Paper maker loses £0.8m
Article Date: Jun 18 2001Margin pressures in paper making sent fully listed forestry and paper veteran James Cropper into the red last year for only the third time in 150 years, writes James Crux.
James Cropper (CRPR) lost £800,000 in the year to March, slightly better than the £1 million loss expected by analysts, compared to a £3.1 million pre-tax profit the year before. Sales were fairly static at £54.2 million (£53.4 million).
Rapid increases in raw material and energy costs, twinned with subdued demand, caused crippling conditions in the company's core paper making business, particularly in the second half of the year. Margins were squeezed by import penetration from Europe into UK markets and a 'rapid escalation' in wood pulp, up from $480 per tonne in 1999 to $710 per tonne in July 2000, a level at which it remained until February.
Problems were compounded by a doubling of the group's gas bill to nearly £2 million over the last 12 months. Chief executive Alun Lewis admits the division is troubled. 'If we're critical, this mature business is slowly going backwards', he explained.
Nevertheless, a 'recovery' plan, involving the loss of 20 jobs and £380,000 redundancy costs, seems to be having an effect. In the first two months of the current year, paper making was profitable. Lewis adds 'we need to put some clear-blue water between ourselves and the pulp-price cycle' and move into 'special and higher value products'.
But the news is not all bad. Cropper's two other divisons, 'converting' and 'technical fibre products' (TFP), performed fairly well last year.
Operating profits rose 10 per cent to £961,000 in converting, which manufactures display and mount boards for advertising and picture framing. Meanwhile, TFP, seen as the group's potentially most exciting 'emergent' division, produced a surge in operating profits from £195,000 to £504,000 on sales up 16 per cent.
TFP, which makes fire seals for doors and insulation products, signed an agreement to develop fuel cells with Johnson Matthey last May. The division has also won new business with suppliers to the medical, chemical, fire protection and construction industries during the year.
The shares were marked down 0.5p to 202p on the losses.
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