RPC rides raw material price hikes

Related tags Constant exchange rates Material

Plastic packaging firm RPC has overcome sharp rises in
polypropylene and polystyrene prices to report a 9 per cent rise in
interim pre-tax profit to £12.4 million.

The company, which operates 45 plants in 11 European countries, increased turnover for the six months to September 30 from £218m to £234m, a rise of 7 per cent. The increase was slightly less than 11 per cent at constant exchange rates.

This performance is impressive given the dramatic increases this year in the costs of packaging raw materials. A whole variety of these materials are hostage to the vagaries of global oil and natural gas prices.

Natural gas - a starting point for the production of polyethylene - has shot up in price this year, with the effect that chemical giants have continually passed on the cost to packaging firms. As a result the international price for naphtha, which is extracted from petroleum and is also used to make polyethylene, has increased from US $222 a tonne in May 2003 to US $420 a tonne in August. The price of benzene, which is used to make styrene, has now reached historically high levels. Prices have been rising steadily since the start of the year, and are now double what they were six months ago.

All this means that polyethylene (PE) and polystyrene producers now have the highest feedstock costs in the plastics producing world, and it is these high energy prices that have been the primary driving force behind most price increases.

"Perhaps the most satisfying feature of our performance in the first half was that it was achieved at a time when oilprices exceeded $50 per barrel and the prices of our two principal raw materials, polypropylene and polystyrenerose by approximately 30 per cent and 60 per cent, respectively, from their January 2004 base,"​ said chief executive Ron Marsh.

RPC's results were helped by a full six-month contribution from the four facilities acquired from Rexam for £16m cash this year. "Overall, their performance over the six month period has exceeded our expectations at the time of acquisition,"​ said Marsh.

Underlying sales growth improved by 3 per cent at constant exchange rates.

The company was continuing to strengthen its partnerships with customers such Kraft, for which it produces Tassimo coffee discs. And since the end of the first half, RPC​ has acquired seven factories in the UK and in Europe from Nampak, the South African packaging company, for £23m cash.

Related topics Processing & packaging

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