British Polythene to cut pension payouts

The plastic packaging manufacturer British Polythene Industries became the latest company to slash the pension benefits of its longest-serving workers yesterday, as it unveiled a 9 per cent fall in its first-half profits.

Although the group said it would make a one-off payment of £20m into its defined benefit pension scheme - which closed to new members six years ago, and has a deficit of some £50m - it said it was also in discussions with members to cut their payouts. It would not, however, give any details of how significant the cuts would be.

The news came as the group revealed a 9 per cent fall in its first half pre-tax profits to £9.2m, blaming an increase in raw material costs and lower demand in the UK.

Although the group's European business performed well, it said trading had been difficult in the UK, where its customers had suffered at the hands of higher energy costs. It added that a colder spring had also affected sales of its horticultural and agricultural products.

"These results are in line with our pre-close update and have been affected by high raw material costs and lower volumes, particularly in the UK," Cameron McLatchie, BPI's chairman, said.

News of continued poor trading over the past few weeks sent the shares down 12 per cent to 436.5p yesterday, giving the company a market value of £113m.

The company said it had been warned by its suppliers that raw material prices would increase again this month.

"Faced with the twin challenges of record high raw material costs and poor demand, it would be rash of us to predict that we will approach the results we achieved in the second half last year," Mr McLatchie said.