- Defense stock trades down as much as 42 percent in London
- Company in talks with creditors over amending covenants
Chemring Group Plc fell the most in 24 years after saying a delay in winning approval to export ammunition to the Middle East will hurt earnings and could leave it struggling to meet debt obligations.
Shares of Chemring tumbled 42 percent, the biggest drop since March 1991 at least, after it said Tuesday that operating profit for the year ending Oct. 31 could be 33 million pounds ($51 million) lower than forecast. The company will enter talks with creditors on securing a waiver in the event of a default.
Chemring said last month that an agreement to supply 40 millimeter grenade cartridges to an unidentified Mideast country would offset the loss of a separate ammunition deal. The plan requires export approval from the U.S., which is acting as intermediary, the Fareham, England-based company said.
Chief Executive Officer Michael Flowers said in a statement that Chemring aims to raise 90 million pounds via a rights offering next quarter to “fundamentally address the high levels of debt,” adding that managing the problem had come “at the expense of further operational improvement.”
Chemring shares traded 33 percent lower at 151.25 pence as of 9:44 a.m. in London. Net debt will be in the range of 155 million pounds to 165 million pounds on Oct. 31, assuming the export permit is not received, compared to the company’s market value of 292 million pounds following today’s decline.