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Foam maker Zotefoams has lifted interim pre-tax profits 50 per cent to £2.7 million and bought into US group MuCell Extrusion.

Based in Croydon, fully listed Zotefoams, world market leader in cross-linked block foam, increased turnover 16 per cent to £18.1 million in the six months to June. With nearly half of sales going to continental Europe, the strength of the euro helped margins and offset a 27 per cent increase in sterling terms in the price of polyethylene, the company’s key raw material.

Finance director Clifford Hurst says he expects these cost pressures to ‘intensify’, with polyethylene likely to rise further from £650 to £750 a tonne in the second half of the year. He says Zotefoams, which sells to industries ranging from durable packaging and construction to sports and aviation, intends to pass on these cost increases as far as possible, and also to maintain an internal efficiency drive.

Last month, the company paid $3 million (£1.5 million) for 30 per cent of MuCell Extrusion of Boston, which boasts a technology for using inert gases to make very thin foam for packaging, wires and cables. Zotefoams has an option to buy the rest of the US company and also a licence to develop MuCell’s technology in its own right for certain product applications.

Analysts expect a tougher second six months, with full year pre-tax profits expected to reach £3.7 million, an increase of 9.8 per cent on 2007’s £3.37 million. At 100.5p, down 1.5p this morning, Zotefoam shares are nearly 23 percent below last year’s peak of 130p and value the company at £37.3 million.

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Robert Tyerman

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Zotefoams	LSE	£22.29m	59.00p	-8.50p
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