Rocketing gas bill hits paper maker’s profits

Jun 25 2008 by Graeme King, The Journal

PROFITS at Cumbrian paper maker James Cropper have dropped 25% as it struggles to digest high energy and pulp prices. The 158-year-old company said yesterday it expected tough trading conditions to continue this year – and is looking at long-term projects to cut energy bills.

Managers have also decided to close about a quarter of their 24 under-performing The Paper Mill Shops nationally.

The firm posted pre-tax profits of £1,580,000 for the year to March 29, down from £2,107,000 in 2006, and sales grew 5% to £72,744,000.

It said it had maintained sales growth in all four of its businesses, but it had been difficult to sustain profit margins because of cost rises.

Financial director John Denman said the company was addressing the impact of higher gas prices on its manufacturing. “The gas price is now 60p per therm, which is double what it was a year ago. Our energy costs in the year just closed were £3.5m, up 25% on the year before, and this financial year they could go to £5m.

“We will do our best to hedge, but the real answer is to reduce consumption by investing in more efficient plant, or to use alternative energy sources. We are looking at investing in a biomass facility to raise steam.”

The shops made an operating loss of £358,000. Mr Denman said six would close as leases expired in the next few years, with employment costs to be cut by 15%, involving job losses.

Chairman James Cropper said: “In the medium to long term, the board is confident in the group’s ability to exploit its competitive positions in its respective niches through the excellence of its products and customer service.”