Key Takeaways

• Rentokil Initial shares tumbled Wednesday after the pest-control company warned it would take a $104.5 million profit hit this year.

• The pest-control company blamed weakness in its North American business and currency fluctuations.

• Rentokil said that the rise in the pound's price versus the U.S. dollar will create a headwind for the firm.

Rentokil Initial (RTO) shares traded in the U.S. cratered Wednesday after the pest-control company warned that slow sales in North America and negative currency impacts will drag down full-year earnings by 80 million pounds ($104.5 million).

The owner of dozens of exterminator brands said it expects to lose 20 million pounds ($26.1 million) in adjusted operating profit in its North American operations because of slower revenue growth. The company said that while it saw some positive momentum in sales in the second quarter, “the trading performance in July and August was lower than anticipated.”

Rentokil also said it had ramped up operations to deliver enough product during the peak season in North America. However, with slowing demand, “the operation was over-resourced in both sales and service,” boosting expenses. It spent more than anticipated on materials and consumables, adding another 50 million pounds ($65.2 million) hit to adjusted operating profit.

On top of its issues in North America, Rentokil noted that the pound has gained value versus the U.S. dollar, and if rates hold, that could create an additional 10 million pound ($13 million) headwind for the firm.

Rentokil Initial shares were down 21% at $24.94 in intraday trading Wednesday following the news. They've lost close to 13% of their value since the start of the year.

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