Essentra packaging division returns to growth

By Richard Stuart-Turner, Wednesday 24 October 2018

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Essentra’s packaging division returned to growth in Q3, reporting an increase of more than 4%, excluding the impact from the closure of the Newport folding cartons site last year.

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Essentra's packaging division posted growth in Q3

The Milton Keynes-headquartered business attributed the growth to “a meaningful improvement in both Europe and Asia and North America”. The full-year outlook for the division for 2018 is for an improved year-on-year trend in revenue and margin.

Elsewhere, Essentra said its components division delivered “a robust organic result”, with total revenue growth boosted by the ongoing successful integration of Micro Plastics and an early contribution from the acquisition of Nolato Hertila in July.

The company said it expected a moderate decline in year-on-year revenue and a stable margin for its filters division. It said the division made “good strategic process” in Q3 but that project volatility, particularly in Europe, resulted in an underlying revenue drop in the period.

The specialist components segment saw a modest decline in sales, largely due to the continued poor performance of Tear Tapes, where a strategic improvement plan is being implemented.

Essentra’s overall expectations for the full year remained unchanged after it posted like-for-like Q3 revenue growth of 1.5%. It said trading “reflected the benefits of the strategic actions taken and the increasing stability across the company”.

Essentra chief executive Paul Forman said: “I am pleased with both the improved stability that we are continuing to drive throughout the organisation, as well as the solid progress we are making on our strategic objectives.

“The return to growth across our packaging division is particularly gratifying and, being well underpinned, is set to continue. Accordingly, we remain confident that we are on track to deliver an improvement in both revenue and operating margin for the company.”

In its results for the half-year period ended 30 June 2018, Essentra posted revenue of £513.1m, down 1.8% year-on-year, though its pre-tax profit was up by 7% to £20.8m. The packaging division had accounted for £170.2m of sales in the period, down 7.8% year-on-year.

Last month Essentra announced the intended closure of the commercial print and consumer packaging site in Largo, US, while in the UK consultation processes are underway at its commercial print facility in Kilmarnock and its Nottingham site regarding the production of speciality tapes.

For the nine months ended 30 September 2018, these businesses generated combined revenue of around £16m and an operating loss of around £1m.

The closures would result in an exceptional H2 charge of around £12m, Essentra said, though the cash element of this charge – around £4m – is expected to be offset by the anticipated proceeds realised from the disposal of the assets and freehold property in Largo, such that the total cashflow impact of the site closures will be at least neutral.

Essentra’s share price has fallen steadily since the Q3 update was released on Friday (19 October), from 391p to 350.8p at the time of writing.

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