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BTP makes a killing on bugs

The Investment Column
BTP continues to reap dividends from its acquisition three years ago of most of MTM, the speciality chemicals group that fell so spectacularly from grace in the early 1990s. Indeed, without MTM's Hardwicke plant in South Carolina and buoyant demand for the insecticide raw materials it produces, yesterday's results from BTP would look a lot more pedestrian. Stripping out a pounds 5.42m provision for the sale of the polymers business announced earlier this month, pre-tax profits rose 19 per cent to pounds 44.5m in the 12 months to March.

The Nipa-Hardwicke insecticides business contributed to an exceptionally strong performance from the dominant biocides and fine chemicals division. Double-digit percentage growth in demand for the bug killers BTP's products go into has been spurred by new applications and their claim to greater environmental friendliness.

BTP has spent $20m (pounds 13m) on Hardwicke since acquisition and last year the plant absorbed over a third of BTP's pounds 21m capital expenditure budget. After a 40 per cent rise in profits to pounds 26.5m and with capacity flat out, the group's decision to spend at a similar level this year looks justified.

Shorn of its storage operations and now the polymers business, the renamed safety equipment division was the other star performer last year. Its world-leading position in supplying safety harnesses and the like to workers in areas as diverse as construction sites and oil rigs meant it was able to cash in on tighter safety legislation in the UK and the US, with operating profits jumping 26 per cent to pounds 8.69m.

Further US legislation is expected to boost sales this year, although it might not do well to rely on Congress to deal with it speedily in an election year.

Poor to dismal performances in BTP's other two divisions, performance chemicals and adhesives and textile coatings, should be reversed in 1996/97. Both suffered badly from last year's well-publicised surge in raw material costs, but prices have since fallen.

Gearing of 7 per cent means BTP is well placed to repeat its success with MTM and is keen to buy. Without a further big buy, profits of pounds 52m this year would put the shares, up 16p at 294p, on a forward p/e of 14. Hold.