Essentra Slides as Macro Headwinds Weigh

Essentra (LON: ESNT) shares fell in early Friday trading after the company said in a trading update for the 12 months ended December 31 that in the fourth quarter, slower global economic growth resulted in toughening market headwinds.

Alongside a strong comparative for the quarter, like-for-like trading day adjusted sales declined by around 3% compared to the previous year.

Essentra explained that performance in Q4 has varied by region, with its European business continuing to deliver growth at moderated levels, but its US business impacted by more significant headwinds, with signs of distributor destocking and cost inflation having an impact.

Furthermore, the company's business in Asia has seen a continuation of disrupted trading in China due to enforced lockdowns. However, it has shown signs of easing through H1 2023 as a result of a change in direction to China's zero-Covid policy.

Essentra shares are down more than 8% at around the 215p mark.

“Management remains confident in the business' ability to pass through price increases to offset cost inflation, and the underlying business operations remain strong,” the company said in its statement. “There continues to be an improvement in customer satisfaction and service levels through Essentra's ongoing focus on enhancing its hassle-free proposition.”

Looking ahead, Essentra said it continues to monitor the macroeconomic outlook. It expects to deliver full-year like-for-like revenue growth of around 6.5%, while FY2022 adjusted operating profit remains in line with expectations.