Cumbrian papermaker James Cropper has reported a steep pre-tax profit drop in the first half of the financial year as it continues to be impacted by higher pulp prices.
For the half-year period to 29 September 2018, the company reported a pre-tax profit of £1.4m, down 39% from the £2.3m recorded in the equivalent period a year earlier.
The impact of higher pulp prices is projected to add an additional £3.5m of material costs compared to the prior year. In September the company had warned its pre-tax profits for the current year would likely be hit by £2m more than initially anticipated.
The group’s revenue in the six-month period grew by 6.1% from £47.4m to £50.3m while adjusted pre-tax profit, prior to the impact of IAS 19 pension adjustments and exceptional costs, fell by 32.1% year-on-year to £1.9m, from £2.8m in H1 2017.
By division, James Cropper Paper revenue was up by 5.5% year-on-year from £35.3m to £37.2m, Technical Fibre Products (TFP) recorded revenue of £12.9m, up 6.7% from £12.1m a year earlier, and the group’s 3D Products (3DP) division recorded sales of £135,000, up 214% on the £43,000 reported in the first half of 2017.
Chairman Mark Cropper said: “TFP has delivered its best ever sales performance for a half-year and is set to continue growth in the second half. Plans are in place for additional TFP non-woven capability increasing capacity by 50% by the end of the 2020 calendar year.
“Paper sales have grown by 6% compared with the prior period comparative but with pulp prices projected to add an additional £3.5m of costs compared to the prior year our paper business is severely impacted.
Referring to the continued development of the 3DP division’s core product range, Colourform, the group said “revenues are making progress, with the pipeline building well; confirming the potential for this new business”.
It said revenues have been generated predominantly in the UK but includes exports to the Americas and Europe. High production demand is predicted by early 2019, in response to which the business said it has earmarked further investment in production capacity to increase it by a further 50% in early 2019.
“Within the group we continue to invest significantly in people, innovation and capability,” added Cropper.
“This will ensure that over the long term the group has the potential to sustain growth across all its businesses. In the nearer term, expectations for the full-year remain unchanged from the previous trading update.”
The group operates two funded pension schemes providing defined benefits, for a number of its employees.
The IAS19 valuations, for the defined benefit schemes as at 29 September 2018, revealed a combined deficit of £19.8m, compared with £19.5m as at 31 March 2018. After deferred taxation the net deficit stands at £16.4m.
Diluted earnings per share decreased to 12.9p, compared to 22.9p in the prior year comparative period, and the board has declared an interim dividend of 2.5p per share.
In early trading James Cropper’s share price climbed by 1.77% to 1,150p. It stood at 1,175p at the time of writing.