Macfarlane Group reports, for the period from June 30 to date, Packaging Distribution sales up 8% year-over-year with volume growth, price recovery; Manufacturing Operations' sales show 4% increase

Kendall Sinclair

COVENTRY, England , November 21, 2011 (press release) – Macfarlane Group PLC today publishes its Interim Management Statement for the period from 30 June 2011 to date. In accordance with its normal trading cycle, the Group has recorded a stronger trading performance since June than in the first half of the year.

In Packaging Distribution, sales levels are 8% ahead of 2010, a combination of 2% volume growth and 6% price recovery. Whilst demand has been subdued in the base business, this has being more than offset by new business wins, increased penetration in the third party logistics sector and early success in the development of our presentational and retail packaging business. We have not fully recovered supplier price increases from existing customers and as a result gross margin is 0.5% below the same period in 2010. Overhead costs as a percentage of sales continue to reduce and profit before exceptional items is well ahead of last year.

Manufacturing Operations’ sales are 4% ahead of the same period in 2010 and both Labels and Packaging Manufacturing are trading profitably. However, Packaging Manufacturing is experiencing delays in recovering raw material price increases and despite good progress in the re-sealable labels sector, an unfavourable self-adhesive label customer mix has reduced profitability in the Labels business. In overall terms profit before exceptional items from our Manufacturing Operations is slightly below that in 2010.

Net interest costs continue to run below those seen last year. The net effect of all of these factors is that the Group’s profit before exceptional items for the year to date is ahead of that for 2010.

Bank borrowings have reduced since 30 June 2011 and are expected to reduce further in the remainder of 2011 as a result of traditionally strong working capital inflows in the final months of the year.

Changes to the investment portfolio of the pension scheme have helped restrict the impact of the volatility seen in investment markets in 2011, however further reductions in bond yields have more than offset this benefit. Although the deficit on the pension scheme will have risen since 30 June 2011, the Group continues to work on actions to address the means by which the level of deficit and its volatility can be managed.

Archie Hunter, Chairman of Macfarlane Group, said

“Demand and raw material pricing continue to be challenging, however our priorities are to maintain sales growth momentum and restore margins, whilst maintaining tight cost control. Macfarlane Group has a strong platform to enable it to deal with the uncertain demand levels caused by current economic conditions.

Although we remain cautious over predictions in the current uncertain environment, the Board expects that Group results for 2011 will remain in line with its expectations.”

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