German recession cuts deep into British Vita: Profits down 35% as plastics company is squeezed on prices

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The Independent Online
RECESSION in Continental Europe has cut deep into profits at British Vita.

The Manchester-based plastics company said that the German market had been particularly difficult. Rod Sellers, chief executive, said: 'I think people believed that Germany would escape recession, but it came last year with a vengeance.' Trading conditions across Europe had now flattened out, he added.

Pre-tax profits for the year to 31 December fell by 35 per cent to pounds 33.7m. At the operating level, profits from the Continent fell 39 per cent to pounds 20.6m, but an aborted venture in Spain cost the company another pounds 5.4m.

Despite more promising economic conditions in Britain last year, UK profits also declined. Operating profit was 6 per cent lower at pounds 15.1m.

Bob McGee, chairman, said the company had been squeezed on prices. 'The main characteristic of the year has been that while volumes in most areas except Germany have remained reasonable, there has been increasing pressure on margins.'

British Vita makes and sells plastics for an enormous range of products, from aircraft seats to brake- pad casings in cars. The acquisition of Gaillon in France last year gave Vita exposure to further areas, including ski manufacture.

The business splits into three divisions. Industrial polymers - moulded plastic - was worst hit with profits falling 46 per cent. The biggest division makes foam and its profits declined by 37 per cent. But from a low base, the fibres and fabric side advanced 28 per cent.

Across the group, operating profit margins fell from 6.2 to 4.4 per cent. Mr McGee admitted it would be difficult to rebuild margins but said the company was making a start by cutting costs. One in 10 of its 5,000-strong Continental workforce has been made redundant at a cost of pounds 4m.

Including the pounds 6m purchase of Gaillon, British Vita spent pounds 11m on acquisitions. In March 1992, British Vita raised pounds 73m in a one-for-five rights issue to fund a series of add- on acquisitions. At the December year-end, the company still had pounds 38m to spend.

At the time of the rights issue the shares were trading at 358p. They closed down 7p yesterday at 268p. Earnings per share were 9.6p, compared to 15.6p, and the total dividend was increased to 7.4p (7.15p).