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It’s not 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% prior to now 5 years, the foremost provider of aqueous polymers has turn into one of many worst-performing penny shares within the UK.
And but the corporate nonetheless introduced in nearly £2bn in income final yr — greater than some other penny inventory in the marketplace. As soon as a constituent of the FTSE 250, Synthomer dropped into penny inventory territory final month after its market cap fell beneath £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 mistaken — and may it recuperate?
The growth and bust years
Synthomer’s story is one in every of cycles. In 2018, the corporate loved a pointy enhance 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 buyers confidence in its development story.
By 2019, that momentum pale. Increased uncooked materials prices and weaker demand in Europe and Asia noticed income contract. Then got here 2020 and the pandemic. As soon as once more, glove demand soared, sparking one other rally.
However the growth was short-lived. The acquisition of Omnova Options in 2020 saddled the corporate with heavy debt. Because the pandemic pale and glove demand normalised, Synthomer was left with rising prices, falling income, and a steadiness sheet underneath strain.
The shares, now buying and selling round 58p, are down 98.5% since a September 2021 excessive above 4,000p. Traders who purchased on the high have seen extraordinary worth wiped away.
Growth 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 targeted 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 nearly halved from prior ranges.
May it recuperate?
Restoration relies on lowering the web debt-to-EBITDA ratio to a safer degree. Which 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 might immediate a rerating of the Synthomer share worth.
Personally, I believe this penny inventory is just value contemplating for buyers with a robust danger urge for food. It could possibly be a traditional high-risk, high-reward turnaround story.
However for me, the heavy leverage, continued losses and unsure macroeconomic atmosphere make it look too speculative for now.
