Molins is smoking

Molins (MLIN) does much of its work for the tobacco industry, but it was the high-speed packaging machinery business that impressed most in 2012. Profit there tripled to £1.5m and a 5 per cent increase in the order book improves visibility. It's also forced earnings upgrades out of broker Canaccord Genuity, which now thinks the shares could be worth 200p.

Underlying pre-tax profit grew 9 per cent to £4.9m and a lower tax rate helped underlying EPS jump almost a fifth to 21.8p. Canaccord now expects a profit of £5.3m this year, giving EPS of 22p. Despite difficulty squeezing orders out of European customers, the packaging division is expected to do well again. Tobacco machinery should, too. Sales there fell 9 per cent to £31.1m last year after an order worth almost £3m was held back, yet a 10 per cent increase in sales of spare parts, mostly to cigarette makers in the Philippines and Africa, meant underlying operating profit remained at £2.2m.

But it's the Scientific Services unit that's set to excite. A new lab and lumpy work from the US Food & Drug Administration may have cut profit at its Arista Laboratories tobacco testing business by over a third to £1.2m, but Molins, with nearly two-thirds of the market, should make a fortune when a new stricter testing regime is introduced in the US. Expect an announcement in April.

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