BPI (BPI) thought raw material costs would fall in 2013. Instead, they rose, ending the year near a record high. That damaged margins at the polythene film manufacturer's UK consumer packaging operations, and the extra working capital needed was partly to blame for an increase in debt of almost a third. Yet underlying operating profit, which strips out £1m of restructuring costs following the loss of a 40-year-old bread bags contract, still grew by a tenth to £24m. And, crucially, the outlook for polymer prices appears more benign.
An ongoing capital expenditure programme increased borrowings, too, but it looks like money well spent. BPI laid out £20m in 2013, and will spend about the same again this year and next. Europe has been a major beneficiary. Profit there grew 8 per cent to £14.4m, and extra equipment currently on order should be up and running in the next few months. That should help volumes grow again this year and next, mostly driven by agricultural stretch-films. Last year, group volumes rose 1.4 per cent organically, despite reductions in film thickness as customers cut their packaging costs.
With clear improvements both in the UK and North America, broker Investec Securities forecasts adjusted pre-tax profit of £23m for 2014, giving adjusted EPS of 59.4p (from £22.1m and 56.9p in 2013).
BRITISH POLYTHENE INDUSTRIES (BPI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 664p | MARKET VALUE: | £179m | |
| TOUCH: | 660-665p | 12-MONTH HIGH: | 740p | LOW: 485p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 14 | |
| NET ASSET VALUE | 180p | NET DEBT: | 43% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 425 | 11.8 | 30.9 | 11 |
| 2010 | 478 | 16.7 | 52.2 | 11.5 |
| 2011 | 508 | 19.2 | 52.8 | 12.5 |
| 2012 | 479 | 17.0 | 42.1 | 13.2 |
| 2013 | 508 | 18.5 | 47.1 | 14.5 |
| % change | +6 | +9 | +12 | +10 |
Ex-div: 12 Mar Payment: 14 May | ||||
