Cropper sees H1 profits fall as EU rules hit investment plan
JAMES Cropper, the listed Cumbria-based paper and technical materials manufacturer, said first half profits had been hit by green taxes and higher raw material and energy costs.
The Lake District-based group revealed too that, despite successfully bidding for £2.9m from the Government’s Regional Growth Fund to build a steam raising boiler on site, European Union rules have made the scheme unworkable, so it has been axed.
Chairman Mark Cropper explained: “Our decision has been principally influenced by restrictions imposed by EU State Aid rules requiring that the boiler be fuelled by waste wood for a number of years in order to receive the full grant.
“This fuel option is high risk, even with a RGF grant of £2.9m, because it would necessitate us having to invest a significant sum of capital to allow us to substitute one expensive source of energy, gas, for another expensive source of energy, waste wood.”
Although profits were down, turnover led by a pick-up in demand in the speciality papers division, was up 8% at £42.3m.
EBITDA fell from £2.8m to £2.2m while profits, after a pension adjustment, fell by £800,000 to to £216,000.
Addressing the decline in profits, Mr Cropper said the major factor had been higher input costs, which the company had been unable to pass on to customers and an increase in green levies.
He said the group’s new award-winning Reclaimed Fibre plant would in future help limit the impact of higher raw material costs.
Looking forward the company said its speciality papers division plans to open a subsidiary in China in a bid to drive growth in the Far East.
While operating profits in the second half will be “significantly higher” than that achieved in the first, Mr Cropper said the impact of higher than expected price rises of gas and paper pulp, would not be fully recovered in the second half.
He said it was prudent to anticipate “an out turn for the full financial year in line with last year’s PBT” – whcih came in at £1.8m.
Mr Cropper concluded: “I am very pleased with the progress of our restructuring and investment plans. These are providing us with a strong platform for near and long term growth and our ambitions remain significant.
“The group has made a number of significant investments in the current period across all aspects of the business and whilst these have combined with higher input costs to impact the current year’s profitability we are confident that they provide a stronger platform to future growth.”
