The Cumbrian paper maker had already flagged that its profits would be badly impacted due to the soaring price of energy and raw materials.
Group sales in the six months to 24 September were up just over 23% to £61.6m, but rising input costs resulted in a £2.5m reversal of the prior year’s operating profit at the same stage.
The firm broke even at the adjusted pre-tax profit level, while the pre-tax loss including exceptionals and the IAS 19 accounting charge was £857,000.
Chairman Mark Cropper said that energy costs had increased by 148% compared with the prior year, while raw materials were up 20%, resulting in “sudden multi-million pound cost increases across the company, which have negatively impacted profits”.
“In the second half of the year, the group has implemented aggressive pricing actions and, eased by the recently announced Government support on energy prices, the surcharges will remain in place until no longer necessary. Each operating division is projecting volume growth, order books are full and the company is focused on a range of enabling actions to build a solid foundation for continued future growth and a return to profitability,” he stated.
Investments in energy-saving equipment on its paper machines are already delivering a 5%-7% per annum reduction in site energy consumption.
The business is also pushing ahead with its decarbonisation plans, which are moving to the planning application phase.
CEO Steve Adams, who took over from Phil Wild in August, said that the Paper division was right-sizing its portfolio around “a smaller more profitable core” focused on luxury packaging.
Adams was previously managing director of the Paper business, James Cropper’s biggest operation. It posted sales up 23% to just over £42m during the period.
“The division is also looking at a more productive operating model and a re-alignment of its supply chain organisation to drive end to end customer focus.”
The plan at the Colourform plastic free packaging operation is to scale up the pipeline in key target markets, and it is also adding added-value embellishment options.
The TFP nonwovens and electrochemical materials wing is also building capability for future growth.
Adams said that while the group’s long-term growth and profitability remained “very strong”, the unprecedented inflationary situation presented “a natural opportunity to review each of the divisions and their operations”.
This work is already underway.
James Cropper’s share price slipped by 6.8% to 852p on the news (52-week high: £16.50, low: 750p).
