NEW YORK ( TheStreet) -- It suddenly seems like accepted wisdom that Europe is recovering, but don't tell it to investors in GSE Holding ( GSE) which were losing more than a third of their value Monday after the small-cap manufacturer revealed in an 8-K filing late Friday it had amended the terms of a credit agreement due what it called "a difficult and slow European market." GSE now expects to report a loss of $32 million to $35 million, or roughly $1.65 to $1.75 per share when it reports second-quarter earnings. That compares to a profit of $3.8 million, or 20 cents per share a year ago and $1.9 million, or 9 cents per share in the first quarter. GSE, which operates around the globe, got 29% of its revenue from Europe in 2012. GSE shares were down 38.55% to $3.38 in early afternoon trading Monday. The company is set to report earnings this Friday. GSE makes geosynthetic lining systems, which have applications such as containing liquids and reducing soil erosion in mining and construction projects. In addition to the weak economy, flooding in Europe negatively impacted second-quarter results, since the weather put many projects on hold that would make use of GSE's products, according to Rob Stone, analyst with Cowen and Co. When the weather improves, in other words, the projects put on hold will resume. Stone says he has heard GSE's capacity will be full-up in the third quarter as a result of the backlog. Stone adds that roughly $1.30 per share of the second quarter loss is from a non-cash charge related to the acquisition of GSE by Chicago-based private equity firm CHS Capital in 2004. The underlying business, in other words, is healthier than the loss would appear to indicate. Stone maintained his outperform rating on GSE despite reducing his price target to $7 from $9. While Europe is showing signs of an economic turnaround, and bad weather -- in this case, at least -- looks like a legitimate excuse for the lost business, there are still reasons to be concerned about GSE. First, the company replaced its CEO just over a month ago, installing a member of the board on an interim basis while it conducts a search for a permanent replacement.