Cropper (J) Regulatory News (CRPR)

30 Jul 2008 11:00



Issued by Citigate Dewe Rogerson Ltd, Birmingham

Date: Wednesday, 30 July 2008

Embargoed: 11.00am

James Cropper PLC

Annual General Meeting and Trading update

30 July 2008

STATEMENT BY THE CHAIRMAN, J A CROPPER

At the AGM to be held at 10.30am today, James Cropper, Chairman, made the following statement:

"The performance of the Group in the opening quarter has been dominated by severe increases in energy costs, primarily that of gas. This has principally affected James Cropper Speciality Papers, which traded at a loss during the quarter. This underlines the difficult trading climate that currently faces this subsidiary that I signalled in the preliminary results statement.

To illustrate the challenges we face, volatility in forward gas prices over the last month has been sufficient, at its peak, to potentially reduce our results for the Group as a whole for the full year to a loss. Based upon current market projections the cost of gas consumed in the current financial year could exceed £5.5 million, compared with £2.7 million in the previous financial year.

Softwood and hardwood pulp prices have remained stable for the past 3 months at $900/tonne and $840/tonne respectively. Market forecasters suggest that a plateau has probably been reached as a consequence of the economic slow-down.

The impact of the increasing cost base will be mitigated in the second half of the year by further sales price increases and additional volume arising from reduced capacity resulting from contraction elsewhere in the industry.

As regards The Paper Mill Shop a programme of redundancies at outlet level has been completed. It is also intended to exit a small number of under performing stores as their leases expire unless it is more economic to do so earlier.

On a more positive note the rapid escalation in the cost of oil has spurred activity in the emerging fuel cell market. As a consequence Technical Fibre Products is beginning to experience an increase in demand for materials to service this market, particularly with regard to free-standing phosphoric acid units.  Investment over the coming year will continue to be focused on energy and operating efficiencies. A conclusion on the viability of on-site biomass combustion is expected by the autumn of 2008. If feasible and cost effective, combustion of biomass fuels could lead to a reduction in gas consumption of up to 20% and thus significant cost savings.

Although the current financial year will be undoubtedly challenging, I am confident that through our existing management approach, which combines profitable sales growth, product development, energy savings and efficiency improvements, the Group will emerge from the current economic downturn much stronger and more profitable."