Birmingham-based automotive components manufacturer, Wagon Industries (WAGN) had its shares suspended after warning of plunging sales.
The company said it was in funding talks with lenders and its major shareholder as the manufacturing crisis - especially tough for automotive – worsened.
The group, whose corporate headquarters are at Birmingham Business Park, said despite the actions taken, profitability for the year to the end of next March was likely to be “materially below” expectations.
In a statement to the London Stock Exchange, the company said: “Order intake in the half year to September 30, 2008 was in line with the same period last year, and the group has significant order nomination opportunities in the second half.
“However, the European automotive market has seen a recent and steep deterioration, with many of the major OEMs significantly reducing production schedules.
“These reductions have been unprecedented in scale and rapidity,” it added.
Wagon’s revenues have weakened materially and indications are they will continue to do so, reflecting weaker end user sales across its customer base.
The group said it had made “strong and prompt cost reduction actions” to ease the impact of the global slowdown and these were being rolled out.
Measures include headcount reductions, short time working, and reductions in capital expenditure and working capital.
“The shortfall in sales has impacted the capacity of the group’s principal invoice discounting facility, and the group is in constructive ongoing discussions with its lenders and principal shareholder to address this, including access to other group facilities,” it added.
The board said it had requested trading in the group’s ordinary and preference shares be suspended, pending the outcome of discussions.
The group said due to the present uncertainty over future OEM production volumes, predictions for the end of the year were limited.
“Despite the actions being taken, the board anticipates profitability for the year to March 31, 2009 will be materially below its previous expectations,” said the statement.
The statement will alarm many other companies in the sector but is not surprising.
Manufacturing is experiencing its toughest trading for almost 17 years, with firms exposed to automotive amongst the worst hit.
As the global slowdown in the automotive sector worsens, with all manufacturers cutting sales targets – especially in the United States – component suppliers are expected to face a difficult 12 months.
Wagon raised £49 million in June via a 10-for-1 rights issue at 4p a share with the proceeds being used in part to provide capital expenditure funding to support the company’s contract successes and to partly prepay existing debt facilities.
However, even this proved insufficient to avert the announcement.
One encouraging note for the beleaguered manufacturing sector will have been that factory gate inflation fell for a second consecutive month in September.
Official data showed price pressures at the start of the inflation pipeline could be beginning to ease.