Powerflute powers up

The traditionally cyclical paper business experienced a "very good year in terms of market conditions", according to finance director David Walton with little fluctuation in prices and demand until the final quarter when economic uncertainty in Europe dampened demand. But 2012 has started positively as the eurozone crisis abated and pricing is tracking just below 2011 levels.

Powerflute’s sale of its loss-making Graphic Papers business last May, which brought in €32.5m (£27m), has given the company a healthy net cash position and allowed it to invest in several capital projects last year. These will add 10,000-15,000 tonnes to its nominal 280,000 capacity and improve efficiency.

Moreover, strong demand for waste paper products from China has helped to put a floor under waste paper prices and supported the paper market generally. Powerflute itself uses virgin wood sourced from its Harvestia joint venture, which is run as a non-profit business for the benefit of Powerflute and its co-owner, biomass business Vapo. Mr Walton calculates that Powerflute is saving around €5m-€6m annually against the cost of its wood feedstock before Harvestia was established.

Collins Stewart is forecasting flat profits of €12.3m for 2012 and EPS of 2.6¢ (2011 €12.4m and 2.5p)