The inkjet developer issued a trading update this morning (29 November) ahead of its year-end.
The Cambridge-headquartered business said that it expected its adjusted pre-tax profit for 2023 to be between £2.5m-£3m.
However, Xaar also warned that trading conditions had become more challenging in the second half of the year, with full year sales likely to be in the range of £70m-£72m.
Analysts had expected sales of around £79m.
Xaar’s sales for calendar year 2022 were £72.8m.
Its share price slumped by nearly 28% on the previous day’s close following the news, falling to a 52-week low of 124.00p in early trading, before recovering to 134.72p (52-week high: 215.00p).
“The board anticipates that weaker demand during Q4 2023 will continue into 2024, and together with delays in some customer product launches, will result in lower revenue and adjusted profit in 2024 than previously anticipated,” the firm stated.
Gross margin will be impacted as the group will feel the full effect of increased input costs, but lower than expected sales.
However, the group’s board also said they were confident about the medium-term outlook and the strength of Xaar’s customer pipeline.
Xaar had previously reported signs of recovery in its key markets. However that was prior to the outbreak of the Israel-Hamas war. Manufacturing activity in China, home to a number of key Xaar customers, is likely to have contracted in November for the second month in a row, according to Reuters.
In today’s update CEO John Mills said that current geo-political and macro conditions had held back the introduction of new products at Xaar’s customers.
“Whilst the external trading environment is challenging, we remain focused on the delivery of our strategy and taking advantage of the significant opportunities we have that will drive profitable growth,” he said.
“Our products continue to generate strong interest from customers, demonstrating our leadership in printing highly viscous fluids with all the performance and sustainability benefits they deliver.”