The AIM-traded ceramic tableware manufacturer reported that while UK and US sales remained robust, demand in Europe and other international markets had fallen, with Germany proving particularly difficult.

Sales in May and June were materially below target, leaving first-half profitability significantly lower year-on-year.

The company noted a trend of customers trading down from higher-end non-round pressure cast products to lower-cost round items.

Despite ongoing demand from its distributor network, cost pressures on end-users - particularly independent restaurants - had led to reduced new installations and a contraction in the overall market.

Churchill said it had scaled back hospitality production in response to lower demand, resulting in weaker factory recoveries and a diluted sales margin.

Nevertheless, the company said it believed it was holding market share in key segments.

Capital investments made in the first half to improve agility and reduce the cost base were now largely complete.

Additional projects were being brought forward to further enhance efficiency, and new product introductions using inkjet and pressure cast processes were being accelerated to support future growth.

“Even with these actions, the continued market headwinds noted above mean that the company will deliver revenue and profits for the full year significantly below the prior year,” Churchill said in its statement.

It added that it remained committed to maintaining a healthy cash balance and saw no change to the long-term potential of the business, which continued to benefit from high-margin replacement orders across structured markets.

Half-year results to 30 June would be published in early September.

At 0943 BST, shares in Churchill China were down 20.7% at 456p.

Reporting by Josh White for Sharecast.com.