British Polythene Industries (BPI) has decided to speed up plans to invest in recycling equipment for its polythene film as a result of the “substantial increase in raw material costs” of £45m.
In its preliminary results for the year ended 31 December, BPI explained that increases in the price of raw materials have had to be passed onto customers. The report stated: “There is no sign of prices coming down and we have seen increases from suppliers both in January and February 2011.
“These increased prices will slow further reduction in our borrowings in the short term, as working capital will increase…At current polymer prices, investment in recycling should deliver very good returns and act as a hedge against continuing price increases.”
Despite increases in raw materials costs of £45m, operating profits were only £1.1m less than in 2009. In addition, BPI’s profit before tax increased by 41% from £11.8m in 2009 to £16.7m in 2010.
BPI chairman Cameron McLatchie said: “The board is encouraged by this very satisfactory performance in difficult circumstances and are recommending an increase in the dividend for the year.
“We are confident that the actions that have been taken over the last few years have put our business in a better position to weather the current economic climate and also to be able to take advantage of any upturn in the economy. 2011 will not be easy, but we have made a good start.”
It added that enquiries from the European Commission and the Office of Fair Trading are ongoing, following an inquiry into the agricultural packaging market. It incurred £0.5m legal costs in 2010 through these investigations.