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Customers Pay Price As BPI Profits Show 31-Per Cent Increase

Posted on: Tuesday, 6 September 2005, 09:00 CDT

BRITISH Polythene Industries, Europe's largest plastic bag maker, yesterday posted a 31-per cent increase in first-half profits on the back of successful moves to pass its higher costs on to customers.

The Greenock-based company also said it had installed new lines at its plants in Greenock and Cowdenbeath, Fife, to produce a new air-cushion material, with which it intends to challenge bubblewrap in the lucrative packing market.

"We've done a superb job passing on the higher costs, " Cameron McLatchie, BPI's chairman, told The Herald yesterday.

"Relations have become strained with one or two of our customers because of our increased prices, but this really is an industry- wide issue and although it has been very difficult to achieve the price rises, we have demonstrated our ability to get there in the end."

McLatchie said that BPI had increased its prices by around 20- per cent as a result of the effect that the steep climb in the price of crude oil has had on the petrochemical industry, which makes the polyethylene that BPI uses in its products.

He said the increase had run to around GBP80m during the company's first-half - but sales had climbed to GBP226m in the six months to the end of June, compared GBP189m for the same period last year.

However, pre-tax profits climbed to GBP10.1m from GBP7.7m last time - and the company said it expected full-year profits to be ahead of last year.

BPI's share price inched ahead 0.4-per cent, or 1.5p to 371.5p after its healthy half-year performance - albeit tempered with caution.

McLatchie noted that with oil prices at record levels and high plant utilisation in the petrochemical industry, there was little prospect of sustained downward movement in polymer prices.

He said Hurricane Katrina had added to the problems of higher costs with the nowgreater squeeze on oil refining capacity and that polymer prices would likely continue rising.

Meanwhile, the Scottish group - which employs 400 of its 3000 staff in Scotland - gave no update on the investigation by the European Commission into an alleged continent-wide cartel in the plastic bag industry, except that an outcome was expected "before the end of the year".

McLatchie added: "We've said we have nothing new to report on this.

"The only impact now is the cost of ongoing legal fees and management time."

The company also said it would save around GBP1m a year from the closure of two small factories in Ipswich and Redditch, Worcestershire, earlier this year.

FACT FILE

2005* 2004

TURNOVER GBP226m GBP189m

PRE-TAX PROFIT GBP10.1m GBP7.7m

DIVIDEND 7p 7p

* First-half figures

Source: Herald, The; Glasgow (UK)

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