Bottom Line: BPB sticks with its cycle

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The Independent Online
GOOD LUCK, Jean-Pierre Cuny, new chief executive at BPB from August. Since the plasterboard maker parted company with his predecessor nine months ago, its shares have risen 30 per cent to 303p, outperforming the rest of the market by more than a third. Maintaining that will be tough.

Yesterday's 14p rise reflected the market's surprise at an 87 per cent rise in pre-tax profits from pounds 57.5m to pounds 107.7m and an 8 per cent jump in the dividend to 8.1p.

What caught analysts on the hop was a rise in pre-exceptional margins from 8.4 per cent to 12.3 per cent. The company believes a return in the mid-teens is quite possible, which in a low-inflation environment is impressive.

Stronger cash flow than forecast should more or less wipe out borrowings by the year-end, and with demand for plasterboard rising in Germany and eastern Europe, volumes should keep rising.

That is the good news. The equally plausible, bear case is that with the appointment of Mr Cuny, a plasterboard man through and through, BPB has finally shut the door on diversifying out of its one-product cyclicality.

Perhaps even more worrying is the decision to expand capacity in Berlin, raising as it does the spectre of a price war to match the madness that all but put the three main European players out of business a couple of years ago.

We've learnt from our mistakes, says BPB - but it would, wouldn't it? In the circumstances, a sector average rating of 11.5 times 1995 earnings, while not demanding, is fair.

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