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Defence firm Chemring issues profit warning after fatal explosion Defence firm Chemring issues profit warning after fatal explosion
(4 months later)
Shares in Chemring plunged after a fatal explosion at its Salisbury factory forced the defence company to halt production there and issue a profit warning.Shares in Chemring plunged after a fatal explosion at its Salisbury factory forced the defence company to halt production there and issue a profit warning.
The explosion and fire on Friday afternoon at its facility near Salisbury in Wiltshire killed one employee and badly injured another. Parts of the factory, which employs more than 400 people and makes products to protect military ships and aircraft from missiles, were damaged.The explosion and fire on Friday afternoon at its facility near Salisbury in Wiltshire killed one employee and badly injured another. Parts of the factory, which employs more than 400 people and makes products to protect military ships and aircraft from missiles, were damaged.
Production at the site has been suspended while the company carries out an investigation with the authorities into the cause of the blast.Production at the site has been suspended while the company carries out an investigation with the authorities into the cause of the blast.
Explosion at Salisbury military hardware factory kills one
Chemring expects underlying operating profit for the 12 months to 31 October to be £10m to £20m lower than the previous forecast of £55m. It said it was unable to quantify accurately the impact of the explosion on 2018 and 2019, as it depends on money recovered from its insurer, when the site reopens and at what rate production resumes.Chemring expects underlying operating profit for the 12 months to 31 October to be £10m to £20m lower than the previous forecast of £55m. It said it was unable to quantify accurately the impact of the explosion on 2018 and 2019, as it depends on money recovered from its insurer, when the site reopens and at what rate production resumes.
Last year the firm made an underlying operating profit of £55.4m, while pretax profits were down 50% to £4m after accounting for one-off items, including restructuring costs.Last year the firm made an underlying operating profit of £55.4m, while pretax profits were down 50% to £4m after accounting for one-off items, including restructuring costs.
Sanjay Jha, an analyst at Panmure Gordon, said the timing of the blast “could not be worse”. Chemring tests its products during the dry summer months in the UK and US, and makes and sells them between August and October, its fourth quarter.Sanjay Jha, an analyst at Panmure Gordon, said the timing of the blast “could not be worse”. Chemring tests its products during the dry summer months in the UK and US, and makes and sells them between August and October, its fourth quarter.
Its shares fell by almost a quarter in early trading on Monday, and later in the day were down nearly 15% at 201p. Investors will have to wait until 4 September for an update.Its shares fell by almost a quarter in early trading on Monday, and later in the day were down nearly 15% at 201p. Investors will have to wait until 4 September for an update.
The company has traditionally designed and produced decoys, flares, detonators and grenades, but also has several big contracts to make sensor equipment to detect roadside bombs and chemical weapons for the US military.The company has traditionally designed and produced decoys, flares, detonators and grenades, but also has several big contracts to make sensor equipment to detect roadside bombs and chemical weapons for the US military.
The Salisbury blast comes after a similar fatal explosion at a factory in Toone, Tennessee, in 2014. The firm has since invested £30m in automating its countermeasures factories across the UK.The Salisbury blast comes after a similar fatal explosion at a factory in Toone, Tennessee, in 2014. The firm has since invested £30m in automating its countermeasures factories across the UK.
Analysts at Berenberg said: “The production of flares is inherently risky, due to the highly volatile nature of materials used.”Analysts at Berenberg said: “The production of flares is inherently risky, due to the highly volatile nature of materials used.”
Chemring is also being investigated by the Serious Fraud Office over alleged bribery, corruption and money laundering involving middlemen in two historic contracts.Chemring is also being investigated by the Serious Fraud Office over alleged bribery, corruption and money laundering involving middlemen in two historic contracts.
The Chemring chief executive, Michael Ord, who joined from BAE Systems, recently took over from Michael Flowers. Flowers led a restructuring of the company which “had arguably overstretched itself at the height of the conflicts in Iraq and Afghanistan”, said Russ Mould, the investment director at stockbroker AJ Bell.The Chemring chief executive, Michael Ord, who joined from BAE Systems, recently took over from Michael Flowers. Flowers led a restructuring of the company which “had arguably overstretched itself at the height of the conflicts in Iraq and Afghanistan”, said Russ Mould, the investment director at stockbroker AJ Bell.
Manufacturing sectorManufacturing sector
MilitaryMilitary
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