James Cropper profits hit by rising pulp prices

Richard Stuart-Turner
Tuesday, June 26, 2018

Cumbrian papermaker James Cropper has reported a pre-tax profit fall of 18.2% in its annual results as “dramatically rising pulp costs” led to increased costs.

James Cropper cup reycling
James Cropper cup reycling

For the year ended 31 March 2018 the company recorded a pre-tax profit of £4.5m, down from £5.5m in 2017. Its revenue jumped by 4.2% to £96.3m, from £92.4m a year earlier.

Adjusted operating profit, prior to the impact of IAS 19 pension adjustments and exceptional costs, fell by 12.1% from £6.6m in 2017 to £5.8m.

The impact of higher pulp prices, which the group warned in January would likely hit its full-year profits, added around £3.5m to material costs for the year.

Chairman Mark Cropper said: “We recognise there are significant challenges in recovering the margins lost [in the James Cropper Paper division] to pulp costs and that continued research, innovation and investment will be vital to maintaining our position and creating future value.”

By division, James Cropper Paper revenue was up by 0.3% from £71m to £71.2m but its operating profit fell by 54% to £1.5m.

The group said that despite the impact from increasing pulp prices, which a combination of price increases, cutting back on expenditure and selective investment had helped to mitigate, the underlying performance of the division “remains healthy with improving operating margins and additional interest shown following the media interest in our Cupcycling brand”.

Technical Fibre Products (TFP) recorded revenue of £24.9m, up 17% from £21.3m in 2017, with operating profit in the division up by 25% to £7.4m.

The group’s recently added 3D Products (3DP) division recorded sales of £166,000, up by more than 2000% on its £7,000 turnover in 2017, but it made an operating loss of £1.64m in the period, up from a loss of £426,000 a year prior.

Referring to the continued development of the division’s core 3DP product range, Colourform, the group said: “Project origination is a lengthy process incorporating design, prototyping and production tooling manufacture.

“Conversion of projects from plastic to pulp has been slow, however early adopters of pulp solutions are now on-board and the business was running all production lines at the end of the period.”

James Cropper’s net IAS 19 pension deficit reduced by £2.2m to £16.2m, from £18.4m last year.

The group operates two funded pension schemes providing defined benefits for a number of its employees.

These schemes are sensitive to a number of key factors including the value of the assets, the discount rate used to calculate the schemes liabilities – based on a premium above gilt yields, the rate of inflation and the mortality assumptions for members of the schemes. Changes in these assumptions will impact the deficit positively or negatively, the group said.

Basic earnings per share have fallen by 12% to 43.3p per share with diluted earnings per share also falling by 12% to 43p per share.

The board has proposed a final dividend of 11p per share, making a total dividend for the financial period of 13.5p per share, up 14% from 11.8p a year earlier.

“As intimated by the recommended final dividend increase, the board and I continue to be excited about the prospects of the group,” said Cropper.

In early trading James Cropper’s share price fell by 0.72% to 1,385p but it has since rallied to 1,469p at the time of writing.

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