Zotefoams plc (LON:ZTF), a world leader in supercritical foams, has provided a trading update for the nine months ended 30 September 2024 and in respect of its financial year ending 31 December 2024.
The Group’s strong performance announced at the interims has continued into Q3, with year-to-date sales up 23% to £110.7m against the comparative prior year period (YTD 2023: £90.3m).
Q3 sales were up 54% to £39.7m (Q3 2023: £25.7m) against a relatively weak prior year comparator. Q3 volumes increased significantly year-on-year in both Footwear and ZOTEK® technical foams, alongside solid growth in polyolefin foams, while T-FIT® advanced insulation saw reduced volume from a small base. On a year-to-date basis, Footwear volumes were up 60% against the prior year comparative, benefiting from an Olympic year, the addition of basketball sales, and increased orders from Tier 1 suppliers resulting from a rebuilding of inventory. Volumes in ZOTEK were up 29% and T-FIT up 1%. Polyolefin foams volumes were up 1% overall, as a 6% decline in EMEA, mostly in Germany, has offset 18% growth in the USA.
Q3 Footwear revenue, which represented 48% of sales in the period (Q3 2023: 32%), was higher than anticipated as ongoing supply chain re-configuration at the Group’s largest customer led to a continuation of elevated short-term demand for our foams. As described in the interim results, we expect the exceptional level of demand in Footwear to return to normalised patterns during 2025. Over the longer term, our customer’s evolving supply chain structure may present further growth opportunities for the Group, and we are engaging with them to assess how Zotefoams is best positioned to support and build on its strong Footwear offering.
Strong margins have been maintained year to date, with the Group’s ongoing focus on effective pricing and mix improvement and a normalisation of operating costs offset by higher people costs from inflation-linked pay increases and further investment in our wider geographic footprint.
Zotefoams has continued its investment in the development of ReZorce® recyclable barrier technology, with year-to-date operating costs slightly higher than the prior-year comparative period. We continue to work towards the key technical milestones, including endurance and sterility testing, which we are targeting to complete before the year end. The commercial scale production of ReZorce requires significant capital investment and, therefore, the priority of the Board and executive management has been to find a strategic partner that will enable the commercial development of this transformative technology. The process to identify a such a partner has been underway since May this year and we will provide a further update to the market when appropriate.
Outlook
With the exception of T-FIT, which is generally heavily weighted to Q4, the Group has good visibility of confirmed orders across most business units for the remainder of the year. As a consequence, and while we remain mindful of the risk of some continued demand volatility in certain sectors, we expect to deliver significant revenue growth in 2024 over 2023.
Across our two foams business units, margins are expected to be in line with the prior year, with mix and growth benefits offset by our investment in Shincell and increased people costs.
In our MEL business unit, the full year loss will be slightly above that of the previous year, as expected, reflecting further ReZorce development costs.
The Board is confident in the Group’s ability to carry positive momentum through the remainder of the year. Based on its current sales forecasts and foreign exchange rates, and subject to there being no material disruption to the business, it expects revenue and adjusted profit before tax to be in line with current market expectations.*
Commenting on the update Ronan Cox, Group CEO of Zotefoams, said:
“As world leaders in supercritical foams, our positive Q3 performance further validates the strength of our core technology and market position. The 23% year-to-date sales growth demonstrates our ability to leverage this foundation across multiple markets, particularly evident in our exceptional Footwear performance and continued progress in technical foams.
We are building from this position of leadership and technical excellence to expand our reach and impact. The recent technical agreement with Shincell represents an important strategic step, enhancing our capabilities in the footwear market and providing new opportunities to extend our manufacturing footprint internationally. We are also strengthening our organisation with key appointments expected by the year end that will accelerate our transition to a market-led approach, allowing us to identify and capture new opportunities that build naturally from our core capabilities.
While we continue to progress the development of ReZorce and explore potential strategic partnerships for its commercialisation, our primary focus remains on expanding our leadership in our core supercritical foam technologies, where we see significant growth opportunities. This focus, combined with increased investment in innovation and operational excellence, will enable us to extend our leadership in supercritical foams into adjacent markets and applications.
Looking ahead, our order book provides good visibility for the remainder of 2024. While we expect Footwear demand to normalise during 2025, we are actively engaging with our key footwear customer to capture emerging opportunities from their evolving supply chain strategies. Despite ongoing inflationary pressures, our operational discipline and market leadership continue to deliver value. As a result, the Board remains confident in its ability to meet market expectations for the full year.”
* Current Zotefoams-compiled consensus expectations for revenue is £145.5m and adjusted profit before income tax and separately disclosed items, for the year ending 31 December 2024, is £14.9m.
