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Plastics Capital anticipates a year of further good progress

Last updated: 04:49 05 Oct 2018 EDT, First published: 03:49 05 Oct 2018 EDT

Plastic machine
The company wants to reposition itself so it can pursue the new opportunities arising from concern about reusing plastic waste

Plastics Capital PLC (LON:PLA), the niche plastics product group, traded in line with expectations in the six months to the end of September.

Sales have continued to grow at double-digit percentage rates compared to last year and profitability has improved as the revenue mix shifted towards the higher margin Industrial Division.

READ: Plastics Capital’s films division enjoys record year

The company said it is now enjoying a tailwind from currency fluctuations.

The Films Division has continued to perform well and is expanding its 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.

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.

The bearings business suffered a setback due to delays and weak demand on two large projects but those projects have now picked up while demand from other customers has been strong.

The matrix business has also performed well and is seeing strong sales growth.

The mandrel business got off to a good start to the fiscal year but the order book weakened significantly as the year wore on and is currently below budget.

Good start to the year

The company said it is considering a name change to reflect the fact that its business relies on the ability to find innovative solutions to its customers' problems in niche market applications rather than on plastics technology.

"Significant organic growth is being achieved across both our divisions,” said Faisal Rahmatallah, the chairman of Plastics Capital.

“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,” he added.

“We have made a good start to the year and anticipate a year of further good progress," Rahmatallah concluded.

Allenby Capital left its full-year forecasts unchanged after the trading update.

"In an otherwise positive trading update, the only negative was that the order book for mandrels has weakened. Nevertheless, we remain comfortable with our FY2019 and FY2020 forecasts that were set in July and make no changes. We are also happy to retain our fair value of 130p," the broker said.

Shares in Plastics Capital were unchanged at 113p.

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