In a trading statement released earlier this week, the Kendal-based business said that as a direct result of the wholesale gas price increases impacting its Q4 period and, subsequently, the profitability of its Paper division, its expectations for the full-year will be for adjusted pre-tax profit for the group of £3.5m.
This was against previous market expectations of £4.9m. Its pre-tax profit for 2021 was £1.1m.
The group also noted that it has experienced strong demand throughout the year and across all divisions, with over 30% sales growth in the current year to 26 March 2022, which is ahead of previous market expectations.
The company stated: “While the situation in Ukraine has resulted in uncertainty concerning the Paper division’s input costs in the short term, the long term opportunity for the group remains positive, and we are encouraged by our ability to flex pricing to respond to rising input costs.
“Building on a strong track record of growth, the year is expected to deliver a new sales high across the group. We continue to maintain a strong financial position, with transformation programmes well in advance to transition away from natural gas across all group divisions.
“The group has recently secured new credit facilities to support investments and other growth programmes. The £4m government provided Covid related loan facility, CLBIL, has been repaid in full and undrawn facilities stand comfortably at £20m.”
The company said its Technical Fibre Products (TFP) division was nominally impacted during the prior pandemic year and has demonstrated over 20% growth this year, “which will exceed market expectations whilst maintaining pre-pandemic margin levels”.
It added the outlook for TFP, which is not significantly exposed to energy costs, remains strong.
The company’s Colourform arm, which had grown by 9% during the previous pandemic year, is expected to have further sales growth of 20% this year and the outlook for the division, which too is not significantly exposed to energy costs, remains unchanged.
Paper was the most significantly impacted part of the group through the previous pandemic year, James Cropper said.
“Nevertheless, all customers were retained, and demand has quickly returned. With new additional customers and contracts won, sales have grown over 30% in the year,” it stated.
“The start of the Russia/Ukraine conflict and the resulting jump in energy costs has, however, significantly affected Paper, which is by far our most energy-intensive division. The average wholesale gas price has moved from 50p/therm to over 250p/therm, peaking at 800p/therm in Q4.
“This has materially impacted the recent profitability of the division. Actions have been taken; in addition to recent price increases a customer energy surcharge is being implemented to mitigate the impact moving forward.”
Plans to decarbonise the Paper division have already been made and the plan is to move away from gas entirely by 2030.
The group will continue to drive its Paper product portfolio towards higher-value products, supported by investment in additional embossing capacity.
James Cropper’s results for the year ending 26 March 2022 are scheduled for release on 21 June.
