Brussels inquiry into pricing casts a cloud over BPI

ONE of Scotland's biggest industrial firms will be quizzed this week on the progress of a Brussels probe into pricing practices in one of its key agricultural markets.

British Polythene Industries, based in Greenock, announced last May that it had been among companies in the industry visited by European Union officials, but the shutters have stayed down on the investigation since then.

Some BPI followers say this has caused concern as about 30 per cent of the company's plastic packaging goes to agriculture in areas such as silage and greenhouse film.

Toby Thorrington, an analyst at Edison Investment Research, said in a brokers note: "The inquiry process is an opaque one and no further information has been released nor a timetable established to do so since the original announcement (on 13 May]. Not surprisingly, this creates an area of financial uncertainty for external observers."

It is unclear whether the company, which has 40 per cent of its group sales outside the UK, with plants in Belgium, Holland, China and North America, will have any more information on the probe when it posts interim profits next Tuesday.

There are no City forecasts for BPI's interim figures, due out this week, although Edison forecasts a slight fall in pre-tax profits for 2010 to 15.5 million from 16.3m in 2009. Both Edison and Investec, another leading broker that follows BPI, which is also a big supplier to retail food chains, forecast the full-year dividend will be held at 11p.

Cameron McLatchie, BPI's executive chairman, is expected to reveal that conditions remain tough in the depressed construction sector, which traditionally chips in about 12 per cent of the company's sales.

Construction groups pulled in their horns in the 2008/09 recession, and recent data plus imminent public sector spending cuts show the brakes are still on in the industry.

One BPI follower said: "The most positive thing to say on construction exposure is that it is not that big in the grand scheme of things for the group."

It is thought that BPI will have seen a "modest" increase in overall volumes, and will confirm it has been able to make some price rises to customers stick.

The market will also be interested to know if the Scottish group has spotted any potential acquisitions. John Langlands, BPI's chief executive, said late last year that the private equity sector was no longer able to price out trade buyers in acquisitions.

He said private equity buyers were finding it harder to borrow from the banks for highly leveraged acquisitions as banks repaired their own balance sheets, and that BPI was alert for possible purchases.

One analyst said: "The group made its first move into the US with the acquisition of AT Films in 2008 and had done many acquisitions before that. Acquisitions are not alien to BPI, they understand the numbers and their markets.