UK Chip Parts Supplier Morgan Advanced Flags Revenue Hit Amid Trade Tariff Woes

Morgan Advanced Materials, a UK-based supplier of advanced materials and components, has warned investors that its revenue could take a hit due to the ongoing impact of trade tariffs on demand. The company, which serves a wide range of industries including aerospace, energy, and healthcare, has seen its shares fall by 12.14% in opening trade following the announcement.

In a trading update, Morgan Advanced Materials revealed that its revenue growth for the first nine months of 2022 was 10.5% at constant currencies, with strong performances across its Thermal Ceramics, Molten Metal Systems, Electrical Carbon, Seals and Bearings, and Technical Ceramics divisions. However, the company also noted a slight slowdown in growth during the third quarter, leading it to downgrade its full-year revenue forecast to growth in the range of 7% to 9%.

The company attributed the slowdown in growth to the ongoing impact of trade tariffs, which have increased costs for imported materials and disrupted supply chains. In 2022, Morgan Advanced Materials reported an increase in raw material costs by £15 million due to elevated tariffs on imported goods, which affected its gross margin, contracting from 34% in 2021 to 30% in 2022.

To navigate these challenges, Morgan Advanced Materials has expanded its simplification program, first announced in March 2023, to achieve an additional £12 million in savings through further cost reductions in supply chain and back-office operations. This restructuring effort is expected to result in total anticipated costs of £45 million, with expected cumulative savings reaching £22 million by mid-2026.



In addition to its cost-cutting measures, Morgan Advanced Materials has launched a £40 million share buyback program, aligned with its capital allocation strategy, complementing its progressive dividend policy and significant organic investments, including £100 million to expand semiconductor manufacturing capacity.

Despite the challenges posed by trade tariffs, Morgan Advanced Materials remains optimistic about its long-term prospects. The company's chief executive officer, Pete Raby, stated that Morgan Advanced Materials is well-positioned with leading market positions, a strong balance sheet, and attractive opportunities in both faster growth and core markets as markets recover.

In conclusion, Morgan Advanced Materials has flagged a potential revenue hit due to the ongoing impact of trade tariffs on demand. The company has taken proactive measures to mitigate these challenges, including expanding its simplification program and launching a share buyback program. Despite the near-term headwinds, Morgan Advanced Materials remains confident in its long-term prospects, with a strong market position and attractive growth opportunities. Investors should monitor the company's progress closely as it navigates the current trading environment.