News

British Polythene Industries (BPI) hit out at European protectionism this morning (3 March) and said it would have to restructure certain parts of its UK business following a 22% fall in pre-tax profits.

BPI's share price fell by 25p to 252p after pre-tax profits for the year to 31 December 2007 dipped from £14m to £11.5m, owing to a "significant" rise in raw materials costs and "patchy" demand from certain sectors.

However, sales rose by 2.4% to £424m.

The firm, which produces polythene films, bags and sacks, said the protectionist policies of the European Commission (EC) brought into question the globalisation of manufacturing.

This followed the introduction in 2006 of an anti-dumping duty of 8.4% on thin bags imported into the EU from China. The duty on BPI products made in China was cut to 4.3% in 2008 after it applied for an individual review.

Chairman Cameron McLatchie said it was hard to see how the EC's imposition of tariffs on goods imported by a European manufacturer from its subsidiary based in China benefited European consumers.

"British Polythene has done more to modernise its manufacturing base than most of our EC competitors, yet it is these competitors who are now being protected by arcane regulations implemented after considerable political pressure from special interest groups determined to maintain the status quo of uncompetitive EC manufacture," he said.

He said BPI would continue to make certain products in China for the EC market that would not attract additional import duty, because they did not fall within the scope of the regulations.

BPI was also diversifying the sales territories for products that did attract this tax and had won new customers in the Middle East, North America and Australasia, he added.

BPI also said 2008 had begun with "unprecedented" raw material and energy prices and the "margin compression" witnessed in 2007 had intensified in the first two months.

McLatchie said the record prices were "unsustainable" in the medium term and BPI was "actively working" to pass on these costs to customers.

The firm was also continuing to reduce its energy consumption and installing energy efficient motors and lighting. However, McLatchie said this would be of "little effect" against the "massive" increases in energy costs.

"We neither have physical stocks of raw material nor any workable hedge against the rising material costs," he added.

The price of the company's major raw material, polyethylene polymer, has now reached unprecedented levels due to high costs of cracker feedstock in north-west Europe.

Looking ahead, BPI said early season sales of silage stretchwrap had been "encouraging" and there were signs that 2008 would be another good year for this product.

McLatchie said he was confident that the firm would generate better returns once the current raw material issues were behind it.