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BPI to continue investing in UK sites despite costs rise

BRITISH Polythene Industries has signalled it will continue to invest in new equipment at its UK sites in spite of the high energy costs in its domestic market.

GROWTH PLANS: Cameron McLatchie, chief executive of BPI, said the firm would expand overseas operations. Picture Steward Attwood
GROWTH PLANS: Cameron McLatchie, chief executive of BPI, said the firm would expand overseas operations. Picture Steward Attwood

The manufacturing business, which is involved in making products such as food packaging, refuse sacks, agricultural wrapping and construction materials as well as the recycling of polythene, yesterday reported a 9% rise in annual pre-tax profits from £17 million to £18.5m and increased its dividend from 13.2p to 14.5p.

Revenue grew 6% from £479m to £508m in 2013 after strong results from its European arm as well as improving performances in North America and the UK.

Chairman Cameron McLatchie said BPI, which employs around 350 people in Scotland at its Greenock headquarters plus plants Stevenston in Ayrshire and Dumfries, had managed to increase UK profits in spite of a £1.4m hike in energy costs.

He said: "That arose not just in the increase in the base price but also from the higher distribution costs and higher energy taxes.

"Our UK cost for energy continues to be the highest in the group and significantly higher than Canada.

"That continues to place us at a competitive disadvantage. For energy intensive industries we are looking to receive whatever help and assistance we can from government to alleviate these costs as much as possible."

On the operational front the company said its capital spending came in slightly below the £20m it had projected as a result of the later delivery of some equipment. However it expects to invest at least £20m in each of the next two years to continue upgrading facilities and enhancing energy efficiency.

Previously BPI has warned it would lower its UK spending amid concerns over energy costs. But Mr McLatchie yesterday said: "We will see quite a bit spent in the UK as we look to [upgrade] some of our lines and recycling equipment."

The company's Ayrshire facility, which makes heavy duty polythene, is among the places in line for further investment.

Mr McLatchie said: "We put in two lines last year and we have seen big improvements in film quality, reductions in scrap rates and more significantly in energy costs.

"We are very pleased with these lines and will add in another this year. It has been authorised and will be delivered in the summer."

Further afield Mr McLatchie highlighted a new silage line which was installed at Zele in Belgium in the second quarter of 2013 with a further €6m being spent there on an additional line, which will become operational this year.

BPI is also adding further resources to its Chinese operations and targeting ways to reduce its reliance on work from the UK.

The Xinhui plant suffered in 2013 because of quality issues after a delivery of faulty material and the loss of some of its UK contracts,

Mr McLatchie said the quality issue was a one-off but BPI would target more customers in Australasia from its Chinese base.

BPI expects to grow its volumes this year and in 2015.

Mr McLatchie said agriculture, recycling and food packaging were among the areas he expects growth in.

Yet he remains cautious as he believes performance is still likely to be driven through self-help measures and operational improvements rather than any upswing in the economy.

He said: "The general economic environment is a little bit [more] positive.

"We are also looking forward to the benefits coming through from our capital plans where we have invested in additional capacity."

BPI's house broker Investec upped its price target on the shares from 704p to 720p.

John Lawson, from Investec, said: "The outlook comment looks encouraging and whilst it is too early in the year to make any forecast changes, the fruits of management's self-help measure and investment programme in recent years are now being seen."

BPI's shares closed down 11p, or 1.65% at 655p.

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