Arjo Wiggins displays benefit of higher European demand

RISING demand in Europe has sent profits at Arjo Wiggins Appleton, the paper maker, soaring 67 per cent.

The advance came despite a 45 per cent rise in the cost of pulp, which Arjo said it had succeeded in passing on to customers.

But the size of the profit increase was exaggerated because the comparable figures were depressed by the one-off costs of a redundancy programme last time.

Pre-tax profits for the six months to 30 June were pounds 105.1m compared with pounds 63m. Operating profit was pounds 122.4m ( pounds 104.1m). The shares rose 8p to 287p.

Arjo made profits of pounds 49.3m from Europe in the half, 52 per cent up on the pounds 32.4m it made in the first six months of 1993. Mr Isaac said that a 45 per cent increase in pulp prices equated to a 12 per cent increase in costs of production.

But it benefited directly from the increasing price of pulp as it reduced losses in its own pulp-producing subsidiaries from pounds 16.2m to pounds 3.4m. Mr Isaac said pulp was making a profit in the second half of the year.

The company earns most of its profits in North America, where it concentrates on the manufacture of high-quality paper. Arjo earns a profit return on sales of 19 per cent in North America compared with 4.6 per cent in Europe, but North American profits were unchanged at pounds 72m.

Earnings per share were 8.1p compared with 3.6p last time. If exceptional items are discounted earnings rose from 5.4p to 8.1p. The interim dividend was unchanged at 2.65p.

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