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Accrol Group’s share price crashes on profit warning!

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The Accrol Group Holdings (LSE: ACROL) share price plummeted on Wednesday after the release of a fresh profit warning. At 38.9p per share the toilet tissue manufacturer was recently down 14% on the day. It’s now down 18% over the past year.

Accrol Group has been battered by rising input costs in recent times. And today it noted that “pressures on the group’s raw material supply chains have been considerable with further tightening in recent weeks.” The penny stock said that rising energy costs, material shortages and general inflationary pressures have impacted pulp and parent reel production costs.

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Furthermore, it said that a shortage of HGV drivers has pushed costs even higher while also restricting revenue growth.

Accrol warns on profits

Accrol said that while “these cost increases are successfully being passed on… there will be a time lag in passing on the full impact.” As a consequence the business reckons earnings for the full year to April 2022 will be lower than expected.

Revenues are now expected to rise 25% year-on-year, it said. And adjusted EBITDA is predicted to advance around 20%. Passing on of these higher costs, combined with operational efficiencies, will result in EBITDA margins similar to last year’s levels of 11.4%.

In other news Accrol noted that demand for discount goods in the UK hygiene sector “continues to see slow but steady improvement”. It added that its liquidity and cash flow position remains “robust.” Adjusted net debt is tipped to remain in line with market expectations.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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