Avon finding value in more advanced products

Avon Rubber (AVON) has a track record of high returns on capital employed (19.4 per cent last year) and healthy margins (operating margins of 13.2 per cent), arising from its strong positions in the respiratory protection and dairy equipment markets. The group is very cash generative, and in recent years has been putting some of its money to use developing more advanced and higher-margin products, while the rest has built up on the balance sheet. With the first sale of one of these products inked just last month, we think there are good times ahead for Avon despite challenges presented by weak milk prices.