ConvaTec shares dive as supply issues hit factory move to hurricane-hit Dominican Republic

hurricane devastation
Hurricane Maria battered the Domican Republic last month

FTSE 100 medical technology company ConvaTec is on course for its biggest single day share price fall due to problems moving supply lines from the US to the hurricane-hit Dominican Republic.

ConvaTec, which was London’s biggest flotation of 2016, cut its revenues and margins forecasts for the full-year in a trading update this morning.

The firm admitted a production switch from North Carolina to Haina in the Dominican Republic that was designed to save costs and boost profits had backfired in the short term.

Supply issues have principally affected its advanced wound care division, which makes surgical and other dressings, as well as its ostomy care division.

Consequently the firm lowered its full-year organic revenue growth target to between 1pc to 2pc, down from an earlier forecast of 4pc.

ConvaTec said back orders had risen, leading to the “loss of some sales”, while the production issues would also hamper its so-called ‘margin improvement programme’.

Supply problems included "hurricanes disrupting shipping lanes in the Caribbean", the firm said.

Goldman Sachs analyst Veronika Dubajova said that the update from Convatec raised questions “not just about the near-term, but also the medium-term margin trajectory at Convatec”.

Paul Moraviec, chief executive at Convatec, said the firm was determined to achieve better margins. 

“Despite these setbacks, the business remains well positioned in large, structurally growing chronic care markets, with strong brands, differentiated products and a strong and innovative R&D pipeline,” he said.

The company’s shares were trading down almost 21pc at 220p in lunchtime trading, taking its stock below the 225p a share level it floated at last October.

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