Bottom Line: Labours of Laporte

THE decline in Laporte's first- half operating margins from 13 to 12.8 per cent overstates the company's problems, but producing specialty chemicals for markets as difficult as construction and paper is plainly very hard work.

After stripping out disposals and rationalisation costs, return on sales was broadly unchanged. And turnover from the core businesses - representing 87 per cent of total sales - was nicely ahead.

That helped pre-tax profits rise 14.2 per cent to pounds 58.6m on sales 11.5 per cent higher at pounds 490.8m. The interim dividend was increased by 6.8 per cent to 7.9p.

Reorganisation into 16 strategic business units is on course to yield pounds 20m in savings over two years. The move to fewer, larger units - there were almost 90 companies within Laporte after the acquisition of Evode in January last year - will streamline manpower and manufacturing sites.

Gearing fell to 41 per cent and interest cover rose to a healthy 14.6 times. In the second half cash will start flowing into the business again, which should keep borrowings on a downward tack.

Kleinwort Benson expects full- year profits of at least pounds 120m, giving earnings per share of at least 45p. On shares down 3p at 749p, the prospective multiple is 16.6. That is a rather optimistic premium, given the only gradual recovery in Laporte's markets.