A manufacturer and distributor of reinforced polymer products. It operates in two segments, conveyor belting and advanced engineered products and is considered a world leader in reinforced polymer technology. I have a holding in my income portfolio (epic code: FENR).
FENR issued an IMS today stating that they have continued to make progress and, in the period under review, achieved revenue and earnings in line with management expectations. They stated that they expect to meet their guidance for the full year, made at the time they announced their interims back in April, which is the expectation for a small decline in EPS. They also reconfirmed a return to growth for next year.
FENR has been affected by two major areas:
The first is soft demand in North America, especially from coal producers, in the second half of 2012 that spilled over into the first half of this year. Order intake though had started to pick up and they comment in this release that order levels and revenues showed continuing improvement.
The second area was lower demand from the Australian mining industry, reflecting lower coal and iron ore prices. This appears to be continuing, although it was notable from this week's announcements from Rio Tinto and Bhp Billiton, that investment and production is increasing in their iron ore mines and logistical operations in Australia. It was also interesting that Rio Tinto had suffered from conveyor belt breakages that caused a three week delay in shipments at Cape Lambert, causing RIO to repair and bring forward their maintenance planned for later in the year. This underlines the critical nature of equipment that FENR sells and how delaying maintenance to save expenditure can have costly repercussions, not that I am implying that this is the reason for the RIO problem.
FENR's current valuation places them on a prospective P/E of just below 10 on a 2013/14 EPS range of 34.2-34.8p.
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