Avon says war in Ukraine shows criticality of products

As Russia's unprovoked attack on Ukraine continues, United Kingdom-based Avon Protection plc says the crisis highlights the criticality of the company's products, pointing to a "notable increase" in customer inquiry activity in its latest trading update.

"We have a number of active discussions ongoing with customers regarding potential incremental orders across both respiratory and helmet products," Avon said April 6.

The manufacturer said it expected to see the impact of the ongoing discussions and their resultant orders on its performance in the financial year 2023, starting September.

Over the first six months of the current financial year, Avon said some of the previous year challenges continued but performance "accelerated" through the second quarter.

Order intake was lower than the comparable period last year, reflecting a very strong first half in 2021.

"But, following the events in Ukraine, inquiries remain robust, giving us confidence in order intake for the second half and beyond," Avon said.

Revenue for the six months ending March 31 was in line with expectations and ahead overall by around 4 percent from last year's $122 million.

Profitability, however, has been impacted by a weaker-than-expected sales mix in the first half and additional manufacturing costs, notably in the helmets business, due to supply chain and process inefficiencies.

As a result, Avon said the adjusted earnings (EBITDA) margin for the period is expected to be approximately 10 percent, compared to 19.7 percent reported last year.

Operationally, Avon said it had made "good progress" on the implementation of the $15 million overhead cost saving program announced in December 2021.

Of that amount, approximately half relates to overheads in the armor business, from which Avon is exiting.

In addition, the company said it closed one of its U.S. offices and changed management structure to streamline the organization into "one focused business."

In the second half of the year, Avon said it expects profitability to improve but will not offset the weakness experienced in the first six months of the year.

"Full year underlying earnings will therefore be lower than previously expected," it said.