Bic profit warning shaves big chunk off share price

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Shares in France’s Bic, a global manufacturer of disposable ballpoint pens, lighters and razors, plunged on the Paris stock exchange Thursday after the company cut its profitability outlook for this year. Late Wednesday, Bic said higher commodity prices and razor market weakness would weigh on margins this year, having already seen a difficult 2017.

The results statement, initially planned for February 14, was brought forward by two weeks because the French group, realizing that its 2018 targets were below forecasts by market analysts, wanted to give them early warning, a spokeswoman told an audio conference. The ink was barely dry on the statement when investors started disposing of Bic’s shares massively, pushing them nine percent lower to 84 euros in morning business on the Paris bourse Thursday.

Analysts at investment bank Bryan Garnier said that after a slightly better-than-expected 2017, Bic’s operating margin forecast for this year was “significantly” below the market consensus forecast. Last year, Bic’s net profit grew 15.5 percent to 288.3 million euros ($358.8 million), partly thanks to a lower tax rate. But sales fell 0.3 percent, and while being 1.4 percent higher on a comparable exchange rate and group size basis, still fell short of the group’s own forecast of comparable sales growth of just below 2.0 percent.

Bic said it now expects comparable turnover to rise between one and three percent this year, and warned of a decline of its profit margin, which is now expected to come in between 17 and 18 percent of sales, compared to market expectations of 19.5 percent. This represents a “margin erosion for the fourth year in a row”, Bryan Garnier noted.

The profit warning “confirms that Bic still suffers from an increasingly competitive environment and unfavorable conditions in two key markets”, the United States and Brazil, the bank said. Recommending a “neutral” stance towards the shares, Bryan Garnier said their fair value was now around 94 euros, compared with 102 previously.

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