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Restructuring cost to impact on BPI results

BRITISH Polythene Industries has confirmed its annual profits will be affected by a £1 million restructuring charge related to the shedding of 90 factory jobs in England.

NOTE OF CAUTION: BPI chief executive John Langlands said energy prices were deterring capital investment.
NOTE OF CAUTION: BPI chief executive John Langlands said energy prices were deterring capital investment.

The announcement sent shares in the Greenock business sliding 43.5p, or 6.4%, to close the day at 640.5p.

However, that still left the shares well ahead of the 405p the stock, which has been on a strong run in 2013, was trading at in January this year.

Last month, BPI said it had lost a contract with Allied Bakeries to supply bread bags for brands including Kingsmill.

It is believed BPI had won the contract, which was valued at around £30m over its term, in 2009 and it will finish at the end of this year.

The loss of that deal has meant staff numbers at the Consumer VMB division in Blackpole, Worcester, are being reduced from around 350.

BPI yesterday said the associated costs, including redundancy payments, will impact on its full-year results.

The company, headed by chairman Cameron McLatchie and chief executive John Langlands, indicated in a trading update that outside of that restructuring charge it was performing in line with expectations.

It said: "Demand has been slightly better than last year and we currently anticipate that underlying volumes for the year, excluding additional volumes from the acquisition of Flexfilm, will be marginally ahead of 2012."

BPI snapped up Cheshire-based Flexfilm, which sells film and printed bags to the food industry, for £5.5m in April this year.

While BPI said its raw material costs had softened "slightly" in November, they had started to rise again in December.

Further increases are already forecast for early next year.

BPI said: "We anticipate that our underlying trading results for 2013 will be broadly in line with current market forecasts, but we now expect to incur costs of around £1m for restructuring in our consumer business where we have very recently been unsuccessful in retaining a contract for bread bags with a major UK bakery.

"This has resulted in the announcement of around 90 redundancies at our Worcester plant.

"After the implementation of this restructuring, we do not anticipate that this loss of business will have any noticeable impact on future profit."

Analysts had expected BPI, which makes products ranging from industrial polythenes to bags for apples, to post an annual pre-tax profit of about £22m, which would be around 3% up on 2012.

BPI, which employs 350 in Scotland at Greenock, Dumfries and Stevenston in Ayrshire, posted a 14% rise in half-year profits from £12.1m to £14.1m on the back of turnover growing from £273.1m to £282.2m.

In August this year, Mr Langlands said soaring energy bills were putting the business off making major capital investment in the UK.

Mr McLatchie then said BPI was making much of its £20m investment across 2013 in operations in Europe, Asia and North America as operating costs in those areas are cheaper.

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