TALK of low inflation is a myth as far as raw materials are concerned,
with the paper and packaging group Bowater joining Coats Viyella in
reporting price increases of 20%. In the case of Bowater, this spring
saw its pulp prices rise by 25% with plastic resin prices up 15%.
Finance director Michael Hartnell believes that a further 10% increase
in its raw materials prices will occur within the next six months.
Increases in prices on this scale have to be passed on to customers,
such as food manufacturers, and will inevitably feed through to
consumers.
Bowater managed to handle the increase in its cost base very well in
the first half, with its operating profits in continuing businesses up
19% to #107m. At a pre-tax level profits inched up by #2m to #105m.
Margins over the period rose to 9.2% compared with 8.8% in the
corresponding period of 1993.
The packaging and print division, which accounts for about half the
business, recovered strongly from a weak second half last year, with
margins up from 7.2% to 8.6%. Competition remains intense in food
packaging, not helped by the supermarket price wars in the UK, but the
group saw demand for its cosmetic packaging recover quite strongly in
the first half.
Coated products saw its profit improve by 13% on sales up 4%, while
the building and engineering division enjoyed strong markets with growth
in sales, profits and margins. The Australian tissue business continued
to improve its performance.
The balance sheet remains healthy with gearing a ''comfortable'' 43%,
down from 48% previously. The company plans to concentrate on organic
growth, although small infill acquisitions are likely, particularly in
Europe. To capitalise on the growing consumer demand in emerging markets
such as India, Bowater has entered into several joint ventures.
During the past five years it has developed into a modern
customer-driven packaging group, holding world leading positions in all
its major markets.
Its intention to operate on an international rather than a national
basis is in tune with many of its major manufacturing customers, notably
in the US. This, together with its capacity to add value to its products
while offering them at competitive prices, should enable it to continue
to win new business and increase profits in the years ahead.
Its shares gained 19p to 492p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article