Manufactory Essentra falls into the loss after considerable goodwill

Components maker Essentra has posted a hefty annual loss after suffering a significant impairment from the sale of its packaging business.

The FTSE 250 company, which makes molded plastics and custom hinges, among other things, reported a loss of £183.8m for 2022 after posting a profit of £28.3m the previous year.

In the fourth quarter of last year, the Milton Keynes-based group completed the sale of its filter and packaging divisions, generating a £182.7m goodwill fee from the former business and leaving it as a components-only business.

Strategic move: Essentra has completed its transition to becoming a pure components company after selling its packaging and filtration businesses in the second half of last year

The packaging segment was acquired by Austrian manufacturer Mayr-Melnhof Group for £262m, while the filtration division was bought by Frank Acquisition Four, a subsidiary of Centaury Management, for £312m.

From its continuing operations, Essentra said losses more than tripled to £31.1m as it recognized core costs formerly allocated to discontinued operations and caused higher net interest debt costs.

However, the divestitures meant the company was able to return £150m to investors through a special dividend and share buybacks, and had net cash of £113.8m at the end of December, compared with net debt of £234.7m at the end of 2021.

Chief Executive Scott Fawcett said: “While 2022 brought a number of changes for the organization as a whole, it laid the foundations to capitalize on future growth opportunities.

‘We have continued to invest organically and inorganically, helping the company to prosper economically while maintaining strong operating margins.’

Essentra sales rose 9.5% currency adjusted to £338 million last year on a recovery in demand from the Americas and Europe.

The group also protected its margins by conducting price increases to offset rising costs of freight, labor, energy and materials.

Trade was impacted by draconian Covid-19 restrictions in China and de-stocking at retailers in the US.

However, the company said China’s easing of lockdown restrictions would benefit business, while demand in Europe remained healthy and new orders so far this year have been 8 percent above 2022 volumes on a like-for-like basis.

Essentra shares rose 0.9 percent to 179 pence on Wednesday morning, despite their value having shrunk around 44 percent over the past 12 months.