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Paper prices pulp profits at James Cropper

The business is looking to reduce its dependence on traditional pulp to boost margins
November 15, 2018

Technical fibre products (TFP) continue to paper over the cracks at James Cropper (CRPR). The division enjoyed a record sales performance in the first half, and is up 7 per cent on the first half of 2017. Here lies the company’s growth prospects – management expects further growth in the second half, while added capability at its Burneside facility could raise the division’s capacity by 50 per cent. But the TFP division contributes just over a quarter of the company’s revenues, compared with the 74 per cent brought in by its troublesome paper business.

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The decline in profitability was again driven by paper, which contributed to a 212 basis point reduction in the operating margin. The rising cost of virgin pulp is expected to add costs of £3.5m to James Cropper’s financial year, so the business is looking to reduce its dependence on traditional virgin pulp by moving towards greater use of alternative fibres and added recycling capacity.

Broker Stockdale forecasts pre-tax profits of £4m and earnings per share of 34.7p for James Cropper’s 2019 full year, down from the £5.8m and 56.8p which, respectively, appeared in its 2018 results.

JAMES CROPPER (CRPR)  
ORD PRICE:1,195pMARKET VALUE:£114m
TOUCH:1,150-1,24012-MONTH HIGH:1,832pLOW: 1,125p
DIVIDEND YIELD:1.1%PE RATIO:36
NET ASSET VALUE:243pNET DEBT:29%
Half-year to 29 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201747.42.323.12.5
201850.31.412.92.5
% change+6-39-44-
Ex-div:29 Nov   
Payment:11 Jan