API result jumps on higher margins and productivity

API, the packaging group that fought off an acrimonious bid from the rival group NMC 18 months ago, yesterday rewarded loyal shareholders with a 46 per cent rise in interim pre-tax profits, writes Tom Stevenson.

Michael Smith, chief executive since last June, said the increase was due to improved productivity and better margins. He said turnover per employee was 15 per cent higher than a year ago, and added that stringent management accounts had been imposed.

Operating margins in the biggest division, foils and laminates, rose from 4.3 per cent to 6.8 per cent. Mr Smith said a target of 15 per cent operating margins had been set for the division, which makes cigarette packets and cartons for bottles of spirits.

The operation had increased market share in Europe, which accounts for a quarter of sales, thanks to the greater competitiveness of sterling since last September's devaluation.

As a result of currency re-alignments Kurz, the German company that commands almost half the European market, is thought to be trying to push through price rises of about 15 per cent, which API hopes will further strengthen its position.

The converted film and paper products division, which makes labels, bags and impregnated paper, also had a strong half, with operating profits 27 per cent higher. The smallest division, heating and ventilation systems, broke even on depressed sales and is thought to have been written out of API's long-term plans.

Group turnover in the six months to April rose from pounds 29.5m to pounds 32.8m. Earnings per share were 42 per cent higher at 6.4p after a jump in pre-tax profits from pounds 1.34m to pounds 1.96m. The interim dividend was raised by 10 per cent to 3.35p.