Plastics Capital plc (AIM: PLA), the niche plastics products group, is pleased to provide a Q3 trading update and to confirm that the Company continues to trade in line with market expectations.
Group revenues were ahead of expectations in Q3 as a result of stronger than anticipated demand. Gross profit margins remain good but a little lower than historically, due to the changing business mix resulting from the acquisition of Synpac. We have meanwhile increased investment in sales, marketing and new product development across the Group to continue to drive the growth of the business and so profits for the current financial year remain on track to meet market expectations.
Bearings and mandrel sales were strong during Q3, supported by new business wins that entered production this financial year and growing demand from US customers. We have also had some excellent new project successes which we expect will enter production in upcoming years and which have replenished the new business pipeline. We are adding sales resources and capacity in both businesses to enable both to meet increasing demand in line with our five year targets.
Matrix activities continue to make progress in line with our strategy of getting “closer to the customer” and broadening the range of die-cutting and die-making consumables that we have to offer. In December we concluded an agreement with our Italian distributor enabling us to take a significant minority stake in this business which also makes a range of creasing matrix products under the brand name MITO. We have also applied for patents for a new product development being undertaken with one of our Japanese distributors, which we believe has excellent market potential and product trials are ongoing.
The Films Division has had a varied year so far. Flexipol has continued to grow sales and profits, whilst Synpac has traded in line with the expectations that we had formed at the time the acquisition was concluded in July 2016. However, Palagan has experienced some weakness in trading as it made important changes to its business strategy designed to position it for longer term growth.
At Flexipol we have nearly concluded the installation of an additional extruder which will increase capacity by a third and is expected to enable the business to continue growing at the same rate over the next five years or so. At Synpac we are busy working on procurement and sales synergies with the other companies in the Division, and integrating it into the Group.
We are currently making important changes within Palagan in terms of its business strategy, which are designed to enable the business to achieve long-term growth. We are investing in the recruitment, training and development of operational staff, the introduction of new films and the development of some innovative products. We anticipate that it will take another 6 -12 months to conclude this transitional phase, at which point Palagan will be in a good position to increase sales and profitability.
Commenting, Faisal Rahmatallah, Executive Chairman, said:
“Trading conditions are generally good and we are busy implementing the investments we have previously highlighted as key to fulfilling the Group’s five year strategy. We are very pleased with progress generally across the Group and particularly in our two most substantial business areas, plastic bearings and specialist sacks. Overall, we anticipate that performance over the second half of the financial year will enable us to announce results that are in line with market expectations.”