British Polythene Industries confirmed yesterday that demand for its plastic bags from retailers and manufacturers is still weak, but profits are holding up well.

BPI said trading was consistent with the conditions it outlined in early November.

"Demand from many industrial customers remains subdued and, at best, we expect overall volumes to be flat from the retail sector.

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"We currently expect total volumes for 2012 to fall short of 2011, however this shortfall has been less pronounced in the second half."

The group said raw material costs continued to soften slowly, no doubt assisted by poor demand, but added that suppliers were currently proposing price increases at the start of 2013.

"Despite this challenging trading environment, we expect our results for 2012 to be at the top end of market expectations, as we benefit from the structural changes effected in recent years in our UK business, and an excellent performance from our European business."

Six weeks ago BPI said third-quarter sales volumes had shown an improvement on the first six months of the year, despite no visible recovery in the construction sector.

BPI has said 2012 will be broadly in line with 2011, when it made a pre-tax £19.2m on sales of £508m.