API pulls out of Chinese venture
API Group announced that it is to pull out of its lossmaking joint venture in China.
The firm said that it hoped to sell its 51% stake in the operations to its joint venture partner in the country.
The ill-fated venture has proved to be expensive – it has declared a loss of £6.7m on its discotinued operations in the country, (£3.3m of which will be covered by its partner) which is due to writedowns in the value of its asset there and continued trading losses.
This dragged down an otherwise healthy performance at the Stockport-based packaging firm. In the six months to September 30, the firm made an operating profit of £2.5m on its continuing operations, and increased sales by 24% to £47m. Its overall pre-tax loss for the period was £5.6m.
The firm said that it expects the sale of its Chinese operation to complete by the end of the month.
Chief executive Andrew Turner said: “Exiting the loss-making joint venture in China will further strengthen the group’s performance. The group has continued to benefit from the recovery in market volumes after the streamlining of the cost base during 2008 and 2009.
“Management is now focused on improving the quality and resilience of the continuing businesses and exploiting opportunities for profitable growth.”
The company said that all of its business units performed strongly, with its Poynton-based laminates division providing the strongest growth, with volumes up by around 47%. The foils business also posted growth, but margins came under pressure as a result of rising raw materials prices.
“While escalating raw material costs present a challenge in the short term, the strong upturn in volumes at Laminates is particularly encouraging,” said Turner.
The firm also said that cashflow remained positive, allowing it to reduce its net debt to £14.4m by the end of the period, compared with £18.5m at the end of March.
