European margins lift Low & Bonar

IMPROVED profit margins in Europe helped Low & Bonar, the packaging and specialist materials group, to report a 5 per cent jump in first-half profits to 31 May.

The taxable result, at the top end of market expectations, rose from pounds 11.3m to pounds 11.8m on virtually unchanged group turnover of pounds 151m. The shares were up 4p at 281p on the news.

The company said the outcome reflected a 20 per cent growth in operating profits in Europe to pounds 11m despite flat demand for packaging.

Profits from plastics doubled to pounds 2.2m, while the specialist materials division raised its contribution by pounds 1m to pounds 4.3m.

Low's UK plastics business returned from a pounds 156,000 loss to an operating surplus of pounds 452,000 in the first half. The turnaround lifted the total profit contribution from the British operations from pounds 5.4m to pounds 6.4m.

However, the company was hit by difficult conditions in North America, where operating profits declined from pounds 3.3m to pounds 2.2m. The bulk of the downturn was felt in the first quarter.

Operating profits from the North American packaging division dropped from pounds 3.4m to pounds 1.9m because of a depressed US industrial shipping sacks business, which slipped into the red.

Low said that it was taking steps to reduce the cost base of the business but its recovery 'to a large extent depends on increased demand in the region'.

Group interest charges rose marginally to pounds 1.2m.

Earnings per share climbed almost 7 per cent to 9.39p. But the interim dividend has been held at 2.7p due to an uncertain economic outlook.

Low said there were still few signs of a sustained growth in demand. 'There has been a trickle of improvement in trading but nothing significant,' said Roland Jarvis, who retires as chief executive this year.

'The rate of economic recovery in our major markets will influence the pace of progress for the year, but our ongoing efficiency programmes and cost-reduction measures will continue to deliver benefits.'