Trading Statement

RNS Number : 0564D

Plastics Capital PLC

05 October 2018

 

Plastics Capital plc

(the "Company" or the "Group")

Trading Update

Plastics Capital plc (AIM: PLA), the niche plastics products group, provides an update on trading for the financial year to date and is pleased to confirm that the Company continues to trade in line with market expectations.

Trading during the six-month period ended 30 September ("H1 2018/19") saw an improvement on the prior year. Sales have continued to grow at double digit rates and profitability has improved as the revenue mix shifted towards the higher margin Industrial Division. 

Currency has also been helpful as the benefit of Sterling's weakness since the Brexit referendum is now being felt as the forward contracts taken out prior to that time have settled and have been replaced by other contracts that have been struck at the weaker post-Brexit rate. 

Films Division

The Films Division has continued to perform well and to derive the best from the combination of the three businesses that we have brought together.  Considerable effort has gone into integrating the three businesses under one management team so that total demand can be optimised across the available capacity and sales activity can proceed in an effectively coordinated manner. 

The Films Division is also busy with several projects to increase capacity and capabilities. Barrier film extrusion, high quality printing and specialist sack making capacity are all being added to enable the division to serve its existing customers more comprehensively in the future and to create the opportunity to acquire new customers.

We are creating a closed loop recycling system within the division to recycle most of the waste that we create.  This recycled material can be reused in our own film packaging products, where specifications allow as well as in new products that we have not considered before. 

Industrial Division

The Industrial Division has performed well over the last six months achieving double digit growth over the same period last year, when sales were disappointing.

Our bearings business suffered a setback in H1 2017/18 due to delays and weak demand on two large projects, but these projects have now picked up and demand from other customers has been strong.

Our matrix business has also performed well as the restructuring of the businesses acquired last year in the USA and in Italy is starting to produce good results. Sales growth has been strong as we continue to broaden the range of products offered.

Our mandrel business had a good start to the half year, consolidating on what was achieved in the prior 12 months, but the order book weakened significantly as the half year progressed and is currently worse than we would expect.  

Plastic Waste

The issue of recycling and reusing plastic waste has become "front page news" in the last year.  Whilst the public outcry has focussed on single use consumer plastic products, which is not an area we have any exposure to, we cannot be complacent with regard to this issue. We intend to do everything we can to position the Group so that it can pursue the new opportunities and avoid the threats that arise from this entirely justifiable cause.

It is important to point out that most of our products substitute others made in materials that are less sustainable than plastic; they also enable our customers' products to be more sustainable than they would otherwise be.  Plastics are far from being universally a bad thing; however, they do not degrade easily and they float, which means they lead to a lot of visible waste. This waste undoubtedly needs to become part of a closed loop system and much can be done to improve recycling and reuse.

We have an objective to recycle and reuse, within our own facilities, 75% of our internally generated scrap material within the next two years.  Previously, most of this would have gone to recyclers and we would not have been aware if any of this material had formed part of a closed loop system. Also, we must consider using any materials in our products whether or not they are plastic if they are more environmentally sustainable and can meet our specifications in other ways. For example, biodegradable films made from plant-based extracts may form part of the solutions we offer to customers increasingly in the future.

We have recognised that, at its core, our business relies not on plastics technology but on the ability to find innovative solutions to our customers' problems in niche market applications.

To signal the importance we give to this matter we are considering changing the company name to something that resonates with this core competence rather than with plastic itself.

Commenting, Faisal Rahmatallah, Chairman, said:

"Significant organic growth is being achieved across both our Divisions. Except for our mandrels business, the order books are healthy. We continue to add capacity to fulfil this demand and to enable future growth thereafter. We acknowledge the issue of plastic waste and whilst the public focus is on single use consumer products which is an area we do not compete in, we are taking significant steps to address it in whatever way possible.   We have made a good start to the year and anticipate a year of further good progress."

For further information, please contact:

Plastics Capital plc	Tel: [phone]
Faisal Rahmatallah, Executive Chairman
Nick Ball, Finance Director
Cenkos Securities	Tel: [phone]
(Nomad and joint broker)
Mark Connelly
Callum Davidson
Allenby Capital Limited	Tel: [phone]
(Joint broker)
David Hart

Notes to Editor

Plastics Capital is a niche manufacturer of specialist plastic products.  Applications for these products vary widely and examples include:

•             Packaging for the food manufacturing and distribution - films, sacks and pouches

•             Steering columns and instrument control knobs in the automotive industry - plastic ball bearings

•             Hydraulic and industrial rubber hose manufacture - various types of plastic mandrel

•             Cardboard box manufacture - plastic creasing matrices

Plastics Capital's business model is based on understanding customers' problems in depth, and then developing and mass producing proprietary, technical solutions for these problems.

The business operates through two divisions, Films and Industrial, and has the majority of its production in six UK based factories, with a further three factories in Asia.  Approximately 50% of its £77 million sales are made outside the UK to more than 80 countries.

Further information can be found on www.plasticscapital.com

 

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