RPC, the rigid plastic packaging group, has managed to maintain its interim operating profit despite severe pressure on input costs.
The group today (30 November) reported operating profit before exceptional items of £18.7m, up from £18.4m at the same point last year, while sales grew 6.9% to £329.7m in the six months to 30 September.
RPC took a charge of £10.3m for restructuring, notably the closure of its Thornaby and Hereford injection-moulding plants, and its Bristol thermoforming operation, cutting pre-tax profit to £3.7m (2006: £12.9m).
The group also built up its stocks of polymer and finished goods to counter any future polymer shortages, meaning working capital increased by £16m in the period from 31 March to 30 September, while "even tighter" credit terms have "become the norm".
Net debt rose by £22.1m, from £137.1m at 31 March to £159.2m at 30 September, and gearing from 87% to 98%. RPC's share price fell by 6% to 221p this morning on the results.
Chief executive Ron Marsh said it was difficult to tell when the impact of new polymer capacity in the Middle East, due to come on-stream in 2009, would filter through to pricing.
He also said he could not rule out further restructuring, but it was unlikely to be on the scale of the Hereford and Thornaby closures.
These would eventually be cash neutral, he said, because RPC owns both sites and will be able to sell them.
Marsh said growth had been particularly strong in the market for plastic bowls and jars for fruit.
"Traditionally, customers have had to pay a substantial premium to switch out of glass into plastic," he said. "But because of increases in the cost of glass, it doesn't cost any more in plastic than in glass.
"It's a very difficult technology and you have to have expertise not just to make the jar but to fill it. Customers often need to have their hands held and we have the people who can do that."
Marsh said RPC's customer base in this sector, which is growing in "double-digit percentages", had become "much wider". Dole has been its biggest customer, but it has picked up new business from companies in Greece and China.
RPC's thermoforming business has suffered "severe competition", particularly in the cups market, where major competitor Huhtamaki parted company with its chief executive, Heikki Takanen, earlier this month.
"People have to wake up and remember they have to make a profit," said Marsh. "I can't imagine that when a new chief executive arrives at Huhtamaki, he's going to decide he doesn't need to make a profit."
He said RPC would be looking for price rises across all areas of its business from 1 January 2008, mainly to cover overhead costs rather than polymer price rises.
RPC has also made another acquisition in the past week, paying less than £1m for Mob, a French producer of blowmoulded containers, after its parent company, toy manufacturer Smoby, went into administration.
The business, which is based in Moirans en Montagne and reported sales of £8.6m (€12m) in the year to 31 March, will make stock containers while RPC's plant at Montonate will focus on customised packs.
Source: packagingnews
The group today (30 November) reported operating profit before exceptional items of £18.7m, up from £18.4m at the same point last year, while sales grew 6.9% to £329.7m in the six months to 30 September.
RPC took a charge of £10.3m for restructuring, notably the closure of its Thornaby and Hereford injection-moulding plants, and its Bristol thermoforming operation, cutting pre-tax profit to £3.7m (2006: £12.9m).
The group also built up its stocks of polymer and finished goods to counter any future polymer shortages, meaning working capital increased by £16m in the period from 31 March to 30 September, while "even tighter" credit terms have "become the norm".
Net debt rose by £22.1m, from £137.1m at 31 March to £159.2m at 30 September, and gearing from 87% to 98%. RPC's share price fell by 6% to 221p this morning on the results.
Chief executive Ron Marsh said it was difficult to tell when the impact of new polymer capacity in the Middle East, due to come on-stream in 2009, would filter through to pricing.
He also said he could not rule out further restructuring, but it was unlikely to be on the scale of the Hereford and Thornaby closures.
These would eventually be cash neutral, he said, because RPC owns both sites and will be able to sell them.
Marsh said growth had been particularly strong in the market for plastic bowls and jars for fruit.
"Traditionally, customers have had to pay a substantial premium to switch out of glass into plastic," he said. "But because of increases in the cost of glass, it doesn't cost any more in plastic than in glass.
"It's a very difficult technology and you have to have expertise not just to make the jar but to fill it. Customers often need to have their hands held and we have the people who can do that."
Marsh said RPC's customer base in this sector, which is growing in "double-digit percentages", had become "much wider". Dole has been its biggest customer, but it has picked up new business from companies in Greece and China.
RPC's thermoforming business has suffered "severe competition", particularly in the cups market, where major competitor Huhtamaki parted company with its chief executive, Heikki Takanen, earlier this month.
"People have to wake up and remember they have to make a profit," said Marsh. "I can't imagine that when a new chief executive arrives at Huhtamaki, he's going to decide he doesn't need to make a profit."
He said RPC would be looking for price rises across all areas of its business from 1 January 2008, mainly to cover overhead costs rather than polymer price rises.
RPC has also made another acquisition in the past week, paying less than £1m for Mob, a French producer of blowmoulded containers, after its parent company, toy manufacturer Smoby, went into administration.
The business, which is based in Moirans en Montagne and reported sales of £8.6m (€12m) in the year to 31 March, will make stock containers while RPC's plant at Montonate will focus on customised packs.
Source: packagingnews
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