Warning sends BPI shares down 8%

SHARES in British Polythene Industries (BPI) tumbled nearly 8 per cent yesterday after the packaging maker warned that full-year profits would be at the lower end of City forecasts.

In its third-quarter update, it said the cost of polymers - the raw materials for its plastic packaging - continue to balloon.

But - following the sale of a vacant site in Brampton for 300,000 and the anticipated sale of an Essex site for 2.5 million - the Greenock-based company still expects to beat last year's results, when BPI posted a pre-tax profit of 11.8m on revenue of 425m.

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Analysts on average expect full-year pre-tax profit of 15.1m, according to Reuters.

The two sites were sold off as part of BPI's ongoing restructuring programme, which involves the sale of surplus properties and stock reduction in order to pay-down borrowing.

In August, the company had warned that it expected the second-half to remain tough as its suppliers anticipated a further hike in raw material prices.

BPI yesterday said: "Many of our suppliers have scaled back production, are running on tighter inventories and were quick to take advantage of the recent wide-scale disruption to petrochemical refineries in France, which led to a severe imbalance of both feed-stocks and finished raw materials."

John Lawson, an analyst at Investec, said: "Whilst BPI is normally able to pass on polymer price rises to its customers, there is usually a time-lag and this delay is likely to have an adverse impact on current year earnings."

Shares in BPI - which closed down 20p at 233p - had gained about 12 per cent after reporting first-half results in August.