FoaMasters International Ltd reported lower profits due to tough export markets and the additional costs of being quoted on Aim.
The China-based foam manufacturer is turning its attention to its home market. This started to pay off in the second quarter when gross margins started to recover.
FoaMasters increased its revenues by 3% to $45.5m in the six months to June 2008. Foam output was flat at 14,800 tonnes. Pre-tax profit almost halved from $3.53m to $1.79m.
The main market for the foam is office and other furnishings although its Vietnamese joint venture supplies foam to the footwear industry. A tenth production line is planned for northern China in December. This will add 6,000-9,000 tonnes of capacity.
The company has exclusive rights in China and Vietnam for 10 years for Mobius Technology’s recycled foam technology, which uses recycled powder. A second production line will be finished before the end of 2008.
Net debt is $6.55m. This could increase in the second half because of the capital expenditure planned.
FoaMasters shares rose 1p to 21.5p, which values the company at £18m. House broker Hanson Westhouse forecasts full year profits of $5.9m (against $8.9m in 2007), which puts the shares on prospective multiple of seven times 2008 earnings.
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