Why Shares In Fenner plc Plummeted

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of Fenner (LSE: FENR) — the FTSE 250 mining equipment manufacturer — fell 15% after a warning on profits in an unscheduled statement this morning. Fenner has previously made reference to the “cautious sentiment in the coal industry”, a situation which has since deteriorated, with no signs of an imminent improvement.

So what: Fenner’s pre-tax profit could fall by up to 15% relative to the market consensus of £77.6m.

CoalThe firm’s Engineered Conveyor Systems (ECS) business, which makes belts, drives, pulleys and other products for the mining industry, is expected to see significantly weaker results in the USA than anticipated.

In the six months to February Fenner’s revenues declined 8% to £360m while pre-tax profits slumped by a third to £17.6m.

Meanwhile, in Australia, trading conditions generally continue to improve. However, Fenner failed to strike a deal to strike with an unnamed Australian company to manufacture and deliver a conveyor belt later in the year. Fenner was “confused and bemused” as to the reason it didn’t get the contract with the Australian iron ore company

Now what: Analysts at Investec have cut its target price from from 360p to 320p. Until there’s a favourable change from the mining sector the shares will continue to be pressured.

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Mark does not own shares in Fenner.