Managing variable demand, maintaining progress
An IMS note maintained FY15 management expectations, despite some weaker areas of demand seen since the interim results. While H2 volume has been softer than anticipated, profitability has been sustained through operating efficiencies, investment and some easing of polymer pricing during the period. On unchanged estimates, British Polythene's (L:BRPI) P/E rating is approaching single-digit levels.
Profit progress being maintained
Indications are that all three reporting regions and many of the sectors that BPI serves have experienced quieter demand to some extent during Q3. Silage stretch volume is reported to be up 5% y-o-y following investment in Europe and North America, despite a slightly shorter agricultural film-selling season than normal. Our sense is that underlying volume is broadly flat but lower in aggregate, allowing for uncommercial business for which BPI has elected not to compete. Polymer prices in BPI’s grades were more than 10% below June levels by the end of October and, historically, such downward movements have provided a short-term margin benefit. BPI typically operates with a relatively short order horizon and has successfully shown an ability to manage demand and input price variability well. BPI notes that polymer price increases are currently being sought by suppliers.
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