Synthomer upgrades 2026 outlook as margins improve, but debt remains the key test

Synthomer's first-half results show a business making genuine operational progress, although its balance sheet still leaves little room for complacency.

The specialist chemicals group reported higher revenue, improved margins and a 16.4% rise in continuing EBITDA. Management has also upgraded its full-year profit and cash generation expectations.

However, net debt stood at £671.3 million at the end of June, while first-half free cash flow was negative £80.8 million. Some of the earnings improvement also came from temporary disruption to competitors' supply chains during the Iran conflict.

That creates a fairly clear investor debate. The strategy appears to be gaining traction, but cash generation and debt reduction now need to follow.

Synthomer's key first-half figures

Continuing operations unless stated	H1 2026	H1 2025	Change
Revenue	£954.3 million	£894.4 million	6.7%
EBITDA	£96.7 million	£83.1 million	16.4%
EBITDA margin	10.1%	9.3%	80 basis points
Underlying operating profit	£48.6 million	£34.3 million	41.7%
Statutory operating profit	£12.2 million	£5.1 million	139.2%
Underlying profit before tax	£12.7 million	£1.3 million	Not disclosed
Statutory loss before tax	£25.5 million	£36.9 million	Not disclosed
Free cash flow	Negative £80.8 million	Negative £30.3 million	Not disclosed
Net debt	£671.3 million	£638.3 million	Not disclosed

Revenue grew 5.1% at constant currency, which strips out exchange-rate movements, supported by a 2.3% increase in volumes. All three continuing divisions contributed to growth.

EBITDA means earnings before interest, tax, depreciation and amortisation. It is commonly used to assess operating performance before financing and certain accounting charges. Synthomer's EBITDA increased faster than revenue, lifting its margin by 80 basis points to 10.1%.

That margin improvement is important. Synthomer is attempting to move away from more cyclical, capital-intensive base chemicals and towards higher-margin speciality products. Gross margin has now risen by 600 basis points over four years, including a 190-basis-point improvement compared with H1 2025.

Why earnings improved

Management estimates that the £14 million year-on-year increase in continuing group EBITDA included approximately £8 million from strategic growth initiatives, cost savings and other recurring self-help measures.

These improvements included new products, geographic expansion, procurement savings and changes to the manufacturing footprint. Synthomer delivered around £13 million of year-on-year run-rate cost benefits during the half, following approximately £30 million in 2025.

The remaining approximately £6 million of EBITDA growth came from Iran conflict-related disruption during the second quarter. Competitors, particularly those based in Asia, experienced supply-chain problems, allowing Synthomer to supply additional volumes at higher prices in some base chemical markets.

Management does not currently expect this £6 million benefit to recur in the second half. Investors should therefore avoid treating all of the first-half growth as structural.

Still, the recurring contribution was the larger part of the improvement, which supports management's argument that its transformation is delivering results.

Coatings and construction led the way

Coatings & Construction Solutions was the standout division. Revenue rose 7.5% to £400.5 million, while EBITDA increased 33.3% to £46.0 million. Its EBITDA margin improved from 9.3% to 11.5%.

Growth came from higher-margin industrial coatings for data centres and other infrastructure, alongside energy products used in offshore and onshore oil and gas drilling. Construction volumes also showed modest growth, led by Asia.

The 220-basis-point margin improvement suggests the division is benefiting from a more attractive product mix rather than relying solely on higher volumes.

Adhesive Solutions made steadier progress. Revenue increased 1.9% to £304.2 million and EBITDA rose 3.7% to £36.7 million. Growth in China and sustainability-focused products helped, although asset reliability problems in Texas and the Netherlands held back performance. Synthomer expects to resolve these issues during the third quarter.

Health & Protection and Performance Materials generated revenue of £249.6 million, up 11.7%, with EBITDA rising 13.7% to £24.9 million. Health & Protection volumes increased 13.5%, partly because Synthomer was able to serve customers affected by competitors' disrupted supply chains. Performance Materials was weaker, with volumes down 5.0% amid soft demand for foam and certain speciality vinyl polymer products.

The statutory loss still matters

Despite stronger underlying trading, Synthomer reported a statutory loss before tax of £25.5 million.

The gap between underlying and statutory performance included £22.0 million of acquired intangible asset amortisation, £7.0 million of restructuring and site closure costs, a £6.2 million pension past-service charge and a £4.5 million loss linked to refinancing facilities.

Underlying earnings per share improved to 21.5p from negative 3.6p. However, this figure benefited from a first-half tax credit that management says will largely reverse during the second half.

Investors should therefore place more weight on operating progress and cash generation than on the headline underlying earnings-per-share figure alone.

Cash flow and debt remain the biggest concerns

Free cash flow deteriorated to negative £80.8 million, compared with negative £30.3 million a year earlier. Excluding movements in receivables financing, it was negative £66.2 million.

The main issue was a £105.0 million working-capital outflow. This reflected higher raw-material prices, normal seasonal movements and the unwind of a temporary £50 million receivables purchasing arrangement.

Management expects lower raw-material prices and the usual seasonal reversal to produce a working-capital inflow and positive free cash flow in the second half. Full-year free cash flow before non-recourse receivables finance movements is now expected to be positive.

Net debt rose from £575.0 million at the end of 2025 to £671.3 million. The covenant leverage ratio was 4.9 times EBITDA, with £268 million of committed liquidity available.

Synthomer now expects year-end covenant net debt to EBITDA of 4.0 to 4.35 times, excluding any benefit from further disposals. That would be meaningful progress, but delivery is crucial. High financing costs are already visible, with underlying finance costs rising to £35.4 million during the half.

Divestments could accelerate the turnaround

Synthomer agreed in June to sell its Acrylate Monomers business, which is now classified as discontinued. The business generated £33.5 million of external revenue and an EBITDA loss of £0.4 million during the half.

The disposal is expected to complete at the end of the third quarter. Management describes the operation as cyclical, capital intensive and dilutive to margins and cash conversion.

Three further divestment processes are underway. These could simplify the group and accelerate debt reduction, although potential proceeds were not disclosed.

Readers can find more company coverage on the Synthomer PLC share page. The full figures and accompanying notes are available in the original company announcement.

What investors should watch next

Synthomer has upgraded its 2026 outlook to slightly ahead of market expectations. Company-compiled EBITDA consensus was £162 million, based on forecasts published since the June trading update.

The positive case rests on continued margin improvement, further cost savings, speciality-product growth and stronger second-half cash generation. The group is also finding opportunities in areas including data-centre coatings, medical adhesives and energy applications.

The risks are equally clear. Around £6 million of first-half EBITDA growth was temporary, end-market demand remains uncertain, financing costs have risen and leverage is still high.

For the next reporting period, the most important numbers will be free cash flow and net debt rather than revenue alone. Synthomer's operational recovery is becoming more convincing, but the balance-sheet turnaround still has to be delivered in cash.