Manufacturing firm British Polythene Industries (BPI) delivered first-half results that were in line with expectations and broadly similar to the corresponding period in 2011, despite a seven per cent decline in sales.
This drop in revenue, from £293.0m to £273.1m, was the result of a five per cent reduction in overall volume, an unfavourable translation of European sales into sterling and contractual price reductions for certain products in response to lower input costs for polymer during the second quarter.
Despite this, operating profit decreased by just one per cent to £14.8m from £15.0m in the same period the previous year. Pre-tax profit was lower at £13.3m compared to £15.1m, partly as a result of unfavourable currency translation. Diluted earnings per share before net restructuring were 32.38p (2011: 33.86p)
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The company is undergoing a restructuring process, which includes reducing its borrowings, to overcome these and other trading difficulties, and as a reflection of this progress, has decided to increase the interim dividend by five per cent, or 0.2p, to 4.2p.
Chairman Cameron McLatchie said: "We had previously indicated that our expectations for the half-year results, at the operating level, were for a performance broadly similar to the corresponding period in 2011 and we are pleased to report that this has been achieved.
"As always, the second half is difficult to call at this stage, as in this manufacturing-come-service industry the order visibility is never very long-term. We are, however, as well-placed as we were at this time last year, and we are confident that the business is capable of delivering a similar result."
"The second half looks challenging as our suppliers increase raw material prices and demand remains uncertain. However, with over 70% of the group sales in more resilient sectors, actions to improve the business and progress with new products, the group should deliver acceptable results."
Total energy costs in the period increased by more than 10% per tonne, with the UK cost per tonne remaining significantly higher than Europe.
Regionally, in the UK and Ireland, operating profit rose from £5.5m to £6.2m, despite a decrease in volumes sold, from 108,900 tonnes to 102,900 tonnes due to poor demand from the industrial and construction sectors. The construction industry continues to have a difficult time and sales of building film and packaging to the sector were down 10%.
Volume sales of shrink film were steady despite poor weather conditions for the UK soft drinks industry but demand from the converter sector was subdued, while sales of silage stretchwrap were in line with 2011 and current weather conditions should ensure that demand continues into the second half.
In Europe, operating profit dropped from £9.3m to £8.4m (€10.7m to €10.2m) on the back of a reduced volume of sales from 42,800 to 40,700. Sales volumes for the three sites in Europe fell 5% due to lower volumes from the industrial and construction sectors and weather conditions reducing volumes in animal feed and salt. Silage products grew by over 40%, while low opening stocks combined with good growing conditions in the main markets contributed to growth in the firm's standard products.
In North America, operating profit fell from £0.21m to £0.17m, while tonnes sold totalled 5,500, up 200 tonnes. The decrease in profits was blamed on power outages, low priced offshore competition and a lack of demand for horticultural products. In total, agricultural sales were 12% ahead of 2011 mainly due to the additional silage stretchwrap sales, while horticultural sales were over 20% down due to poor demand from the growers.
"Margins suffered due to low price competition particularly from the Far East where polymer prices were significantly lower throughout most of the period. The second half performance will be impacted by the severe drought in mid western USA but we should see improved demand from the horticulture and western Canada grain markets," the group said.
The share price fell 1.65% to 358p by 13:41.
NR
‘Inheritance tax insurance’ enquiries are soaring – but is it worth it?
MPs warn over Lifetime ISAs which could leave savers out of pocket
