Fiberweb

Amid recovery in certain markets, international nonwoven fabrics producer Fiberweb delivered a sixth consecutive half-year of operating profit and margin growth.

Restructured by CEO Daniel Dayan, Fiberweb’s industrial businesses focus on niche filtration, speciality construction and agriculture markets, whereas its hygiene operations supply nonwoven components to diaper, feminine hygiene and adult incontinence product producers.

Recent interims to June were strong, showing 33% operating profits growth to £13.6m, on lower sales of £231.7m (2009: £242.5m), as operating margins expanded from 4.4% to 5.9%, with a favourable product mix and cost-cutting offsetting rising polymer prices. From earnings up 44% to 5.6p, the dividend was held at 1.7p.

Fiberweb's industrial arm enjoyed the benefits of cyclical upswing, with US volumes up 19% as the construction sector showed signs of life. Meanwhile, volumes in the defensive hygiene division were 4% ahead year-on-year and the FitesaFiberweb joint venture, which has given Fiberweb exposure to emerging South American markets, chipped in with a £1.9m profit.

Whilst sustained recovery in the US and European residential construction markets still eludes and Fiberweb is fettered with net debt of £142m, the company continues to benefit from the defensive characteristics of its hygiene business as well as from growth in its non-cyclical industrial businesses in medical markets and filtration.

For the year, investors can expect pre-tax profits of £10.5m (2009: £12m), upgraded from an earlier £9m and earnings of 9p, placing the shares, offering a yield of around 7%, on a lowly forward p/e of 6.5.

Though down from the 67.25p at which Growth Company Investor recommended them in February, they are worth holding onto, given Fiberweb's growth prospects in markets in need of consolidation.