Scots firm faces years of uncertainty over EU inquiry into its key market

ONE of Scotland's biggest industrial firms yesterday admitted that a Brussels investigation into pricing practices in one of its key markets could overhang it "for years, not months" and influence how people view the group.

It came as Greenock-based British Polythene Industries (BPI) posted resilient interim results despite "very challenging markets", but said it had nothing to currently add about the EU inquiry divulged in May.

At that time, the firm revealed it had been visited by officials from the European Commission and Britain's Office of Fair Trading "as part of enquiries which they are conducting into the agricultural films market".

John Langlands, BPI's chief executive, declined to elaborate on the inquiry yesterday. He said: "We have nothing further to add. You have to accept that these things can take years as opposed to months to resolve themselves."

But he acknowledged it was unhelpful as long as the issue was unresolved, raising echoes for some analysts of the lengthy OFT pricing inquiry into East Kilbride-based Robert Wiseman Dairies.

"It's an issue that's out there. It can have an influence on how people can see the company," Langland said. About 30 per cent of BPI's plastic packaging goes to agriculture in areas such as silage and greenhouse film.

BPI revealed a 10 per cent fall in operating profits to 12.2 million from 13.7m on significantly higher input costs, mainly polymers for its plastic wrapping for the agriculture, retail and construction industries.

Langlands said: "We think this is a reasonable result against very difficult market conditions. (Polymer] prices increased every month to a record average of 1,100 per tonne over the period.

"They eased in August but we believe they (the suppliers] are looking to force them up in September. But we are hoping for some respite (in the second half to December)."

Langlands said BPI had passed on price rises to customers "and we will continue to do so". But he said it had hit operating margins at the company, with the business making 78 profit per tonne in the first half compared with 91 per tonne last year.

These price rises to customers meant revenues rose 12 per cent to 260.8m, while volumes were up 3 per cent.

Pre-tax profits increased by over 40 per cent to 13.1m from 9.1m, aided by a 3.5m property gain from the closure of BPI's Stockton factory, offset by a cost of about 700,000 from the closure of its Brampton site as part of an efficiencies programme.The interim dividend is hiked 4 per cent to 3.65p, with most City analysts forecasting an unchanged dividend of 11p for the year.

Cameron McLatchie, chairman of BPI, said the company was also hit by "poor early summer demand for silage stretchwrap due to abnormal growing conditions".

Silage, the grass for feeding animals in winter, grows best in rainy, hot conditions, but the climate in the period was cool and dry, the group said.

During the period the Stockton closure was completed and the equipment transferred to Greenock and another Scottish plan at Ardeer.

BPI said sales to the beleaguered construction sector had improved from the first half of 2009. Net borrowings fell to 49.5m from 55m at end-June 2009. Langlands said: "We felt borrowings were at too high a level and decided to bring them down."