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James Cropper

  • BY: Andrew Hore |
  • POSTED: 20/11/2007 |

Paper maker and technical fibre products developer James Cropper increased its first half profits but cost increases could make the second half tougher. 

Energy costs are becoming a problem again as is the rise in the pulp price. At the moment the company estimates that this year’s gas costs will be 20% higher than last year. The benchmark price for softwood pulp is expected to rise from $760/tonne in April to $850/tonne by the beginning of 2008. Cropper is passing on the costs to customers but there is a lag.

All the main operations increased their turnover in the six months to September 2007. The group’s turnover rose from £33m to £35.7m despite the effect of the weak dollar. Profits before pension adjustments increased from £1m to £1.4m. The pension deficit has fallen by £2.7m to £3.46m. The interim dividend was increased from 1.9p to 2.2p a share.

The largest improvement in turnover came from technical fibre products. A new manufacturing outsourcing contract boosted sales although margins are lower than for other products. Cropper acquired a US metal coated carbon fibres business as well as the rest of its joint venture in this area. That means Cropper will now consolidate all of its loss.

House broker Brewin Dolphin forecasts a rise in full year profits from £2.1m to £2.5m. This reflects an understandable caution about cost increases and the continued weakness of the dollar. The balance sheet is strong and the long-term outlook is good, particularly for technical fibre products. At 239p, the shares are trading on around 12 times forecast earnings for this year and a forecast yield of 3.3%.

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