At the same time it pointed to pressures of higher energy and waste costs but these had to some extent been offset by stronger performances on the Continent.
Group chief executive Tony Thorne said that trading in the first quarter of financial year 2008-09 had been in line with expectations and the group's total operating result in the quarter was also in line with that of the same period in the previous year.
He said: “As previously reported, operating performance is being impacted by slowing demand and higher input costs, particularly in our UK businesses. To date, the effect of this has been offset by better results from our continental European businesses. As part of its ongoing funding programme, the Group has further strengthened its balance sheet by recently renewing, for a period of five years, its syndicated revolving credit facility.”
Packaging
Mr Thorne said that European demand for corrugated packaging (boxes) is slowing and that industry statistics indicated that in the first six months of 2008 the market was down by over 1% on the same period in 2007, with the second quarter being weaker than the first.
“This lower demand has resulted in a significant fall in corrugated case material (CCM) prices in continental Europe, although CCM prices in the UK have remained firmer due to the strength of the euro,” said the chief executive.
He continued: “The high level of energy and waste paper input costs is exerting pressure on CCM margins throughout the industry; a number of continental producers have recently announced CCM price increases to recover these costs.
In box manufacturing, the continuing move towards higher value-added retail-ready boxes is contributing to a greater level of capacity utilisation, especially in the UK.”
And, the company said that in the UK Paper and Corrugated Packaging segment, it had outperformed the market in boxes and is benefiting from “the actions taken” to strengthen its position in the fast-moving consumer goods sector of the market. The segment's overall results, noted Mr Thorne, have been affected by lower CCM sales and higher input costs.
Importantly, the project to commission the lightweight CCM machine at Kemsley Mill in January 2009 remains on schedule.
He added: “The Continental European Corrugated Packaging segment, which is a net buyer of CCM, has made substantial progress. The Polish business has achieved good growth, particularly in higher value-added products, supported by further investment. Sales have also advanced well in Italy, while the French business is benefiting from operational improvements at its main facilities.”
Plastics
In Plastic Packaging, the company said that performance in liquid packaging and dispensing had been encouraging, while in returnable transit packaging performance has been more variable depending upon the market sector served. A programme to recover the recent further increases in polymer costs through price increases is underway.
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