RPC battles competition and cost pressures

Borrowings rise to fund stock build up.
 

30 November 2007 – Shares in rigid plastics packaging giant RPC fell by more than 6% today after the UK group warned of intense competition in the marketplace and the rising cost of polymer raw materials.

 

Chairman Peter Williams said: “As a result of the increases in polymer costs over the last five years, the entire rigid plastic packaging industry in Europe is in disarray.” The thermoformed cup business has been particularly competitive, Williams noted, with prices at levels “that we believe our competition cannot sustain”.

 

RPC itself reports a 16% increase in the cost of polymer from the first half of 2006/07 to the same period of 2007/08, together with higher transport, electricity and packaging costs. The company raised its borrowings by £22m, primarily because of both the cost of polymer and the tighter payment terms being imposed by producers in a sellers’ market.

 

Restructuring charges associated with recently announced rationalisation measures amounted to £10.2m, effectively halving the operating profit for the period to £8.4m against £16.2m for the equivalent period of last year.

 

However before taking the charge into account, the operating profit was slightly up at £18.7m (versus £18.4m). Pre tax profit totalled just £3.7m compared with £12.9m for the first half of 2006.

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