Bloomberg News

Filtrona 2nd-Half Profit Gains 4.1% on North America (Update2)

March 01, 2006

Filtrona Plc (FLTR), the U.K. cigarette filter maker spun off from Bunzl Plc last year, posted a 4.1 percent advance in second-half profit after demand increased for its plastics products in Europe and North America.

Net income rose to 15.1 million pounds ($26.5 million), or 7 pence a share, from 14.5 million pounds, or 6.6 pence, the Milton Keynes, central England-based company. Revenue increased 9.1 percent to 261.8 million pounds.

Filtrona, which makes filters for British American Tobacco Plc's Kent brand, closed a factory in Crissier, Switzerland amid lower filter sales in Europe. It opened a plant in Monterrey, Mexico, where demand is growing and costs are lower, and will expand a facility in Indonesia to take on work transferred from Jarrow in northern England.

``There's nothing to get your blood racing,'' Numis Securities analyst Francesca Raleigh said in an interview. ``What they need is some new news like acquisitions.''

The shares dropped 8 pence, or 2.7 percent, to 292 pence.

Numis's Raleigh said some investors may be disappointed that Filtrona, post spinoff, is failing to match both the growth and prospects of former parent company Bunzl. Second-half revenue at Bunzl jumped 18 percent, driven by the U.S. and acquisitions.

Plastic Trim, Tear Tape

Chief Executive Officer Mark Harper said today Filtrona's plastics division will drive growth and the outlook for markets is favorable. Demand for standard cigarette filters is on the decline, led by northern Europe, pushing the company to expand in countries such as Russia, Venezuela and Korea, the CEO said today.

The U.K. company also makes plastic trim for Boeing 777 airliners and deodorant bottles for Unilever Plc. The company derives about 55 percent of sales from plastics including tear tape and the rest from fiber applications including filters.

Earnings from plastic products improved in Eastern Europe with capacity at a warehouse in Poland doubling and a new distribution center opening in the Czech Republic. Growth in northern Europe prompted plans to enlarge a distribution center in Germany this year to bolster stock levels.

Filtrona will begin selling a new track and trace seal to manufacturers this year, through its joint venture in FractureCode, designed to prevent goods being moved illegally across borders or counterfeiting. It raised its stake in the company to 80 percent in December.

Acquisitions

Filtrona booked de-merger costs of 1 million pounds. Bunzl, a U.K. packaging suppler, spun off Filtrona last year to concentrate on packaging and distribution. Harper's strategy for Filtrona may now involve purchases.

``We are looking at a variety of acquisition opportunities in both plastics and fibers,'' Harper said in an interview.

Shares of Filtrona have gained 25 percent since its debut on the London Stock Exchange in June, for a market value of 658 million pounds.

Molins Plc (MLIN), a maker of cigarette-rolling machines and packaging equipment, narrowed its full-year loss to 4 million pounds after it downsized its operations on falling demand for its machinery. Revenue fell 1.2 percent to 121.4 million, the company said in a Regulatory News Service Statement today.

To contact the reporter on this story: Sophie Kernon in London at bmcgee3@bloomberg.net.

To contact the editor responsible for this story: Chris Jasper at cjasper@bloomberg.net.


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