Blagden warns again on profits

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BLAGDEN Industries, the steel drum maker, saw its shares fall 20 per cent yesterday after making its second profits warning in 12 months.

A vicious price war, centring on Germany, was blamed for forcing Blagden into loss in its second half. Cameron Smith, chief executive, could give no indication of when the group might return to profit.

First-half taxable profits for the six months to 30 June were pounds 3m. Yesterday Blagden said full-year profits to 31 December would be pounds 2.5m - pointing to a loss in the second half of pounds 500,000.

Panmure Gordon, Blagden's stockbroker, has cut its full-year profit forecast in half. It had been predicting pounds 5.5m.

The company said the price war lopped 2 per cent off profit margins between the second and third quarters. Price pressures were compounded by an increase in the cost of steel. Rising costs cut another 2 per cent off margins.

The profits warning 12 months ago was prompted by a fall in volumes. This time Blagden's price- cutting strategy has enabled it to maintain sales volumes.

Mr Smith said the company had to respond with lower prices: 'It is not a game you can opt out of.'

Blagden exports four-fifths of its product to the Continent. Mr Smith said the price war clearly indicated over-capacity. One German producer had recently gone out of business but greater overall reductions were required.

Shares fell 32p to 132p yesterday. In November 1992 the shares fell 30 per cent from 200p to 140p.