The Herald

BPI chief warns of restructur­ing as costs pile up

- SIMON BAIN simon.bain@theherald.co.uk

PACKAGING industry veteran Cameron McLatchie has criticised European Commission tariffs for protecting inefficien­t competitor­s and fuelling petrochemi­cal giants’ profits.

The chairman of Greenockba­sed British Polythene Industries,unveiling a 15% drop in pre-tax profits to £11.5m, warned of a new round of restructur­ing which will hit the group’s 2100 UK staff, a sixth of them in Scotland.

McLatchie confirmed the c o m p a ny ’s wa r n i n g last December of “challengin­g market conditions including significan­t increases in raw material costs and patchy demand from certain sectors”. He said: “BPI has previously adapted to market changes and opportunit­ies and this experience will hold us in good stead.”

However, 2008 has begun with “record raw material and energy prices”, the chairman said.

The shares, which have halved in the past year, lost almost 5% to close at 263.5p yesterday.

In January the EC granted BPI a reduction in the 8.4% anti-dumping duty on thin bags from China, where BPI has been manufactur­ing since 1994. But its tariff is still 4.3%.

McLatchie said BPI was now manufactur­ing for the EC market only those products that did not attract the import duty, and diversifin­g the sales territorie­s for those that did, with new customers in the Middle East, North America and Australasi­a.

He commented: “The decision by the EC to impose duties on the importatio­n of goods by an EC manufactur­er from its Chinese based subsidiary sends a clear message to potential investors in China, and brings into question the issue of globalisat­ion of manufactur­e. British Polythene has done more to modernise its manufactur­ing base than most of our EC competitor­s, yet it is these competitor­s who are now being protected by arcane regulation­s implemente­d after considerab­le political pressure from interest groups determined to maintain the status quo of uncompetit­ive EC manufactur­e. It is hard to see how this benefits European consumers.”

BPI has also been adversely affected by rules recently imposed on exporting companies by the Chinese authoritie­s relating to recoverabi­lity of VAT on imports. “This has had an impact on our cashflow and margin in China as we import almost all of our raw material,” McLatchie said. “It is inevitable that the EC duty and the new Chinese VAT regulation­s will have a detrimenta­l effect on the performanc­e on our Chinese site in the short term as we reposition our sales efforts.”

McLatchie also called on the EC to lift polymer import tariffs. “The price of polyethyle­ne polymer, our major raw material, has now reached unpreceden­ted levels … The prices of these oil derived byproducts seem to have lost their relationsh­ip to the price of a barrel of oil, as the cash margin between a tonne of oil and a tonne of polyethyle­ne has almost doubled in five years. When one tonne of oil cost £150, one tonne of lowdensity polyethyle­ne cost £500. Now one tonne of oil costs £350, and l ow - d e n s i t y polyethyle­ne costs over £1000.”

McLatchie added: “It is no coincidenc­e that major oil and petrochemi­cal companies are reporting record profits.

“It would seem an appropri- ate time for the EC to consider dropping tariffs on polymer imports into the EC.’

He said the consumer was being indirectly hurt by increased packaging prices, the EC packaging industrywa­s fighting imports of finished product, and “the only client group being protected are the mainly integrated petrochemi­cal companies who seem perfectly able to take care of themselves”.

Chief executive John Langlands said of the threat to jobs: “We will have to look at matching our capacity with sales in some of our more traditiona­l businesses.”

The dividend is held at 22p. Group pension scheme deficit almost halved to £18m.

 ?? Picture: Angela Catlin ?? WRAPPING TO RAPPING: Cameron McLatchie feels European authoritie­s and big oil have heaped pressure on BPI.
Picture: Angela Catlin WRAPPING TO RAPPING: Cameron McLatchie feels European authoritie­s and big oil have heaped pressure on BPI.

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