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It isn’t uncommon to see a penny inventory that has suffered heavy losses, however few have fallen fairly so far as Synthomer (LSE: SYNT). Down 97.37% previously 5 years, the main provider of aqueous polymers has turn out to be one of many worst-performing penny shares within the UK.
And but the corporate nonetheless introduced in virtually £2bn in income final yr — greater than every other penny inventory available on the market. As soon as a constituent of the FTSE 250, Synthomer dropped into penny inventory territory final month after its market cap fell under £100m.
In its 2024 full-year outcomes, the group reported a web earnings lack of £72.6m – down sharply from a £208m revenue in 2021. The newest half-year outcomes for 2025 made issues worse, with an earnings per share (EPS) lack of -26p, in contrast with forecasts of a 2p revenue.
So what has gone improper — and might it recuperate?
The increase and bust years
Synthomer’s story is considered one of cycles. In 2018, the corporate loved a pointy increase in demand for nitrile butadiene rubber (NBR), a key ingredient in disposable medical gloves. Earnings spiked and acquisitions helped place the group as a worldwide speciality chemical compounds participant, giving traders confidence in its progress story.
By 2019, that momentum light. Larger uncooked materials prices and weaker demand in Europe and Asia noticed earnings contract. Then got here 2020 and the pandemic. As soon as once more, glove demand soared, sparking one other rally.
However the increase was short-lived. The acquisition of Omnova Options in 2020 saddled the corporate with heavy debt. Because the pandemic light and glove demand normalised, Synthomer was left with rising prices, falling earnings, and a steadiness sheet below strain.
The shares, now buying and selling round 58p, are down 98.5% since a September 2021 excessive above 4,000p. Buyers who purchased on the high have seen extraordinary worth wiped away.
Enlargement and financials
In October 2021, Synthomer purchased Eastman Chemical’s adhesives enterprise for $1bn, which included a manufacturing unit within the Netherlands producing round 80 completely different artificial resins. Whereas the deal expanded the product base, it added to the debt pile.
Even ,so, the steadiness sheet will not be with out benefit. The group holds £2.45bn in property and £996.6m in fairness in opposition to £960m of debt. It additionally generated £15.7m in working money move final yr.
Administration is now centered on deleveraging, and covenant aid agreed with lenders runs till 2026, giving some respiratory room. Plus, free money move improved final yr and web debt has already been virtually halved from prior ranges.
May it recuperate?
Restoration will depend on decreasing the online debt-to-EBITDA ratio to a safer degree. That will contain promoting non-core property, refinancing on higher phrases or ready for rates of interest to ease. Any signal of earnings stabilisation or debt discount may immediate a rerating of the Synthomer share worth.
Personally, I feel this penny inventory is simply price contemplating for traders with a powerful threat urge for food. It might be a traditional high-risk, high-reward turnaround story.
However for me, the heavy leverage, continued losses and unsure macroeconomic setting make it look too speculative for now.
