Laminates business drives volumes at API

PACKAGING firm API Group announced a healthy bounceback in volumes during the year to March 31 as sales grew by 26.2% to hit £100m.

However, its withdrawal from a joint venture in China meant that an otherwise profitable business sunk to a loss. Profits from its continuing operations were £2.6m, compared with a £300,000 loss last year, but a £4.1m loss at the Shanghai Shen Yong Stamping Foil Company dragged down its overall performance for the year to a £1.5m loss.

Non-executive chairman Richard Wright said the firm’s disposal of its 51% share in the company to its local joint venture partner in January “was  a  key  step  in  the  turnaround  of  the  Group’s financial performance”.

“While the Chinese venture  made a  positive contribution  to the Group  over the full 12 year period  of API’s involvement, increased competition in the local foil market and erosion of margins on export business meant that trading losses in recent years had become unsustainable.”

At home, the Poynton-based company credited top-line growth to a stronger performance by its laminates division, where sales increased by 58.3%. It said that demand was particularly strong from alcohol and tobbacco clients, while a tighter grip on costs has meant the businesses margins improved, with earnings before interest and tax up to 11.8%, from 7.3% last year.

However, increasing costs of thin-gauge polyester film pushed up costs in its foils business, where operating margins fell by 43.3% to £1.4m despite an 11% increase in revenues.

Its overall improved performance also helped API Group to pay down debt, and it finished the year with net debt of £8.5m, which is £10m lower than at the start of the period.

Wright said: “The year has seen a step change in many aspects of the Group’s financial position and it is particularly encouraging that, despite facing the challenge of unprecedented increases in the cost of raw materials, the Group has delivered its best trading performance for a number of years.

“Results will continue to be influenced by the uncertain economic climate and by customer decisions affecting our more significant supply positions.  

“In the meantime, management is focussed on improving the quality and resilience of our earnings, and restoring margins in our Foils businesses is a particular priority.”