James Cropper

Paper maker James Cropper unveiled strong interims to 25 September, with second half recovery spilling into the first half of the current year. In a sales-led uptick, pre-tax profits powered up from £95,000 to £811,000 on turnover up 10% to £30.2m (£27.6m) - all divisions traded profitably and the half time payout was held at 1.9p a share. Sales lifted 9% at the paper division, with business up in the packaging, business and industrial paper sectors, and growth emanating from the UK, the USA and China. It also appears the chain of retail paper mill shops is thriving. At TFP (Technical Fibre Products), there was good progress in the US market, boosted by rising demand for composites containing metal-coated carbon fibres. There are good growth prospects for TFP materials further down the line with the US Military in particular. Despite these bull-points, there are numerous bear factors diminishing the current investment case, including the weakening dollar. Key among them is the rise in gas prices, which is denting the benefits of falling pulp prices. Analysts say that, over the year, gas could add as much as £1m to overheads. For the full year, Tim Freeborn at Evolution Securities predicts profits of £900,000 and EPS of 7.8p. On a hefty prospective p/e of 21.5, and with gas likely to dampen profits with the winter approaching, the shares are best avoided for now. Reduce/avoid.

Sector: Industrial Engineering

Companies: James Cropper

Market cap: £13.2m

PE Forecast: 21.5

Share price: 167.5p

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