(Reuters) - British defence contractor Chemring Group Plc (L:CHG) lowered its forecast for full-year underlying operating profit by nearly a third, hurt by delays in revenues from a contract in the Middle East.
Shares in Chemring fell as much as 42 percent to a 10-year low on Tuesday morning.
Chemring, which makes ejector seats for fighter jets and flares used to counter heat-seeking missiles, cut its forecast for 2015 underlying operating profit to 33 million pounds from 49 million pounds.
The company has been struggling with delays in its Middle Eastern contracts as well as defence budget cuts in key markets.
Figures released in June showed that defence spending by NATO countries is set to fall again this year in real terms.
Chemring said it would speak to its creditors about amending the terms of its debt covenants, and would also raise up to 90 million pounds through a rights issue.
"The main issue for us is the balance sheet," Panmure Gordon analyst Sanjay Jha wrote in a note. The brokerage cut its rating on the stock to "sell" from "buy".
Chemring Chief Executive Michael Flowers said managing the company's debt had hurt its ability to focus on operations.
"The recent progress of the Group has been impeded by its high levels of debt and associated interest costs," he said.
The company had net debt of 149 million pounds as at 30 April, according to Thomson Reuters data.
Chemring's shares were down 35 percent at 145.5 pence at 0921 GMT on the London Stock Exchange, having recovered slightly from the day's lows.