Asia gives Zotefoams a first half boost
By Hamish Champ
Posted 7 August 2012
Zotefoams, the Croydon-based foam specialist group, has announced a near-10% rise in first half revenues, boosted by a good performance from its high-performance products, particularly in Asia.
For the six months to the end of June the stock market-listed company recorded revenues of £24.8m, up 9.9%. Operating profits rose 9.3% to £3.6m, while pre-tax profits increased 9.5% to £3.5m.
Earnings per share were up 10.6% at 7.3p, while the group said it would increase the interim dividend by 6.3% to 1.7p.
Zotefoams said sales of polyolefin foams rose 8% to £22.3m during the period.
On a constant currency basis the group said polyolefin foam sales rose 10%; in the UK revenues were up 14%, followed by the US, up 9%, and Europe, approximately 5%.
Sales across the company’s high-performance polymers division rose 80% to £1.72m, driven by activity in the aviation market, where demand for its fire-retardant Zotek fluoropolymer foams was proving to be strong, especially in North America.
Zotefoams said its MuCell extrusion business, which it bought outright last year, had seen sales dip 14% as the result of two licences not being renewed, although the group said neither were in core areas of future development and elsewhere progress had been “significant”.
The company added that its MuCell division had signed a deal to license Dow Chemical’s thin-foamed films patent family, “using MuCell innovative foaming technology to create physically foamed films for all film applications. This contract will further the two companies' relationship as innovation collaborators”.
The group said the Dow deal would “not only eliminate existing confusion among potential customers as to patent and licensing obligations, but it also provides a clear demarcation of responsibilities for support of these foaming technologies”.
Dow will continue to offer resins specially formulated to optimise foaming results while MuCell will provide hands-on technology transfer equipment and technical support to customers, it added.
Looking at Zotefoams' trading in the first half, chairman Nigel Howard said the group had delivered "a strong performance in sales and profit growth and operating cash generation.
"We have made good underlying progress in the higher-growth parts of our business such as HPP and Azote foams in Asia, supported by a robust performance across the wider portfolio of our operations which will stand us in good stead for the future."
Zotefoams planned to spend £5m on capital expenditure in the second half, up from the £1.3m invested in the first six months of the year. Money would be ploughed into new projects at the firm's Croydon plant, including installation of a new extruder and expansion of the site to accommodate demand increases.
Energy costs had risen more than a third over the period, with energy efficiencies “only partly offsetting a significant rise in gas and electricity prices”.
However prices for LDPE had fallen month-on-month from its April 2012 peak, Howard said, and the group’s forward order book was strong.
Despite the “turbulent macroeconomic conditions” he expected 2012 to be a year of “further progress”.
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