BPI double profits but lower demand likely to slow recovery

BRITISH Polythene Industries more than doubled its profits last year as raw material costs fell, but it warned that it expected little recovery in demand in 2010.

The Greenock-based firm reported a pre-tax profit of 11.8 million for 2009 yesterday, up from 3.9m the previous year. While its sales fell by 56m to 425m on weaker demand, profits rose strongly as raw material and energy costs plunged compared to 2008.

Chief executive John Langlands warned that sales, in particular to customers in the construction industry, showed little sign of recovery, with BPI viewing 2010 with "caution".

BPI is midway through the closure of Stockton, which is expected to lead to the loss of around 160 jobs. Around half of Stockton's output was sold to the construction industry, although Langlands said it would not add capacity for the sector at its other sites. Europe's largest plastic bag maker, BPI warned that its sales to the retail sector were changing, as supermarkets demand thinner, stronger packaging, although its market share remains stable.

The company was able to slash its debt pile during 2009 by 23.8m to 52.2m and predicted that the level will fall further in 2010. Langlands said debt had been cut as lower costs boosted cashflow, while it also saw a benefit from lower interest costs.

John Lawson at house brokers Investec reiterated a 400p target price on the shares.

"Whilst the markets remained challenging, the group's exposure to defensive sectors has helped and BPI has managed its cost base well," Lawson said.

Shares in BPI closed up 4p at 294p.