Somero Enterprises says that international business is growing but the US market is weak.
US-based Somero supplies laser concrete screening equipment that is used to ensure that the concrete floors of warehouses and other buildings are flat. Demand is dependent on construction activity. Somero says that poor quality concrete in Asia will lead to demand for its products.
Somero is building up its sales outside of the US and they are now two-fifths of the total. These continue to grow by around 20% but it is the US market that has the problems. Management puts this down to reduced capital expenditure, particularly in the non-residential construction market. The residential market was already weak.
Somero reported its 2007 figures at the beginning of April. Revenues were 19% higher at $66.4m and pre-tax profits increased by 30% to $10.7m in 2007. Somero also announced a final dividend of 3c a share, taking the total for the year to 6c a share. Net debt was just under $20m.
Somero expects 2008 revenues to be 10%-15% lower than last year. Given the growth in international business, a rough calculation suggests that US sales could fall by at least one-quarter, even if group revenues fall by 10%.
Management has cut costs and this will save $1.9m in 2007 and $2.5m in a full year. Even so profits will be “materially below market expectations”. The good news is that net debt is expected to halve by the end of 2008.
Following the trading statement the shares slumped 45p to 40p, valuing the company at £12.44m.
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