Engineering and plastics group Barlo returned to the black in the year-ended March although it warned that trading conditions remained challenging and it did not anticipate any real growth in profitability in the current year.
The company reported pre-tax profits of 9.1 million, ahead of analyst expectations, compared with a loss of €9.2 million the previous year when it incurred an exceptional restructuring charge of €12.7 million.
Turnover was ahead by 3.4 per cent to €306 million, driven by sales volume growth in both its plastics and radiators business. Meanwhile, operating profit was up by 41 per cent to €21.7 million as the company benefited from last year's restructuring and cost- reduction programmes.
However, Barlo warned that trading conditions remained "difficult and unpredictable" throughout Europe and it did not anticipate any improvement in the current year.
"As a result, it [the group] is not planning for real profit growth and the principal focus will be on continued debt reduction," Barlo said.
"Given the unpredictable outlook for the euro-zone region, particularly the German and neighbouring economies, there is downside risk to expectations," the company said.
Barlo does not plan to pay a dividend again this year, preferring instead to use its cash to pay down its heavy debt load.
Last year, debt levels were cut by €25.6 million to €115.1 million, ahead of market expectations, leaving the company with a gearing level of 96 per cent, down from 122 per cent.
Barlo said its improved trading performance, tight control of working capital and reduced capital expenditure contributed to the debt reduction.
While it is not expecting profit growth this year, it expects cash generation, which came to €34.7 million last year, to remain strong.
Although analysts are poised to downgrade their forecasts for the group, reflecting the continuance of tough trading conditions, they welcomed the paydown of debt, noting it was the biggest issue facing the company.
"At current ratings, the key with Barlo is not earnings risk but financial risk. Whether EPS is five cents or seven cents is not key as long as progress is made on debt reduction," Merrion Stockbrokers said.
