James Cropper

Paper maker James Cropper reported a sharp drop in interim profits for the half ending 1 October and warned difficulties in its speciality papers business would likely lead to a loss before tax for the full year.

On sales of £31.5m (£31m), pre-tax profits (before IFRS pension adjustments) slipped from £1.2m to a mere £500,000, sending earnings per share tumbling to 1.4p (6p). Amid the gloomy numbers, the one crumb of comfort was a maintained dividend of 1.9p.

The main problems emanated from Cropper’s speciality papers arm, where the European market was subdued and the rising cost of pulp and energy hurt profits. Tellingly, the cost of natural gas rose 36% compared to the first half of the previous year and forecasts suggest even higher costs for the second half.

Elsewhere, margins in the converting division continued to suffer from pressure on display board prices and rising raw material costs, although Cropper’s paper mill shops enjoyed a 30% rise in sales for the half, despite being affected by the retail sector slowdown, as two new outlets opened in Mansfield and Hatfield. Technical Fibre Products reported flat sales in sterling terms, although US dollar revenues were 10% higher thanks to growth from composite materials containing metal-coated carbon fibres, the majority supplied Cropper’s 50% joint venture EFT.

Shares in James Cropper remain in the doldrums and while so many negatives remain the shares are best avoided.