Shares in Morgan Crucible lost nearly a quarter of their value yesterday after the engineering company said the weak dollar would hit its 2007 results and it struck a cautious tone about its prospects.
In early trading, Morgan Crucible shares were down 22 per cent to a two-year low of 204.5 pence, after falling as low as 199.75p.
The group, which makes carbon and ceramic components for industry including body armour for British and US forces, said the dollar's weakness would cut its 2007 revenues by around £30 million and underlying operating profit by £6 million.
Morgan, which has plants in Birmingham, Rugby and Stourport, also has a 49 per cent equity stake in NP Aerospace, which employs 200 people at its premises in Coventry.
It said its 2007 underlying operating profit margin is expected to improve around 150 basis points to come in "the mid 12 per cent range", while revenue was seen rising over five per cent.
It said its order book remained healthy, at the same levels to this time last year.
Mark Robertshaw, chief executive, said: "Our full year results for 2007 will show strong progress on 2006 in overall group operating profits and profit margins both before and after one off items.
"We continue to deliver on our strategy of focusing on higher margin, higher growth, higher value-added products and markets and moving away from more commoditised and economically cyclical market segments which we continue to do successfully.
"Our market positions are strong and our order books currently remain healthy."
But he added: "In light of the recent market volatility and macro economic concerns, the board will be
keeping a watchful eye on how global demand develops in the coming months but we remain cautiously optimistic about our prospects for continued margin progression next year.
"The carbon division has been affected by one of our key customers suffering production issues in the second half of the year which led to a £5 million loss of sales.
"The thermal division has seen very strong growth in large project business over the past twelve months. Despite these high comparatives Morgan was still seeing positive year on year revenue growth in the businesses but at a more modest level than from the previous twelve month period."
An analyst at Numis Securities said: "Numbers are in line but there is reference in the outlook statement to potential moderation in growth and uncertain economic outlook. The words they are using just make the whole company look a little bit more risky."
Citigroup analysts also cautioned that Morgan Crucible's guidance of more than five per cent growth in revenue suggests that the second-half would slow to the low single-digit area from 9.7 per cent in the first half.
The brokerage cut its 2007 earnings per share fore-cast by six per cent and 2008 forecasts by 6.7 per cent.
Morgan Crucible is expected to report £702.9 million in 2007 revenue and £81.6 million in operating profit, according to estimates.
It said its balance sheet had flexibility to pursue its strategy of seeking bolt-on acquisitions to expand its core businesses, with net debt seen at one times core earnings at the end of 2007.
It has been focusing on higher-growth and higher margin markets.
And has been reducing exposure to slower-growing, more commoditised markets.
Its three core businesses are in carbon, technical ceramics and insulating ceramics. The firm will announce its full year results on February 19.