Low & Bonar(LSE: LWB)has slumped more than 17% today, after the supplierof performance materials warned that its profit before tax, amortisation and non-recurring items for this year will be lower than expected.
The group blamed this under-performance on adrop in demand across European civil engineering markets, due to a slowdown in construction activity across the continent, reflecting the difficult economic climate.
On a 
like-for-like basis, the groups civil engineering sales grew by 4% in the first half. However, a decline in third quarter orders means that civil engineering sales will be flat for the year as a whole.Sales from this sector represent around a quarter of the groups overall sales.
Whats more, the groups civil engineering joint venture in Saudi Arabia has continued to suffer a slower than expected order intake. The division is now expected to report a loss of at least 1m for full-year 2014.
After including all of the above factors, Low & Bonars management nowanticipates that profit before tax, amortisation and non-recurring items for this year will be around 25.3m, compared to last years result of 26.5m a decline of 4.5%.
Unfortunately, when the company reportedits interim results on July 10, management stated that itremained confident that full year profits would show significant growth over last year. So todays warning is a surprise for many investors.
Concerned investors
After this mornings fall, Low & Bonars shares have declined nearly 7% year to date, wiping out most of the gains made over the past 18 months. The shares now trade 30% below their 52-week high of 96p.
Nevertheless, the companys dividend yield, which currently stands at 3.6% remains attractive. For the time being, this payout appears safe as it is covered two-and-a-half times by earnings per share. City analysts expect Low & Bonars dividend yield to hit 4% during 2015.
And with the groups high exposure to the European construction sector, Low & Bonar remains an attractive recovery play. On the other hand, due to its exposure to Europe, Low & Bonars shares remain a risky bet.
A risk worth taking?
Still, after todays declines Low & Bonar trades at an attractive valuation of 12.8 times forward earnings, which could be an attractive proposition for some investors.
However, it is possible that after the profit warning, its likely that City analysts will have to adjust their earnings forecasts for this year and next. As a result, there is a chance that Low & Bonars valuation could rise.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
