delay means that the contracts will not commence until the first half of Avon’s financial year in 2022.

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“We are working collaboratively with our customers to resolve the delays to product approval for the DLA ESAPI and VTP contracts as quickly as possible. These contracts remain an important part of the ballistic protection portfolio and will be a significant contributor to the Group over the medium term,” commented Paul McDonald, Avon’s CEO.

The news saw Avon’s share price plummet as low as 2865p. Since the open, it has regained some losses and is now trading at 3280p, down 12.30% on the day.

LON: AVON

The company also provided a trading update confirming that trading has continued as expected in the first quarter of fiscal 2021 with “good order intake.” Avon was able to secure the first orders under its NATO Support & Procurement Agency Contract totalling $33 million, with follow on orders from the US Department of Defense.

The NATO order will see Avon supply Norway, Finland and Belgium with its respiratory protection including FM50 mask systems, filters, spare parts and accessories.

“The business continues to perform strongly, and our 2021 financial year will see further significant progress as a result of continued growth as well as the contribution from the recent Team Wendy acquisition,” stated McDonald.

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