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Increased prices and demand boost Macfarlane profits by 60%

Macfarlane has reported a 60% increase in pre-tax profit for the first half of the year on the back of increased prices and improved demand.

The packaging manufacturing and distribution group reported a 9% increase in revenue for the six months to 30 June of £64.1m.

Macfarlane chief executive Peter Atkinson told Packaging News that the majority of the revenue boost was due to price inflation being passed on to customers.

"There's been significant raw material price pressure in the first half of the year and players in the market have had to fight a difficult battle with customers to manage the price increases," he said.

"We are pleased with the performance in the first half but are not assuming it will be sustained and are cautious about demand in the rest of the year."

"We have strong strategy initiatives that should give us momentum at the back end of the year, moving into 2011."

7% turnover growth in manufacturing

The packaging manufacturing business reported a 7% increase in turnover of £12.8m due to recovering demand, particularly in the industrial manufacturing sector.

"The cost increases came early and we are suffering the effects of a long lag to push them through to label customers who are the big retailers and FMCG companies," said Atkinson.

The distribution business reported a 6% drop in operating profit of £1.16m but said the supplier price increase and increased demand had increased turnover by 9% to £51.3m.

Considerable focus on pricing
Macfarlane chairman Archie Hunter said: "There has been considerable focus on sales pricing levels with existing customers, seeking new business opportunities, reducing costs and addressing underperforming parts of the business. Macfarlane Group is emerging stronger as a result."

Macfarlane is continuing its strategy to reduce its pension deficit that translated into a £1.2m exceptional gain in the first half of the year. "Further measures to reduce the deficit are planned," said Hunter.

MACFARLANE HALF-YEAR RESULTS
(£000)

Revenue 64,121 (59,078 in 2009)
Profit before tax and exceptional items 723 (450)
Profit for the period 1,365 (1,970)