Low & Bonar overcomes rising costs as profits jump

Industrial fabric maker Low & Bonar was able to overcome a weaker macroeconomic climate and rising raw materials costs to post a strong rise in both profits and sales in the year ended November 30th.

Profit before tax rose from £18.6m to £23.4m year-on-year, while the operating margin improved from 7.5% to 7.9% in spite of what its Chairman described as "severe raw material price inflation for most of the year". The group said it was on track to reach its medium-term operating margin target of 10%.

Revenue totalled £388.7m, up from £344.6m the previous year, with sales volumes rising by 6% to reflect strong fundamental drivers, a bigger contribution from new product and emerging markets as well has a continued recovery in 'heartland' Western European and North American markets. Average prices were increased by 7% as the company attempted to pass on higher costs to customers.

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The company is targeting a 25% contribution from non-heartland geographies to group sales in the medium-term. In 2011, 21.8% of sales were from outside the heartland markets, up from 21.1% in 2010 and 20.4% in 2009.

Chairman Martin Flower said: "These are excellent results during a period that has seen significant raw material inflation and macro-economic challenges within Europe and further demonstrate the quality of our business and its growth prospects."

"The group's good trading momentum has continued into the new year and the board remains confident that the group is well-positioned to make further progress towards our stated targets," Flower said.

The board recommended a final dividend of 1.4p per share (2010: 1.1p), taking the full-year dividend to 2.1p (1.6p).

The share price rose 7.83% to 58.5p by 14:13.

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