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Asia boosts Yule Catto

TIP UPDATE: Chemical group Yule Catto has shrugged off its exposure to the rising oil price
March 9, 2011

Yule Catto's results don't reflect its of German competitor PolymerLatex, which is due to complete at the end of this month. Yet the group still reported decent progress - even after a resilient performance in 2009. Indeed, adjust for a £30m goodwill write-down in 2009, and an £11m gain last year from selling an adhesives business, and pre-tax profit rose 19 per cent to £47m.

IC TIP: Hold at 216p

Underlying operating profit at the core polymers division grew 10 per cent, on volumes up 4 per cent. The return on sales fell, but that was mainly down to sharp price increases having inflated revenues - Yule Catto largely maintained margins in absolute cash terms. Moreover, finance director David Blackwood says the group has "redoubled" its efforts to pass on raw material costs - which are mainly oil related. Volumes grew most strongly in southeast Asia, led by demand for synthetic rubber gloves - a market in which Yule Catto will have an even stronger position after it has integrated PolymerLatex. Europe was weaker, with a patchy performance following the first-half rebound.

Broker Brewin Dolphin expects adjusted pre-tax profit of £84.2m for 2011, giving EPS of 18p (from £47m and 16.2p in 2010).

YULE CATTO & CO (YULC)

ORD PRICE:216pMARKET VALUE:£735m
TOUCH:215.8-216.2p12-MONTH HIGH:245pLOW: 104p
DIVIDEND YIELD:1.2%PE RATIO:10
NET ASSET VALUE:31p*NET DEBT:68%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)†Dividend per share (p)†
200648514.71.675.99
200751134.011.56.18
200860238.914.32.58
20095437.142.60nil
201065157.822.02.60
% change+20+710+746-

Ex-div: 8 Jun

Payment: 8 Jul

*Includes intangible assets of £124m, or 37p a share

†Adjusted for December 2010's rights issue

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