BPI maintains margins in face of soaring oil prices

PACKAGING maker British Polythene Industries (BPI) maintained its margins in the face of sharply rising raw materials costs last year to record an operating profit of £17.9 million.

The Greenock-based firm said yesterday in a preliminary results statement that it had passed on 45m worth of price increases to customers during 2010.

Operating profit fell by just 1.1m on the previous year "due to the inevitable time lag" in raising prices. Profit before tax was up 4.9m to 16.7m in the 12 months to 31 December as the firm sold two factories in England and restructured some of its operation last year.

The board recommended a total dividend for the year of 11.5p, up 4.5 per cent on 2009.

BPI's raw materials costs are closely connected to the price of oil. The cost of polymer rose by 250 a tonne to just over 1,100 during 2010 and is now at a new high of 1,335.

Chief executive John Langlands said costs were now at a record high.

He said: "We have seen further increases in January and February, and we will see a rise in March."

He said that the company had "no alternative" but to pass on significant price increases to customers and many of its contracts were structured that way.

"Customers will determine whether or not there's a limit, but I think they are getting used to seeing these increases," he said.

He said that the company's levels of working capital were adversely affected by the high costs, and it would "make life easier" if the price of oil came down.

BPI kept its sales volumes flat in the UK and Ireland, saw a slight growth in North America, and gained 8 per cent in Europe, mainly in agricultural markets in the east.

BPI also announced the appointment of RPC group chief executive Ron Marsh as a non-executive director yesterday.