LONDON (ShareCast) - (Sharecast News) - Shares in Accrol Group fell sharply on Wednesday, after the tissue manufacturer warned on profits.
The AIM-listed company, which makes toilet, kitchen and facial tissues, said that in common with the wider market, pressure on its raw material supply chains had been "considerable", with further tightening in recent weeks.

In particular, it cited higher energy costs, input shortages and other "general inflationary pressures", alongside a lack of HGV drivers.

"While the group's supply chain has shown significant resilience and supply shortages have been managed, considerable cost increases had to be absorbed in the short term," Accrol noted. "In addition, distribution pressures - notably the availability of HGV drivers, which served to increase costs further - have restricted revenue growth in the 2022 full year."

Accrol therefore anticipates 2022 full-year earnings will be be lower than previously expected, with revenue growth of around 25% and adjusted earnings before interest, tax, depreciation and amortisation around 20% higher year-on-year.

However, operational efficiencies, integration synergies and passing on of cost increases will mean percentage EBITDA margins should remain on par with 2021, Accrol said.

As at 1245 BST, shares in Accrol were off 15% at 38.31p. Earlier in the session they had hit a multi-year low of 33.5p.

Wayne Brown, analyst at Liberum, said: "The group now expects 25% net revenue growth, and 20% adjusted EBITDA expansion in the 2022 full year, and we cut our estimates to bring them in line with guidance.

"While the group has seen very substantial cost increases over the last six months, Accrol is in a structurally much stronger position to deal with these pressure than at any time in the past."

Liberum, which is Accrol's joint broker, cut its price target on the stock to 80p from 95p, but maintained its 'buy' rating.

Shore Capital, which aims to initiate formal coverage "in the near future", said: "We believe the business is doing the right things in terms of mix, cost control and price recovery in markets where transparent supply constraints are proving challenging for all to manage.

"We note the current pressures but also look through the curve to a well invested and resilient everyday business with bright prospects."

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