It is not unusual to see a penny stock that has suffered heavy losses, but few have fallen quite as far as Synthomer (LSE: SYNT). Down 97.37% in the past five years, the major supplier of aqueous polymers has become one of the worst-performing penny stocks in the UK.
And yet the company still brought in almost £2bn in revenue last year — more than any other penny stock on the market. Once a constituent of the FTSE 250, Synthomer dropped into penny stock territory last month after its market cap fell below £100m.
In its 2024 full-year results, the group reported a net income loss of £72.6m – down sharply from a £208m profit in 2021. The latest half-year results for 2025 made matters worse, with an earnings per share (EPS) loss of -26p, compared with forecasts of a 2p profit.
So what has gone wrong — and can it recover?
The boom and bust years
Synthomer’s story is one of cycles. In 2018, the company enjoyed a sharp boost in demand for nitrile butadiene rubber (NBR), a key ingredient in disposable medical gloves. Earnings spiked and acquisitions helped position the group as a global speciality chemicals player, giving investors confidence in its growth story.
By 2019, that momentum faded. Higher raw material costs and weaker demand in Europe and Asia saw profits contract. Then came 2020 and the pandemic. Once again, glove demand soared, sparking another rally.
But the boom was short-lived. The acquisition of Omnova Solutions in 2020 saddled the company with heavy debt. As the pandemic faded and glove demand normalised, Synthomer was left with rising costs, falling profits, and a balance sheet under pressure.
The shares, now trading around 58p, are down 98.5% since a September 2021 high above 4,000p. Investors who bought at the top have seen extraordinary value wiped away.
Expansion and financials
In October 2021, Synthomer bought Eastman Chemical’s adhesives business for $1bn, which included a factory in the Netherlands producing around 80 different synthetic resins. While the deal expanded the product base, it added to the debt pile.
Even ,so, the balance sheet is not without merit. The group holds £2.45bn in assets and £996.6m in equity against £960m of debt. It also generated £15.7m in operating cash flow last year.
Management is now focused on deleveraging, and covenant relief agreed with lenders runs until 2026, giving some breathing room. Plus, free cash flow improved last year and net debt has already been almost halved from prior levels.
Could it recover?
Recovery depends on reducing the net debt-to-EBITDA ratio to a safer level. That may involve selling non-core assets, refinancing on better terms or waiting for interest rates to ease. Any sign of earnings stabilisation or debt reduction could prompt a rerating of the Synthomer share price.
Personally, I think this penny stock is only worth considering for investors with a strong risk appetite. It could be a classic high-risk, high-reward turnaround story.
But for me, the heavy leverage, continued losses and uncertain macroeconomic environment make it look too speculative for now.
