News

British Polythene Industries (BPI) is "examining all options" to improve its return from its UK operations and warned that this might include further closures.

The firm said changes in demand patterns and the downturn of the industrial and construction base in the UK had affected business.

"We are actively taking steps to bring our production capacity into line with current customer demand," said chairman Cameron McLatchie.

The warning came this morning (29 August) as BPI reported group operating profit down from £10.1m to £8.7m for the six months to 30 June as raw material prices and energy costs continue to bite.

Raw material prices reached "a new record" of £1,200 a tonne in July, rising again in August to £1,255 a tonne.

BPI chief executive John Langlands said: "Higher increases were charged by our suppliers on certain grades of polymer and some price reference organisations failed to reflect the higher market price movements, requiring our sales teams to increase selling prices above reported movements."

The firm put up prices by £100 a tonne in January and by £80 a tonne in May.

Electricity prices rose "substantially" with costs in the UK £2.5m higher than the equivalent period for 2007.

Langlands said these increases would have a greater impact in the second half as 2008 summer prices were now higher than last winter's.

"While these price increases have been driven by the rise in oil, gas and coal prices, the UK market continues to be the highest priced market in Europe with a subsequent disadvantage to UK industry," he said.

Turnover for the six months rose 18% to £265.9m, but sales volumes from BPI's UK and European sites were unchanged at 172,000 tonnes. Higher sales of silage stretchfilm for the agricultural sector outweighed lower sales to the construction industry.

Operating profit in UK & Ireland dropped from £5.2m to £3.4m. Tonnage volumes were flat at 132,000 tonnes.

Sales volume of shrinkwrap was below 2007 as poor weather hit the soft drinks industry.

Sales of refuse sacks were ahead of 2007 with "good demand" from the health and port authority sectors. The firm launched the Green Sack in February, which has been "well received".

Industrial packaging sales dropped owing to the downturn in the construction industry, but sales of printed film to the food and drink industry were 10% higher than the previous year, reflecting "strong demand" from "quality" customers.

BPI said its first 10-colour printing press is scheduled for delivery at the end of this month.

Langlands said the second half looks "very challenging" and is dependant on the firm's ability to recover raw material and energy costs and "normal levels of activity" in its non-construction activities.