Burmah profits hit by strong pound

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The Independent Online
Burmah Castrol warned yesterday its profits would fall by 9 per cent, more than pounds 20m, this year if sterling maintained its current strength, making it the latest in a long line of companies to be hit by the soaring pound. Jonathan Fry, chief executive, also cautioned that Europe and North America remained difficult markets for the motor oil that dominated group sales but said the Far East was booming.

Profits before tax rose 6 per cent during 1996 to pounds 261.4m, despite the early effects of the pound's rise as strong turnover growth in Asia more than made up for sluggish markets in Europe and severe price competition in North America. According to Mr Fry, five of Burmah's top 10 markets are now in Asia and the company is creating 350 jobs in the region this year to add to the 400 it added last year.

Castrol's Asian arm now makes more profits than its business in North America and the company expects it to overtake the European operation by2000. It is building factories in Bombay, Singapore and China to capitalise on the region's rapid growth but announced plans yesterday to close a factory in North America where a scramble for market share has kept the lid on selling prices.

In chemicals, where Burmah has faced a long struggle to justify its acquisition in the early 1990s of speciality group Foseco, profits rose 9 per cent to pounds 66m and the division's return on sales of 8.3 per cent came close to Mr Fry's target return of 10 per cent. He said he expected to pass that milestone this year.

Burmah's shares closed 16.5p higher at 1,014p, partly reflecting Burmah's decision to pay all of its final dividend as a foreign income dividend of 24.8p, which it then enhanced by 6.2p for the benefit of non-tax-paying institutional investors.