James Cropper reports record sales but profits hit

Cumbrian papermaker James Cropper has achieved record full-year sales, but pre-tax profits have almost almost halved due to the impact of continued higher pulp prices.

For the year ended 30 March 2019 the business reported sales of £101.1m, up 5% from the £96.3m achieved in 2018, but its pre-tax profit fell to £2.6m, from £4.5m in 2018.

Adjusted operating profit, prior to the impact of IAS 19 pension adjustments and exceptional costs, fell by 30% from £6.1m to £4.3m.

Chairman Mark Cropper said pulp prices, which outstripped market expectations for the second year in succession, increased cost pressures on the company’s paper business by more than £6.5m over the past two years.

“The strength of the group remains strong with record revenues, product mix improvements, investment on the increase and sound EBITDA levels providing clear headroom against our covenants,” he added.

“I remain confident that we are deploying and evolving the right strategies in this regard and this will ensure sustained – and sustainable – growth for the long term.”

By division, revenue at James Cropper Paper was up by 4.3% year-on-year from £71.2m to £74.3m but it generated an operating loss of £1.9m, compared to an operating profit of £1.5m in the prior period.

While the increasing pulp prices have impacted the paper division, the group said the underlying performance of the division “remains healthy with the progression of an improved value portfolio”.

“I am confident Paper will be restored to profitability in the current financial year and advance thereafter,” said Cropper.

“As well as working carefully with our long-term customers to recover margin, Paper is also winning new contracts at improved margins, not least to meet the retail packaging needs of global brands.”

Technical Fibre Products (TFP) achieved revenue of £26.5m, up by 6.3% from £24.9m in 2018, with operating profit in the division up by 19% to £8.9m.

The company’s 3D Products (3DP) division recorded sales of £290,000, up by 75% on the £166,000 it achieved in 2018, but it made an operating loss of £2.46m, up from a loss of £1.64m a year prior.

James Cropper said the further losses in this division have been incurred “as we scale up our investment to meet anticipated demand for this new subsidiary”.

“3DP did not grow as quickly as hoped in the year, owing to the timing of its first significant contracts, but the business is now moving rapidly beyond proof of concept,” said Cropper.

“While the business is bringing exceptional quality and colour to market, transitioning customers from existing packaging options (not least plastic) is taking longer than anticipated.

“Nevertheless we continue to see great potential, not least in the beauty and cosmetics market. The target is for the business to be cash flow neutral in the current financial year and it will grow to become a significant division for the group.”

James Cropper’s net IAS 19 pension deficit increased by £2.6m to £18.8m, from £16.2m last year.

Basic earnings per share in the period fell by 44% to 24.3p per share with diluted earnings per share falling by 43% to 24.3p 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, the same as last year.

Cropper said the recommendation to maintain the dividend “directly reflects the confidence the board continues to have in the company’s prospects in the coming years”.

In early trading, James Cropper’s share price fell by 6.4% to 880p but it has since rallied to 945p at the time of writing.


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