Shares in machine tool maker The 600 Group plunged more than 30 per cent on the news that annual results will be below market expectations amid difficult market conditions.
The Heckmondwike-based firm said machine tool consumption fell 19 per cent last year and the weakness it has seen in Europe is now also being seen in the US.
The group’s shares closed down 4p at 9.12p.
600 said that market conditions were difficult in 2015 and these adverse conditions have continued into this year with customer confidence to commit to purchases remaining a concern.
The latest Oxford Economics Global Machine Tool Outlook Survey’s figures for machine tool consumption in 2015 showed Europe was down by 18.8 per cent with the US flat.
Whilst the forecast for both was modest growth for the coming year at 4.6 per cent in Europe and 2.6 per cent in the US, other trade bodies and commentators are reporting more negative figures.
Executive chairman Paul Dupee said: “We have seen continued weakness within Europe and the UK and a marked fall in confidence in the US.
“Figures recently released for machine tool orders from the Association for Manufacturing Technology in the US recorded a negative 17.5 per cent for the year to end December 2015.
“With general economic and in particular manufacturing forecasts being weak, customers are leaving purchasing decisions until the last minute and consequently order books overall are at a little over one month and visibility of future trading is difficult to predict and subject to monthly fluctuations.“
Analyst David Buxton at FinnCap said: “The group has announced a disappointing trading update, pointing to the expectation that full-year results will be below market forecasts.
“The deterioration in purchasing managers’ confidence in North America, causing a deferral of ordering, has particularly affected the Machine Tools business, with a high drop-through to profits.
“We downgrade current year EPS by 37 per cent, followed by a 32 per cent cut in 2017.
“As a result, we have reduced our target price from 24p to 15p (down 37 per cent). Clearly, this announcement will have an impact on the shares.”
Mr Dupee said the group has taken steps to reduce overheads and improve factory efficiencies.
It expects this to produce an annual saving of £1m going forward.
It added that the benefits from the integration of the TYKMA and Electrox laser businesses are now producing improved margins.
Mr Dupee said that sales and marketing initiatives are gradually showing signs of success despite the poor market conditions.
“However, these improvements and the restructuring benefits are unlikely to offset the effects of the volume decline from the market weakness in the machine tool industry,” he said.
He added that as a consequence, the group’s results are expected to be below current market estimates.
Talking about the future he said the group is optimistic that moves to promote its industry recognised brands such as Colchester, Harrison, Clausing, TYKMA and Electrox through an increased worldwide distribution network will lead to revenue growth.