Raw material prices ease to aid BPI profitability

EASING raw material prices and a strong performance from its European business will help profits at Scottish packaging group British Polythene Industries (BPI) come in at the top end of market expectations, the company said yesterday.

In a pre-close update ahead of its full-year results, the Greenock-based packaging firm said the bullish prediction came despite continuing “subdued demand” from many industrial customers and flat volumes in the retail sector.

Chief executive John Langlands said: “Despite this difficult trading environment, we expect our results for 2011 to be at the top end of market expectations as we benefit from the structural changes effected in recent years in the UK and an excellent performance from our European business.

“Raw material costs continue to slowly soften, no doubt assisted by poor demand and an increase in the volumes of imported polymer from new sources in the Middle East,” he added.

The company expects total volumes of product sold in 2011 to be marginally below 2010.

Analysts at house broker Investec, which have a “buy” rating on the shares and a 400p price target, have pencilled in a 17 per cent increase in pre-tax profits to £18.5 million on sales of just under £500m.

Toby Thorrington, an analyst at Edison, said that, although the share price is up by 36 per cent so far this year, “on our current estimates there is certainly scope for the rating to expand further”.

BPI closed up 2.5p at 322.5p.

The company is the largest manufacturer and recycler of polythene film products in Europe with customers in industries including agriculture, retail and manufacturing.

In September the company saw its shares rise after the European Commission ended its competition inquiry into the market for plastic films used in agriculture.