Low & Bonar

Despite battling against soaring raw materials prices, performance materials specialist Low & Bonar (LWB) has reported a solid set of results.

In the six months to May the fully listed company suffered from a £15m jump in material costs, but was only able to pass £10m of this on to customers. Despite this, pre-tax profits soared 42% to £11.2m as sales increased 20% to £182.6m - investors have also received a fillip with a 40% hike in the dividend to 0.7p.

The outlook has improved, with Low also benefiting from strong demand for recently launched products. Sales into the flooring and civil engineering markets have led the way, with a good recovery taking place in the transport and industrial sectors. The weak spot has been building products.

Low has maintained its operating margin, helped by manufacturing efficiencies, it has also witnessed a stabilisation of polymer prices. The yarns business is expected to return to profit thanks to the closure of its production site in Ostend, and the transfer of kit to a new, more efficient facility in Abu Dhabi.

Emerging markets are showing particular strength so expect further expansion here. Low has net debt of £72m, so is well within its recently revised borrowing facilities of £150m - this headroom allows scope for acquisitions in what is a hugely fragmented market worth £50bn. Broker Altium has upped its full-year forecasts to pre-tax profits of £23m and EPS of 5.4p. The shares have doubled in the last year, so at current levels look up with events. Hold.