Zotefoams

High-performance foams maker Zotefoams (ZTF) has warned that rising raw material prices have 'impacted margins in the short term'.

In a trading update, the fully listed venture reported a 10% increase in like-for-like sales for the six months to July due to growth in sales of its Azote polyolefin foam products. Meanwhile, sales of its high-performance polymers were described as being at 'a similar level to that experienced in the first half of 2010'.

Concerning MuCell Extrusion – the foam company it acquired control of in March – Zotefoams remarked that the newly acquired business is 'trading in line with our expectations', adding that it is planning to invest further resources to 'support our medium-term plans for growth'.

Raw material prices were described as being 'significantly higher than the equivalent period last year', with the group observing that there have been 'certain supply-related issues caused by high levels of market demand for polymer products worldwide'. However, it insists that the company is 'trading in line with expectations', adding that it remains confident of its future prospects.

Following the announcement, analysts at Evolution updated their forecasts. Pre-tax profits of £5.2 million on turnover of £43 million are pencilled in for the year to December 2011, with EPS of 9.9 and 10.8p forecast for 2011 and 2012 respectively.

Last recommended by Growth Company Investor this March at 138.5p the shares currently trade at 147p. Trading at a respectable p/e rating of below 15 times 2011 earnings, shares in the company have recovered strongly from a 2009 low of less than 50p. Despite this, as a long-term play they have not gained a great deal of ground since our 2001 recommendation at 102.5p. We see little reason to change our earlier hold rating.