Cumbrian paper maker's figures improve but fears linger

Nov 19 2009 By Iain Laing, The Journal

PAPER maker James Cropper has turned its half-year profits around but is bracing itself for a tough trading period.

The Kendal-based company may have seen a 5% slide in turnover to £35.9m for the six months to the end of September but its earnings have jumped back to £1.65m compared with a £260,000 loss a year ago.

It squeezed more profit out of its speciality papers business, helped by a hike in its selling price and a fall in the cost of pulp and gas from the high levels seen a year ago.

But it said that its strongest business will be hit by a fall in sales in the next six months and profits will be hit by the now rising cost of wood pulp.

And the company said that its TFP business, selling insulation, was likely to be hit in the coming months as orders had been hit by a restructure at a major client and a fall in business from other clients hit by the recession.

Divisional turnover was down by 17% and this was flattered to a degree by currency movements with US sales down 21% on a constant currency basis although the turnover value was only down 2% on a reported basis.

Chairman James Cropper said: "TFP’s order book is down considerably and this is likely to remain the case until at least the fourth quarter as a consequence of recessionary pressures on customers inventories and markets."

But he said he was confident that the business was well-placed for the future after building a client base in the aerospace and energy sectors.

The company also expected a fall in trade at its 20-strong Paper Mill shop chain and that it would continue to shut its under-performing stores as their leases ran out.

Broker Brewin Dolphin said the results confirmed that the recovery that took hold in the second half of its last financial year had "continued strongly into the current year." And it highlighted its £3.5m reduction in net debt which, combined with improvement in trading, encouraged the company to double dividend back to the 2008 2.2p level. But although Brewin said the company had gone a long way to achieving its forecast full-year pre-tax profit of £2m the broker was still taking a cautious view because of uncertain demand and rising costs.