Bottom Line: Drum of hard knocks

SHARES in Blagden Industries, the oil drum manufacturer, slipped 17 per cent yesterday to 127p. Operating profits were cut in half and a restructuring charge took the company into the red at the pre-tax line. In addition, gearing has ballooned to 82 per cent, the final dividend will be passed and plans have been laid to hold a rights issue.

Yet even after yesterday's fall, shares trade at between 50 and 75 times house brokers' estimates of likely 1994 earnings, depending on the terms of the rights issue.

Margins have been eroded by a price war led by German manufacturers and a rise in raw material costs. On the company's own admission, demand will remain weak and prices will probably stay deflated. The company is also made vulnerable by its dependence on the manufacture of standard steel drums.

Blagden has replaced its chief executive and the chairman will retire shortly. Fresh management will have its work cut out.