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High polymer prices dent RPC

RESULTS: High polymer prices and a weak euro have dented profits at plastic packaging group, RPC - although self-help measures and a shift towards higher-margin products offer hope

Plastic packaging specialist RPC (RPC) saw its full-year adjusted operating profits slide 4 per cent to £89.7m - reflecting headwinds from near record high polymer prices, and the time lag in passing on those costs to customers, as well as the impact of the weak euro. Indeed, such worries led management to issue a profit warning back in March.

IC TIP: Hold at 422p

What's more, around 85 per cent of sales are in tough UK and European markets, while weak European construction markets and cold UK weather hasn't helped demand. Some of these factors have been offset by cost savings from the integration of the group's acquisition of Superfos in 2011. Moreover, RPC's new Fitter for the Future initiative is targeting £12m of annualised cost savings over the next two years - although that programme did result in exceptional charges of £36m. Developing new higher-margin products - such as home coffee machine capsules - also helped mitigate against weak conditions and the group's operating margin improved from 8.3 per cent to 8.5 per cent. RPC is also looking leaner after having existed the European vending cup and automotive business.

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