PWR Holdings shares slump on bleak profit forecast
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The news: Shares in PWR Holdings tanked in morning trade on the ASX after the automotive cooling products manufacturer projected a sharp decline in first-half profit due to cancelled electric vehicle (EV) programs.
The numbers: PWR shares tumbled 23.5% to $6.95 by 11:20am AEDT.
The company said it expects first-half net profit after tax, which includes expenses for the company's new headquarters in Stapylton, Queensland, to be between $3.2 million and $3.7 million, below the actual NPAT of $9.8 million achieved during the same period last year.
PWR expects first-half revenue to grow year on year in its aerospace and defence (67.1%) and motorsports (1.8%) businesses. However, it forecasts revenue from its original equipment manufacturer (-44.2%) and aftermarket (-18.7%) segments to shrink.
The context: PWR said the decline in its original equipment manufacturer business has been driven by three EV programs that are not proceeding in FY25 despite the company receiving purchase orders for the work.
Whilst several new programs are in different stages of discussion, the volatility of the EV market is creating unpredictability, the company said. Meanwhile, PWR noted that its aftermarket business has been impacted by broader economic pressures.
Elsewhere, the group flagged that production costs are higher compared to the same period last year, as they cannot be immediately reduced to match lower-than-expected volumes.
What they said: "We are reducing our cost base to be more aligned to the current trading environment while balancing the opportunities we are pursuing in our aerospace and defence business, which continues to give us confidence in this market," PWR managing director Kees Weel said.
"As mentioned at the full year, FY25 will be a transition year for PWR which we believe is crucial to successfully positioning the business for future growth, as we move to our new headquarters in Stapylton."
The source: ASX announcement
