RPC deserves credit, not criticism, from investors

It seems that turning a steady profit is not good enough for some investors. The Times reported in February that activist investors North Atlantic Value and SVG raised their combined stake in RPC from 11.7% to 12.2% because of concerns that its share price had become undervalued.

Although last week’s announcement boosted RPC’s share price by 17p to 202p, it still remains well below the levels of July 2007, when it hit more than 300p.

It’s difficult to see what chief executive Ron Marsh and his team could do differently, though. Hit hard by the rising oil price, in both the costs of energy and polymers, RPC still expects to record an adjusted pre-tax profit of £27.5m next week – compared with £29.4m this time last year – when it reports its results for the year to 31 March.

To put this into perspective, in April rival Huhtamaki said it would stop making rigid plastic packaging in the UK for consumer goods because of a decline in volumes and increases in manufacturing costs.

Some analysts I’ve spoken to say that RPC has done a very good job in a difficult climate and that anyone who thinks otherwise is being unrealistic. According to one, the only fault, if it could be termed as such, is that management haven’t been quite as good at selling the merits of the business to potential investors as they have been at running it.

RPC could be playing a clever hand, though. By teasing out the appetite in the market for acquisitions of either the whole group or parts of it, it might just end up proving that no one thinks they can do a better job than the incumbent team.

There are also doubts that, in the current financial climate, there will be a queue of potential buyers prepared to part with a substantial sum of cash, or get themselves into more debt, to fund a deal.

Packaging is not, and is unlikely to become, the darling of the stock market, and plastic packaging in particular has been singled out for media criticism due to its dependence on oil.

So it may be that RPC’s best prospects lie away from the markets and in the control of the management team that has worked hard to build it up in the 15 years since its flotation.

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