LONDON (Alliance News) - British Polythene Industries PLC on Friday said it managed to defy raw materials volatility and the weak euro in the first half to generate an increased pretax profit, prompting it to hike its interim dividend.
The polythene products maker said its pretax profit in the first half was up to GBP15.7 million from GBP14.8 million a year earlier, despite revenue falling to GBP265.8 million from GBP281.1 million. The profit rise was driven by volatile raw material costs, which were sharply lower at the start of the year but rose with comparable severity in the second quarter, though not enough to offset the overall benefit the company got to its margins.
British Polythene said its senior management team described the first half was "the most difficult period of raw material price movements that they have ever encountered in their careers in the polythene film industry."
Volumes for the company in the half were up by around 2.0% it said, with good performances in the UK and Europe, despite margin pressures in its retail-facing businesses in the UK and translation effects from the weak euro dragging on European revenue.
The company also said it was an "unusual" half for sales of silage stretch wrap film, which is used to bale grass, as overall market demand was hit by the cooler weather conditions in northern Britain and Ireland and near-drought conditions in the majority of central Europe. Despite this, silage stretch wrap sales were higher in the first half, primarily due to a good performance from the company's premium products.
Taking into account the solid performance against the tough market conditions, the company has increased its interim dividend to 6.0 pence per share from 5.0p.
"We are now pleased to report that, despite the headwinds of unexpectedly volatile raw material costs and considerably weaker currency translation of the profits from our European business, the results for the first six months continue to show progress," said Chairman Cameron McLatchie.
Having clearly demonstrated that we can cope well with volatile pricing through the cycle, your board is confident that our business is well placed to meet our expectations for the year as a whole," McLatchie added.
Shares in British Polythene were up 0.2% to 706.25 pence on Friday morning.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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